Do Sellers net more or less from their sale with a discounted MLS listing vs. a full service high commission listing?

If you were the seller, would you pay the conventional higher commission or the lowest fee that includes MLS?

What is the greatest benefit to a Seller for paying the higher fees? With MLS presenting all properties to all buyers independent of commissions, serious buyers are going to find the seller’s property without additional marketing of the property.
Please forgive my pessimistic view of why I suspect higher commissions equal higher net proceeds for Sellers. Here goes…
The more the Listing Realtor has at steak of losing if the listing expires, the more likely the Realtor will convince the Seller to lower their asking price to the probable selling range before Buyers discount the property for being listed too long. The Realtor is most convincing because they can point to all the additional marketing that they have done, so the listing must be priced too high.

If this is the main reason for high commissions, then are high commissions needed in a hot rising Sellers market?

Your comments?

Kind of tired of this same debate. Have you read any of the other posts on discount versus full service?

Each agent is different, so the seller needs to get statistics from them to what their list to sales price is, average days on market, etc. They should compare apples to apples and see which one best suits their needs. If one agent charges more, but seems to sell homes more quickly and for a higher price, then that's the best route. Works vice versa.

Now hopefully this won't drag out into the same debate we've been having every single day. We used to have more discussions that were directed towards helping each other grow our businesses or providing advice to consumers.

I've seen a huge change in the topics for the past 3-4 months. Topics like this seems as if we're really focused on commissions.

Sorry, Dee.. I actually like this kind of banter as long as we keep it logical.


Buyers-
Here is my theory. I believe that commission is a direct function of the supply of agents combined with the demand from buyers.

In the long run, technology has only an indirect effect on commissions (contrary to popular belief). In my opinion, consumers desire more personal attention when dealing with the purchase and sale of large, tangible items. Therefore, increased technology is a tool, but not necessarily a market revolution.

When we are in a pure seller's market (high demand from buyers), it takes less and less effort to sell a home. Therefore, we see a influx of agents into the industry, thus creating a abnormal level of competition.

This influx of agents (increased supply) drives down equilibrium price of commission as a result of the abnormal level of competition.

When market forces change, and demand from buyers decreases, we see a rise in equilibrium price of commission.

Why? Because decreased demand is felt across the board. Discount models run on a smaller profit margin (I am not talking profits in dollars. Rather, profit as a % of gross receipts). Since it is less, the profit margin of discounters is more quickly eroded, thus decreasing the owner's rate of return.

Eventually, the profit margin for discounters will become so low that the owner of the business will realize that he can obtain a higher rate of return in another investment arena.

This can happen in other models, too. So quit your screamin'!

The big mystery here is: Which came first, the chicken or the egg? Did the increase in supply of agents cause higher demand from buyers? Or did the increase in demand from buyers cause an increase in the supply of agents? There is evidence for both arguments.

Greg,

The lowering of commissions was a direct result of the Internet and the National Association of Realtors greed in wanting to collect advertising revenue from agents via homestore.

Now you have a once closed system for listing properties (mls) virtually open to the public for viewing. Now you have agents realizing they can take advantage of this system with lower co broke commissions. Sure, the house may not sell as fast but you can bet they will be getting a lot of buyer leads in the mean time. Those buyer leads and sales will more than compensate for the reduced commission offered by the selling agent. NAR wins no matter what. Nar doesn't make money off commissions they make money on the ad space via homestore.

And now finally you have Home Discovery that offers a 202.00 (less 200.00) co broke. They are taking advantage of this total exposure for 2.00 bucks. Now if some of these full commission agents on there really had a leg to stand on with their, "well mr. seller your house will never sell with that co broke" then HD wouldn't sell a single house. HD sells thousands of homes!! How much more proof does a seller need that high commissions aren't needed to get a house sold, for the highest price.

There is no argument that more homes sell via the MLS than any other place. I would imagine that 87-92% of them do sell through that medium. This is why my argument for companies like HUS and A2S (mostly A2S because of the full service) are the best way to go for a seller. They pay a flat fee on the listing side and can still offer a competative co broke on the MLS. The seller still saves bundle on the listing side, since 87-92% (or more) sell there anyway.

What irks me is when listing agents sell the fact that, "oh, we need to do all this other marketing in addition to the MLS", we all know this is BS. Most of these listing agents on here know full well it will sell via the MLS and that extra so called marketing will go to one of two places, their pocket or marketing for leads.

Rick Mense = Tin foil hat.

Logic=0

I am sure there are anecdotes to be shared on every side of the coin, including the narrow rim...
But here is mine.
I believe that it really depends on the market and the property.

I had a client whose partner in a transaction had great success with one property where they offered a 4% co-op and only paid a $600 flat fee with no marketing to the listing agent. The home was seen by a zillion agents right away and sold in a reasonable amount of time.
So, when these two teamed up later to sell an investment home, the partner was adamant that they do the same.
The home sat, and sat, and sat. Had very few showings. Common co-op around here is 3%. They were offering a 4%. Still no one really looked at it. The market had changed.
I took over the listing 4 months later at full commission and offered 3% co-op, advertised it, had several showings each day, had open houses that were swarmed, and sold it at list price - which was the same list price as before - within 30 days.
--A

Rick -
Blah blah blah blah blah -
Different day same old "blah"
You are a 35 that keeps skipping & repeating.

Salem,

You comments just show how right I am. Your kind will become a thing of the past soon. Better get that resume and application ready for your 40 hour work week, you'll need it with that mentality.

Rick, you need to understand something - Discounters have always come and gone.
You are not anything new.
You WILL go away just as the others have.
Then some other "SCHMUCK" will take your place.

Logical or not, this is the same people, same barbs, same points, same debate. If you guys like talking about commission so much, just set up your own little email group? Once you see the same debate over and over, it gets useless. There's no unique information.

I hate to admit but Rick is right. We all know (whether you want to admit it or not) that sellers who sign with a full commission agent get 2 things for their money:

1) MLS exposure.
2) A good feeling.

The "good feeling" comes from the presentation that makes it look like the marketing dollars the agent spends will cause the house to sell faster and for more money. This simply isn't true, because we all know that agents market THEMSELVES, not houses.

We can go through the list that every agent loves to include in their listing presentation as 'proof' that the MLS is needed to sell houses.

Open houses sell 1% of listings
Newspapers and RE mags sell 3%
Yard signs sell 20%
MLS sells 76%

These stats aren't any surprise when you look objectively at how agents use non-MLS marketing. Signs depict a huge brokerage logo or picture of the agent, and a tiny "for sale". At open houses hardly any agent tries to sell the house they're standing in. And we all know that hardly anyone reads the newspaper anymore.

So what does a seller get for paying $20,000 in commission? The 'feeling' that their agent worked hard for them.

Finally, to answer the original question. The success of listing agents is in direct proportion to how effectively they can convince sellers to drop their price. It's referred to as "pricing to sell" and it means pricing so low retail buyers would be fools not to snap it up.

I think the real reason full commission agents are so angry at discounters is because discounters are charging what the service is actually worth.

Dee In Austin -
I agree
Everyone has their own opinions, Right or Wrong and I think everyone has heard the ALL.
But enough is enough
The "Horse is Dead"
Move on -

RealDeal,

Couldn't have said it better. I use that in my listing presentations. Agents like to use your commissions to advertise their face. How come they didn't use those dollars to advertise their current listngs???? because they lie at their listing presentations. Discounters give the real picture and charge what is fair. Most agents don't sell but 5-7 homes in a year, of course they have to screw whoever is dumb enough to list with them, that is the only way they survive.

Rick, therein lies a catch-22 for discounters though. If you charge only what the actual service of selling is worth, then you don't have the money for marketing yourself to get more listings. If you're not getting enough listings then charging only what the service is worth isn't practical.

Not only do full commission agents market themselves more, but their brokerages market their names more too. So you end up with a situation where sellers are more inclined to call an agent from a brand like RE/MAX or C21, than they are to call "Sell For Less Realty", even though they're offering equal or better service for a lot less money.

Oh well, I know that when I first started posting on this forum I was very angry at agents and wanted to bring them down. But now to be honest I don't really care what happens with the real estate industry, whether discounters win out or FSBOs take over. None of it has any effect on my business, I'll just go on working my little niche.

Real,
The volume of listings gets more listings! The fact that volume puts signs everywhere in addition to the lower commission charge sort of equals out the full commission guys self promotion.
It is very powerful when you can market how much money you saved the last client.
Cash is king.