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.

better service? what kind of better service do discount companies offer than those big full service companies you mentioned? :rolleyes:

Uh how did the last so called illogical debate on this topic turn out. I guess saying Ditto might be the best reply here. If you want to discount go ahead its legal and fine. I sure do not care. I get plenty of bussiness at regular price. I am comfortable with that. Stop being mad at full price agents becuause we make more. It is a free country and you can work anyplace you want for whatever price you like. Hey I enjoy making more than you discount fellas and doing less work. I am happy about it and do not hold a grudge. Why are you so concerned about what full price agents are doing? Why? Why? Why?

Keep in mind that my perspective is that of someone who might use your services if they weren't so overpriced, I don't provide them.

Simply NOT charging me thousands of dollars extra so you can advertise yourself equals better service.

"Simply NOT charging me thousands of dollars extra so you can advertise yourself equals better service."

I got a new idea. lol Lets advertise the house bring more buyers and get a higher price buy creating additional trafic. Yes more buyers do bring higher prices. We call it supply and demand.By having more buyers we automatically increase the demand.
By the way as a independent agent I do not have to work with everyone. I can choose to not work with a prospective client if I feel we would not work well together. I have done this in the past and will do it in the future. Sometimes this is best for both parties.
If you truely want the biggest discount sell your own home. Unrepresented sellers do sell thier properties sometimes.

Agent 007,
MORE? Well for starters, do you give back the Co broke if you sell your listing? A2S does! You can't get much better than that!!! I laugh when listing agents tell their clients," well you know, that other 3% will go to the selling broker." Then the next day the listing agent sells the house on an simple ad or off the MLS.... THEN THEY KEEP THAT 3% they just told the sellers was going to another agent.
TERRY, this is the problem I have. Agents are supposed to be Ethical. Nothing about this situation is ethical. If you knew it was price well and most likely would get a buyer, you were effectively lying (or at minimum not being totally honest).
This GREED is why real estate agents and REALTORS are viewed as used carsalesmen. Assist2Sell doesn't behave this way, why do the full commission guys do it???? Let me guess, cause you can. Cause that is what the seller agreed to pay ( YES BUT ON THE PRETENSE THAT IT WAS GOING TO A HARD WORKING BUYERS AGENT, NOT YOU SELLING IT THE NEXT DAY ) GREED GREED GREED.... you full commission agents should be ashamed of yourself, I don't know how you sleep at night. But there are places in the afterlife for people like you, sleep tight!!!!

My point exactly! If full commission agents advertised the house and brought more buyers and got a price high enough to more than compensate for the commission, then the commission would be worth it. But as it is full commission agents DO NOT do that, they spend my money to advertise their own faces so they can get more listings, not more buyers for my house.

Agreed. I choose not to hire a realtor for the same reason, they won't work hard for me.

Haven't you been listening? I already sell my houses myself because realtors are overpriced.

If there was a $100 listing service around here I would probably use it. The cheapest listing agent around here is $1,500 and that's still too much for MLS advertising. Right now I sell 20 houses for that price.

"My point exactly! If full commission agents advertised the house and brought more buyers and got a price high enough to more than compensate for the commission, then the commission would be worth it. But as it is full commission agents DO NOT do that, they spend my money to advertise their own faces so they can get more listings, not more buyers for my house."

Well some discount brokers snort coke and rape babies but not all of them. I guess some full commission agents advertise the house and get full price too. How in the world can you be so narrow a view to accuse us all of something? Oh I see you have a agenda not based on truth but your feelings.

"Agreed. I choose not to hire a realtor for the same reason, they won't work hard for me."

All agents are not the same. Yes I work hard for my clients and do a good job. Even better I work smart for my clients. Just took a listing today and we are asking 20,000 more than the other agent. I am giving a 1% discount if I bring the buyers. My clients like that.


"Haven't you been listening? I already sell my houses myself because realtors are overpriced."

This forum is for Realtors. If you want to whine and cry please go to a bar or place of your choosing. You do not have to use us and I for one do not want you as a client. My clients value my service and like my performance.


"If there was a $100 listing service around here I would probably use it. The cheapest listing agent around here is $1,500 and that's still too much for MLS advertising. Right now I sell 20 houses for that price."

So you say? Well what is your point? It costs $3000 a year in fees to be a Realtor so you want my first 30 homes a year to be free? Try a drug clinic crack can kill. Does anybody here really care becuase all you do is complain. Nope I do not care at all and do not value your bloviated opinion has been trumpeted all over here for no real reason other than to make yourself happy.
News flash we are here to talk to other Realtors and help each other. Please leave the forum as your agenda is clear?

ditto on terryinva. samegoes for rick mense. we all know that your model is better and we are all leeches on the backsides of the truly ethical discounters. ok? we know we'll all be out of bussines in a very short time and the discounters will rule the world. we know. you have convinced the traditional brokers and agents of the error of our ways. we have been educated in all of the complexities of the re world and bow in unison to your greatness and brilliant re acumen. in short, you win, you are right we are wrong. please forgive our transgressions. we are all trully sorry to have doubted your genius and stategery.
now, please, pretty please, pretty please with sugar on top, shut up about it.

realdealer, we collectivly bow to your powers of real estate sales. we are sorry that one of our agent brothers or sisters have failed to meet your obviously high standards of conduct. we will strive to live up to your expectations. until then, i call on all agents around the world to work for you pro bono in order to rebuild your faith in our chosen profession. but of course, a bussinesman of your stature and wealth would never accept help from anyone as loathsome as a re agent, but i wanted to show you how deeply concerned we are of your opinions of us. now, is that what ya'll wanted to hear? you have won and we have lost you were right we were wrong. now please, please, please shut up about it.

TerryinVa, if you think I was accusing you of something why don't you come right out and say so?

agent steve, that's more like it you may now kiss my ring.

Realdealer
I was kinda vague just like you on purpose so you would understand your own point. lol
I am now convinced by you my life is meaningless. Thank you for showing me the truth. I am going to Tibet and become a monk now.

(comment deleted)

Rick, I'm a full commission broker, but I just lost a listing to a Seller who was insulted by my CMA and decided to list with an agent who was charging 7% commission with 3.3% going to the buyer agent. I showed him that his net proceeds would be less going with the other agent, but he was determined to make sure that his home sold at the price he felt it deserved.

If selling homes was just about money then you might have an argument, but it is an emotional experience where people have certain requirements. There is room for full commission, discount brokers, FSBO's, and high commission brokers in the scheme of things. I know my niche and I stick to it. I gladly passed up that listing.

I did a CMA for another potential client who said the only thing standing between her and the price she wanted was my commission. I encouraged her to do a flat fee CMLS listing as a FSBO. She's doing that now and reports in to me every week on how miserable the experience is. A snoopy neighbor demanded to come to see her home and went into every closet and cabinet.

People are not always rational when it comes to selling their homes. That's one of the reasons I love this business. It is so interesting.

RealDealer,

Knock it off NOW, this is your warning! It's fine to debate but that comment is absolutely going over the line.

RealDealer, you just responded to my last post something that doesnt make sense. here you are saying that for less money you get better service going with a discounter. well, my last post i asked you what better service do you get? you responded that its just cheaper. well, for less money, besides that being your "better service", what better service do you really get?

thats what i thought.

Rick,
you are basically saying that the majority of us as listing agents end up bringing the buyer also. how often does this really happen? hardly ever! and if we do ever bring the buyer, then why shouldnt we get paid for doing even more work? as we all know, that 3% co-op fee does attract agents to bring in buyers. that includes myself.

let me ask you something too. how often does A2S actually bring in your buyer? do they even work with buyers? i think they work with mainly sellers. i thought thats why they are called Assist 2 Sell! if you think that charging clients a flat rate of $2995 to just list the house in the MLS, then go for it. thats about all the help you'll get from those guys.

To All Members,

As you probably noticed I deleted several posts on both sides of this debate due to unnecessary personal attacks that in no way contributed to this thread. Feel free to debate but please stop the personal attacks or further action will need to be taken by myself, Paul or Admin if need be.

Thank you, Brian. It's always the same people who immediately launch personal attacks when we should be adults here.

Over heard this in another forum today.

"Enter the flat fee, discount broker. He takes the discounted rate, but offers the buyer's agent a reduced commission split. His houses get shown pretty infrequently. Then there's the guy who charges you up front a reduced flat fee. For this fee, he'll put the house on the MLS, give you a sign to put in the yard ( advertising for him-not for you!) while you go ahead and try to sell it yourself. What a sport! This joker is the real crook in the industry!

Now, here's what I think should be happening out there:
An agent who lists a house should get a listing fee--up front--not when the house sells.Put it on the MLS and Realtor.com--even Yahoo. He should do advertising that works--a sign with phone number is good, some in-house flyers, e-mails to other agents, ... This listing should be good until sold or withdrawn.
Where's the money? How about a 4%-5% buyer's agent commission? Then realtors would be doing what the public wants, and what they should be doing----SELLING HOUSES!"

I think this poster had some good points. I cannot agree 100% but must listen to thier point of view and consider it.

Quote: Now, here's what I think should be happening out there:
An agent who lists a house should get a listing fee--up front--not when the house sells.

I agree that we should be paid for our efforts Terry. I think the problem with this type of model is that it tends to de-motivate the listing agent with respect to closing the transaction. What does the listing agent get if and when the home sells if the LA doesn't write the offer?

Funny how someone who knows nothing of how a tranditional works gives presentations on how they work.

Another funny thing is how the discounters advertise the traditionals listing as sold and very tiny print on the flip side it says that the listing may be another brokers listings...

The only real reason to work for a discounter is because you can not make it in the real world of real estate and need it handed to you like a chicken being feed before slaughter.

What people like Rick Mense and other discounters do not seem to understand is that a "full" commission is necessary to provide the entire system known as the real estate industry.

Due to the fact that the sale of a personal residence is such an emotional and significant transaction, there are huge inefficiencies that have to be paid for by each successful transaction. Why? Because many buyers never buy. And many sellers never sell.

Yet Realtors have to service them all. Many buyers just look. They use the services of the industry to pre-qualify for a mortgage, access all the databases (which cost a fortune to maintain), drive around looking at homes with a Realtor in tow, who answers all the myriad of questions about areas, schools, locational characteristics, and the home itself. They might even put a few offers in. But a good percentage of the time nothing happens. They decide they are not ready. So as a Realtor, I just wasted a lot of time, even though I provided a valuable service. So how do I get paid? When a transaction actually ends in a closing.

Due to the inefficiencies of buying and selling this huge asset, a sufficient commission must be charged so that the successful transactions pay for the unsuccessful ones. This is in the best interest of all parties involved.

The real estate machine goes on, but nothing is for free. As long as buyers and sellers act irrationally, and they always will, because the stakes are high, commissions will always be elevated beyond the actual cost of the specific transaction to compensate for the transactions that fail to consummate.

Again this is in everyone's best interest. The "machine" is always available to the public. Many will use it for free several times in their lives. They will pay when they actually buy or sell. The market runs smoothly as a result.

Keep in mind also that the commission does not only cover the marketing of the home. It also covers the transaction management that is crucial to closing the sale. Like making sure the appraiser from out of town has the right comps. Or negotiating the sale of personal property. Or running documents to various parties promptly and efficiently. Or arranging several accesses to the property for home inspections, specialty inspections, municipal inspections, or just plain showing the in-laws. Or advising the buyers how to determine their true closing costs. And explaining a lot of the legal concepts involved with the transfer. Or very often, doing the job of the discount broker who can't be found and works on "volume", incompetently underserving all their clients to make a little bit of money from a lot of suckers.

Navarac,

You have completely missed two things. Your theory used to be the case.

I agree, commissions need to be at a certain level in order for the system to work. I agree that you must be able to compensate for the lost transactions and bad buyers/homes that don't sell. Here are the two errors in your theory:
First:
When you speak of effeciency you also need to understand there are WAY TOO MANY agents out there. They are not charging 6% to make up for the fact that they have had bad deals, they are charging it for another reason, to many agents not enough sales. They have to charge that much just to survive.
Second:
NAR has stated that the average work load of a real estate agent has diminished by about 1/2 from before the advent of the internet in the average home. Basically it says that the amount of time you spend on bad deals is not as bad as it used to be, therefor full commission isn't needed to make a profit. Sure, if you drove people around all day and some didn't close ever that would be one thing. We all know buyers pretty much drive by the houses they want to see first then call. Or better yet, they see the bulk of what they want to look at online.

Your thinking is partially correct, just very old school.... The discounters have just as many headache clients as you do, but mysteriously they are making a profit with their discounted commissions. I think that says something. The discounters are the efficient ones. They don't OVER HIRE agents like the traditional model, which dilutes the commissions over too many agents. The discount model hires agents when there is a demand.

Nicely done navarac...

As for traditionals charging 6% as a whole, Rick... You are again very lost.

The average commission is well below 6%, which puts these homes at a disadvantage to those that choose the higher commission.

Why do discounters charge a set fee, sold or unsold? Simply because the majority of their listings expire and go unsold.

As a traditional, do we charge this set fee? No.

Would I have a discounter sign in my front yard with their number on it to generate leads to the house up the street which they can get a 3% comp?

Don't think so...

I am a traditional and I know what brings in the buyers and I would also pay top dollar both ways.

Why, with all my knowledge of the industry and marketing skills, would I go with a traditional rather than a discounter?

Because they just plain live in a world of dreams.

Why do I always see these homes that do sell through a discounter, pop up a month, or sometimes sooner, with a “nobody” broker sign?

Could it be that perhaps the property was unsold and attracted investors that are now going to sell it at it's true market value?

If you are looking for the answer, it would be yes.

How do I know: Experience and research.

Why do traditionals hire so many agents?

Brokers don't pay a hourly wage, workman's comp, etc... They are making a profit by hiring an independent contractor that pays office dues, buys product from their marketing division, and on and on...

Then a few agents get listings and bring in commissions...

Heck, if I could start a business this way and everything was a plus and not a negative, I would pack the office as well.

A broker provides an opportunity for people with dreams and a license who can operate and see if they can be a success.

The broker provides the tools and the know-how, the agent uses these tools and know-how to make sales.

Does everyone have what it takes to be a sales person? No… That's why we have discounters; the last choice between quitting and working in a gas station.

I am confused as to the amount of emotions concerning a flat-fee or fee-for-service. Maybe its that Realtors (myself included) have been brained washed to believe the one-size-fits-all is the only way.

We offer full service as well as a fee-for-service program for FSBO or people who want to be more involved in the process.

We need to be more responsive to our clients needs instead of trying to put a square peg into a round hole, we should be offering multiple levels of service.

Isn't that why we have agents like you and Rick? (I think that's a good thing) Not everyone wants to be an agent for every buyer and seller needing/wanting a discount.

All true, but I must share this experience I had today

I had a call from a realtor about one of our FSBO properties listed in MLS. She was almost beside herself; How could a FSBO be listed in MLS! I expained that we had no agency relationship with the seller and the concept of Flat Fees and Marketing and also reminded her that they had agreed to co-op 2% (Here in Tucson co-ops range from 2-3). You would have thought I insulted her, she said she would never work for 2%. So I suggested she get the other 1% from her buyers or get it from the seller through adjusting the sales price. The phone went dead.

Anyway this story has no moral to it, just thought Id pass it along. But what struck me as wrong was I detected no concern for what was in her buyers best intrest only her commission.

Imagine how much better your life would be if you could use a higher income level to solve some of your "me" time problems.. Exposing yourself to toxic mold and gutting a house may bring tears of joy, but wouldn't you rather have simply paid a properly protected cleanup crew, or had the homeowner, who's responsibility this toxic mess is, clean it up while you could focus on "me" time? Here's the hitch, we all only have so many hours on the this planet. How you are rewarded is all up to you. Money isn't everything, but it sure does offer you a few more choices. "Me" time becomes an option, instead of a dream when you do have more income.
Here's another thought. With the over-the-top level of customer service you provide, you could easily charge more, make more and STILL get teary eyed letters. Clients will pay for service, simple as that; and they will appreciate it just as much as your "discount" clients. Money won't rule your life, but neither will your clients. Still not convinced? Let's say you did 10 deals last year, each at $100,000.00 and each at, 1.5% comm. That's $15,000.00. Now, if for the same effort you received 3%, think what kind of options doubling your income would make. Think this is overcharging?? Is being poisoned by toxic mold, and clambering through the detritus of a hurricaine at a discounted rate really worth your health? Just my .02. YMMV

jmlrealty

You have valid points. I like and respect logical argument.