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 This listing should be good until sold or withdrawn.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.