As for why real-estate agents still exist at all: they are necessary for sales when the seller has already moved out to another town. Huge hassle to set up meetings with multiple prospective buyers to let them into the house or apartment at a time of their convenience. Agents exist primarily to serve that purpose.
Agreed about the ludicrous 5% charge, though. In Germany they charge it because they can: they have respected professional organizations with impressive-sounding professional qualifications, and everyone of course charges the same fee to avoid unseemly competition. Not sure if “rogue agents” with flat fees exist here yet, although I do think they are technically legal.
I can only assume it’s because people buy and sell homes so rarely and the overall transaction value is so high, that they don’t care too much about the fees.
I also think there’s a related psychological aspect: those professional qualifications, however phony, instill some degree of confidence when making such a large and rare transaction.
William Howsonsays:
“Agreed about the ludicrous 5% charge, though. In Germany they charge it because they can: they have respected professional organizations with impressive-sounding professional qualifications, and everyone of course charges the same fee to avoid unseemly competition. Not sure if “rogue agents†with flat fees exist here yet, although I do think they are technically legal.”
I’m sorry but this is crap. You are literally describing how Realtor view themselves in America. They have ” respected professional organizations with impressive-sounding professional qualifications” too. Also the vast majority do this “everyone of course charges the same fee to avoid unseemly competition”
I’ve worked and bought homes in the UK and the US. The reason I felt compelled to respond is your comment seemed arrogant and ignorant in the extreme.
You seem to have thoroughly misread my comment. I do not doubt that realtors work in UK and US much like in Germany, but it’s only the latter that I’m personally familiar with. The “respected” etc. was of course ironic. Realtors provide precious little actual value for their high fees, so the facade is a requirement to make the fees seem reasonable.
Leanne Dsays:
The reason the internet has not killed the need for a realtor yet is that there has not be developed an easy to use program to take the scary out of selling it FSBO. If someone intelligent would develop a simple program, that any age owner can use to take them step by step in how to sell their home, things will change. Think of “Rocket Mortgage” or online tax programs or even Carvana work. No one enjoys paying to much to sell their home and working with realtors is a real disappointment and frustration. Some very bright person is going to make a lot of money.
Both the buyer and the seller have to decide to forgo using an agent in order to have an agent-free transaction. Perhaps the situation is somewhat like a prisoner’s dilemma. The travel example is not quite analogous, because the choice is entirely up to the traveler.
As far as I can tell, in Canada, the buyer does not have incentives to sign up with an agent, only the seller does. So as a buyer, you can shop around, try agents and also check out the Internet. If, as a buyer, you choose to limit your options to whatever an agent will show you (=sellers that have signed up with an agent), then you are obviously being captured. But why would you do this?
For the seller, it is a bit more complicated since they usually have to sign an exclusivity contract. But why would the sellers agree to such harsh terms?
Why would a buyer not want to have representation, when the buyers’ agent is paid by this listing brokerage as a requirement of MLS participation? Effectively, the buyer’s agent works for the buyer at no cost to the buyer. The listing brokerage’s fee schedule (commission percentage or flat rate) to the seller does not change when an unrepresented buyer shows up, so the only person who benefits from the buyer not using a buyer’s agent is the listing agent.
Michaelsays:
This actually would be fraud all most everywhere I have heard of in North America at least. The buyers commission can not be pocketed by the selling brokerage. In fact it is never forwarded by the seller’s lawyer, only the funds agreed to in the commission sharing agreement built into the sale agreement (or it’s equivalents)
Kathleen Gsays:
Actually the listing brokerage and the seller agree on a %. If a buyer uses a different agency, the % is split between the two brokerages. If the buyer is unrepresented, the listing brokerage earns the full % and does not split with anyone. Ps the “agent” doesn’t receive the commission. The brokerage firm does. The agent receives a portion of that based on their ageement with their broker.
debbiesays:
I have bought and sold around 10 houses in different states and have never really felt that the realtor was representing me (even when they come with recommendations from acquaintances) – only interested in the transaction going through. I am done with realtors.
I am curious, what could your agent have done to make you feel represented?
ellysays:
I had it with realtors and Realtor.com, and Zillow, and and ReMax. I posted my house few times at craigslist and had more buyers from Craigslist, then from the local realtors.
Realtor.com, have a picture of my house and they posted my house address on pictures are not from my house. They posted filthy bedrooms, trashy rooms, and basements from other filthy homes, with my home address on them and a picture of my house outside. Showing that this is how my house looks at the inside. Zillow, Remax Realtor.com and Trulia, including local realtors, are disaster for my property. This is what I get from local realtors. : Will be glad to get your house off your hands. It will sold very quickly at $29.900″ A $120k house built 1990’s for $30K? Their desperate to steal homes to give it to their children and or to rent them. The Realtors are Unethical people. Don’t put them in your home. They are careless and disrespectful of the seller’s property. Local realtors came to my house with out my knowledge when I had my home listed with them. Many valuable items were missing, they bring big families into my house, and everybody is running loose in it and stealing from the seller. All this Zillow, Realtor.com, Trulia and Remax are crooks! They evaluate and post your property with out your permission at the lowest price possible. Everything they post is out of date. Who are they to tell me how much my house is worth? Here in the USA, you been chased from one neighborhood to another due to the stupid realtors criminal idea. Low pricing your homes, can bring criminals into your neighborhoods. Time to sell it for the crook can make more money in commission. People work hard for their properties, and wishing to leave it to their children, instead to the drug sealers and criminals who move into the neighborhoods. They end up with beautiful homes because the stupid realtors trashed the neighborhood down with low prices of our homes. I put lots of money into my house to keep it up. Realtors can go to hell!
Some crooks end up with beautiful homes, and the owners could not afford a Nursing home to stay. That what is going on. People, you know your home more then a realtor just like you know your body. You price your home, you know how much it worth.!!! If a realtor want to rip you off, shoe him /her the door. I have seen too many crooks rip off hard working innocent peoples money and property.
Michaelsays:
That is completely incorrect. Buyers in Canada do sign with real estate agents. This in no way limits your options to what an agent will show you. An agent doesn’t get paid unless a deal comes together so it would make zero sense to limit showings at all.
Also an “exclusive contract” doesn’t give the agent complete control, in fact the contract isn’t even between the agent and the homeowner at all.
The analogy with taxis and travel is not quite right. Selling a house with an agent involves two individuals (as opposed to one and one service providers as in taxi or travels)
There might be also a psychological factor because it is — mostly — a once-in-a-lifetime event, and people are willing to pay for it. I would think that the use of agents declines for people buying/selling frequently.
Selling a house with an agent involves two individuals
Doesn’t Airbnb also involve individuals?
There might be also a psychological factor because it is — mostly — a once-in-a-lifetime event
Could be.
people are willing to pay for it
And it does make sense to pay for it… but the amount being paid should be lower today since it is easier to sell and buy.
Here we have a setup where the job of selling and buying houses are never been easier, the information is freely available and easily managed… whereas the commissions are, in anything, increasing.
In effect, I am saying that the Internet should have increased the real estate productivity. It hasn’t.
James D Easleysays:
My wife is a realtor. She has been a realtor since 2002.
What my wife goes through to list or sell a home is not an easy job. She also has to pay for her own training, insurance, automobile, gas, and upkeep out of the 3% commission.
Owners usually have an emotional attachment to their home, therefore, they tend to overpriced their home, which causes it to stay on the market for a longer period of time.
The buyer wants to get the home at the best lowest price. A great realtor then becomes more like mediator. The sell and/or buy of a home is probably one of the largest purchase a person will ever make in their lifetime. I for one am willing to pay the 3% on the buying side to handle all the documents and transactions to be submitted, not to mention a realtor being aware of the home price market for the neighborhood.
I for one am willing to pay the 3% on the buying side to handle all the documents and transactions to be submitted
For an average house in Canada, that’s well over $10,000. I am not sure which paperwork one refers to, but it does not include the deed, which is a separate step with additional fees, nor does it include the financing or payments.
not to mention a realtor being aware of the home price market for the neighborhood
It is trivial, at least in Montreal, to look-up prices online for similar houses in a neighborhood.
The internet has made buying and selling harder.
Most of the data is wrong. I cant count how many times I get a call from someone regarding tax rates for a property they like and zillow has it way low.. Also, Zillow zestimate is off in most markets by 20%+ more then 80% of the time. Why would you risk underpricing your most valuable asset by 20%+? Why would you risk overpaying for your most valuable asset? Why would you risk overhaggling on repair requests, especially if your agent, who has likely spent 10k hours watching the market, touring 1000s of homes, has 100s if not 1000s of closings under their belt is telling you that the price is incredible and if your not more flexible on a 100 dollar repair your going to lose 30k in potential equity. See it happen all the time. Selling and buying is rare and extremely stressful. The internet cant cope with that part of the transaction.
Your edit is correct regarding the travel industry. Early on, I felt like i was finding my own incredible deals, no need for a travel agent. Now those easy deals are gone and so are the traditional agents.
Tech companies have given people who liked the no haggle pricing of the saturn, a way to buy and sell homes.
Lets not forget the actual viewing of homes. I see this in the rental market and it amazes me everytime. Landlords trying to save a fee and list on their own. Tenants who dont know they can use an agent. Months and months of vacancies for landlords in hot markets.. because they arent available 9-9 for showings. They often accept the tenant who is most eager to match the landlords schedule as months if vacancy drags on. These most eager often have issues and hope the inexperienced landlord doesnt do a rental background check, leading to huge risks in the landlord.. costing months of lost rent and eviction costs.. all because they wanted to save 10% annualized.
The tenant side is just as bad.. They often call me 6 months in advance expecting a 3 day rental process to take 6 months. 6 months to do it themselves vs 3 days!! The internet has made it harder to buy and sell.
Jenelle Fontenotsays:
Probably referring to the purchase offer with contingencies, acceptance, and repair requests. These documents really aren’t that complicated though.
You forgot to mention that,
First: not every listing will give you 3%(or 6% with the buyer side),
Second: you do not make the 3%,
A Little less than Half(depending on your split) goes to the broker, 0.5% goes to marketing,
Net Pay is around 1% of the transaction.
This article messed up when he talks about commissions.
James, Great point. There are tons of fees, licenses, Mls , gas and the list goes on that the realtor has to pay, without mention zero benefits, we are independent contractors.
How about having a professional to help you sell the most expensive item in your portfolio.
Funny that he talks about $25k in commissions, just do the math, you need to sell a over a million dollar home to achieve that. Does not happen every day or year.
While you are right, you forget that the point Daniel is making is that things have gotten easy for the agent with automation, prices of real estate have exceeded inflation, but the commission has not gone down.
Forest Millersays:
Late to the party, Dominic, but you keep mentioning how things have gotten easy for agents, with technology, etc. The same can be said for many industries, yet prices for their services increase. To me, it’s weird that real estate brokerage fees HAVEN’T increased. I had a blood test last week — $800. FOR ONE BLOOD TEST (and that is only the lab’s fee. . .can’t wait to see what the diagnostic aspect will cost). Imagine them demanding that price even a decade ago. The average price of a U.S. home in 1980 was $68,700.00. Today it’s $264,800, yet real estate agents make that same 1980s commission rate. What other industry has an expectation from the public that their pay, be it commission or otherwise, should decrease??? Just curious. And, no, I’m not a real estate agent.
The average price of a U.S. home in 1980 was $68,700.00. Today it’s $264,800, yet real estate agents make that same 1980s commission rate.
If you make the same commission rate and the house prices go up, your income also goes up. So it simply not true that, in nominal dollars, the fees have not increased. They have.
A more interesting question is whether they have increased after accounting for inflation. I would guess not.
The same can be said for many industries, yet prices for their services increase.
Productivity across all industries increases by one or several percentage points every year. That’s why we are much richer today than we were in 1970, and incomparably richer than people in 1900.
Waynesays:
Of course you would be willing to pay the fee because your wife is a realtor. Therefore, your opinion is biased and irrelevant.
John Isays:
You are ignorant of what real estate agents actually do. When was the last time you acted as an agent in a real estate transaction? Do you own your own business where you are responsible for your insurance, taxes, benefits, gas, marketing, and all the other aspects of being a small business owner? I think not. I just got into the real estate business. It has become harder since the internet has been invented because people believe everything the read on the internet. 90 percent of the time it is incorrect or inaccurate because they get it from an unreliable or outdated source. Try being an agent someday, you’ll learn through your battle scars like I have.
“Doesn’t Airbnb also involve individuals?”
It does indeed. But look closer at the business model. The company charges the “host” a service fee of 3%. It also charges the traveler a “Guest Service fee” that varies between 6 & 12 %.
Airbnb hasn’t REMOVED a middleman. They’ve simply hidden it so that people forget it’s there.
Neither has Uber, or any of the other rideshare companies. Each of those companies keeps a hefty percentage of the fare paid by the rider. I believe it’s up near 20% in most cases.
Goransays:
Airbnb provides tremendeous value. Cost of short term rentals using an agency exceed 40%.
There are exclusive buyer agent agreements in Canada and people do sign them. Also, if the buyer decides not to use an agent but falls in love with a home such that the seller has an agent, then the buyer must use the seller’s agent. The buyer cannot directly deal with the seller.
Also, if the buyer decides not to use an agent but falls in love with a home such that the seller has an agent, then the buyer must use the seller’s agent.
… because the seller has signed away his right in the first place.
But then, my question is really: “why hasn’t the Internet lowered their power”.
Why would I agree to sign away my rights when doing so, the research shows, is against my own interest?
Lukassays:
The real estate market cannot really be compared to the taxi or travel market. I can perfectly go to any place without a travel agent by organizing the trip myself but if I want to have that exact real estate then I will have to buy into the agent no matter if I want to use their services or not. For me it’s pretty much like protection money. In the Austrian rental market usually only the buyer has to pay the agent. Since flats in cities are scarce, it’s a seller’s market for the agents as well.
I can perfectly go to any place without a travel agent by organizing the trip myself (…)
That’s true today with the Internet. However, only 20 years ago, that was not practical. For example, you’d have to track down a hotel in the city you wanted to go. Then you would have to call them (using the phone) to make a reservation. Same with booking a flight. It was time-consuming and required a lot of knowledge.
I will have to buy into the agent no matter if I want to use their services or not
I don’t think that’s true. Look at how I started my blog post, back in 2002, there were already plenty of houses advertised on the Internet. This is even truer today, of course. I bought my current house without a real estate agent many years ago.
The very fact that researchers can compare the degree of satisfaction people have with and without an agent proves that people can manage without an agent. And the research seems to indicate that people who forgo the agent are more satisfied.
In the Austrian rental market usually only the buyer has to pay the agent.
That’s interesting. The reverse is true in Canada.
I would argue that people who bought without an agent would be inclined to say they were satisfied with the process. You might get a different answer if a couple disagreed over whether they should get an agent, went without one, and then asked the person who disagreed.
Also people who paid an agent have a tendency tp question their value since they paid a lot for it. It is like customer satisfaction on high end cars.
jdsays:
People travel more than they buy houses. Fear of the unknown and social pressure.
You do realize that not every home is over a million dollars and you do not get the entire commission.
To make what you stated in the article is selling homes over 1.5 million.
That changes nothing. Even if the agent made 1% out of the 5% charged to the homeowner, the homeowner still pays 5%.
It is tens of thousands of dollars. In comparison, a home inspection will be a few hundreds, a lawyer will charge you a flat fee, maybe as low as $1000. The bulk of the transaction fee is clearly charged by the agent.
To make what you stated in the article is selling homes over 1.5 million.
Real estate agents in the US charge over 5% on average. 5% of $1.5 million is $75,000
If both buyer and seller have agents, the agents split the commission (2.5% each, instead of 5% for one). From the buyer’s point of view, it might seem like the cost of their agent is free, since it does not effect the total price that they pay.
The comparison with the hotel search is good. The typical GDS (=global distribution system, the bakends of Expedia etc) systems charge a fee of 15%-20% of the hotel booking price. AirBnB charges about half that, between 6% to 12%. Still, both the GDS and the AirBnB fees are much higher than the typical real-estate broker fee, which is around 6%.
As in the case of real estate, in principle, hotels would be better off by getting clients directly, bypassing intermediaries altogether. However, this has not happened, due to the highly-fragmented nature of the hotel market. Buyers cannot search the market effectively to find what they need. The case of real-estate agents is similar.
The intermediaries in both real-estate and hotel-search are smart to avoid imposing any fees to the buyers, making the sellers absorb all the visible costs.
If you compare with the airline market, you will see that the intermediaries get, comparably, tiny fees. They are in fact so tiny that one travel site entertained the following: When the user is about to click “confirm” to book a flight, pop-up an ad and send the user to book directly with the airline. The referral advertising fee was competitive with the fee that the travel site could charge for the flight.
When I book my travels, I usually go directly to the hotel website. I had not realized the financial impact of my choice.
Goransays:
You’re comparing apples to oranges. Airbnb could be compared to short term rental agencies which charge 40%+ fee. Airbnb, VRBO and others are makin such agencies extinct. Also Airbnb charges the booking fee which pays their commission to buyer.
Olafsays:
It is also about trust. A friend in russia sold her appartment, with the money going directly to buy two smaller appartments. There was a huge anxiety regarding being screwed over, when so much cash walks over the table. Stories with people selling appartments, that they do not own, enemy appartment take overs with kicking old people out and so on. If those real estate brokers push such stories, only evil minds would think so. :>
At least in Canada, real estate agents do not handle the transactions: banks do. It would be very unusual to buy and sell properties using cash, it is all through bank accounts.
Stories with people selling apartments, that they do not own, (…)
At least in Canada, real estate agents do not handle this part of the business, as they typical do not have any legal stance to do so. There are official registries and you have to pay separately to get the deeds. Legal fees are a fraction of what the real estate agents charge.
In effect, at least in Canada, all that the real estate agent does is to connect the seller and the buyer, everything else (transactions, deed) is separate subject to its own fees.
My accountant actually recently recommended that one of my spouse or I get a real estate license to avoid these fees in the future 🙂 So I am now somewhat up-to-date about this (and you, too, could be for the low low price of $66 and a 75-hour online course).
To be clear: this is all for NY state/USA, so laws in Canada (and to a lesser extent, other states) may be different than what I know. However, to clear up a few misconceptions from the other comments:
* I think the main reason is that most listings are posted on multiple listing services, which, depending on the MLS, may require you to be an agent to participate in. Thus, I think the internet has probably exacerbated the need for agents, since people generally aren’t finding houses by driving around seeing lawn signs or checking the classifieds anymore.
* Brokers that charge flat fees absolutely exist. They are generally called “discount brokers.” Keep in mind agents aren’t keeping the commission, either, it actually goes to their broker, it’s split between the buying and selling brokers, and then the agents get a percentage of it.
* As someone mentioned above, if the seller uses an agent and the buyer does not, the seller’s agent will be a “dual agent” for both parties in the transaction. Now, if the buyer is using an agent and the seller is selling-by-owner, the buyer’s agent isn’t going to be super interested in showing the buyer that property, since they might not going to get a commission for it.
* There are an amazing number of disclosure laws about property condition, history, and rights which are mostly waived when an owner sells a property themselves.
However, going through the course taught me just how many people have their hands in the pie on an average real estate transaction and it’s kind of ridiculous (at least a dozen by my count). I think the industry is ripe for disruption, but it’s also dominated by who owns the listings, which right now is Murdoch (realtor.com).
Though I am sure that laws and conditions vary quite a bit as you move around the globe, my hasty research seems to indicate that there are many similarities.
Msays:
Not sure how NY is but in IL your only considered a duel agent IF both parties agree to it and if seller has an agent and the buyer doesn’t it really doesn’t matter. If the buyer has one and the seller doesn’t, you can still show the home, but can choose have the buyers sign that if they choose to buy the fsbo home that they will be responsible for paying the agents commission.
James D Easleysays:
You are right on. My wife is a realtor with 13 years experience selling high end homes ($400k – $1M). For a while, she was helping with VA buyers, but the obstacles and uniformed buyers make it hard to assist the VA buyer, who’s in the market for a $150k home. She actually has to work twice as had to help a first time VA buyer, mostly because they are not savvy on a real estate purchase.
I have been a REALTOR FOR OVER 35 YEARS. I have always put the seller’s interest above my own. I have many times lowered the fee to the seller to make the sale work.
I say to those who think real estate brokerage is so easy, quite your job, get a real estate license, work fulltime and try making a living selling real estate.
It takes a special kind of person to be successful in real estate.
James G Snotherly, REALTOR
Raleigh, NC
919-345-2458
Janet Bidwellsays:
Kristina: * As someone mentioned above, if the seller uses an agent and the buyer does not, the seller’s agent will be a “dual agent†for both parties in the transaction. Now, if the buyer is using an agent and the seller is selling-by-owner, the buyer’s agent isn’t going to be super interested in showing the buyer that property, since they might not going to get a commission for it.
Me: I am a NYS agent. No, that is not how one becomes a “dual agent”. One becomes a dual agent when buyer and seller agree to it. Then the agent becomes a facilitator and the seller loses all the fiduciaries they previously had with the agent. I do not work as a dual agent, if I sell my own listing the buyer understands I am representing the seller and has agreed to use me to purchase. I have a duty to treat the buyer fairly and honestly, and if you think I’m going to screw someone who is going to see me at the supermarket and tell all their friends I screwed them, that’s just silly.
I have sold FSBOs representing buyers and had no trouble having the seller sign a one time fee for that buyer. If they don’t, the buyer is responsibly for the fee and it becomes part of the offer: “buyer offers $X with X% paid to my agent at closing”. If the FSBO fits my buyers needs, I sell it.
Kristina: * There are an amazing number of disclosure laws about property condition, history, and rights which are mostly waived when an owner sells a property themselves.
Me: What makes you think sellers don’t have to disclose if they don’t use an agent? Did you say you got licensed in NYS? @@
Here is the answer from an experienced by owner seller who turned to use the agents: Both buyers and sellers are uneducated as to the mortgage and realestate attorneys who can help. Also EVERYONE personally knows a realestate agent so a LARGE percentage of buyers have agents or should I say the agents exclusively lead them to the highest cost purchases, one can not even list on Zillow without the agents appearing affiliated from the buyer perspective. Thus you reduce dema.d by cutting out agents. $30,000 to sell my house and I paid it because by owner I would not have the same customer base. Now however I would know hiw to advertise it on my own and will do that for my clients as tbeir realtor.
Scott Bradfordsays:
The same is true in many fields. Why do Professors get paid so much! I can look up all the things I want to learn on the internet. No need for universities I can learn it all on my own. (Get the point!)
The same is true in many fields. Why do Professors get paid so much! I can look up all the things I want to learn on the internet.
Actually, you always could look most things up nearly for free. There is a great movie line on this very topic: https://youtu.be/s8KZbov-mD8?t=169 But college professors are not in the “looking things up” business.
Msays:
Here’s the thing ladies and gentlemen, I’m an agent so I can tell you why we are useful and where that commission check goes. Most companies, not all, will charge a monthly due, that we pay regardless of whether we sold a home that month or not. We don’t get paid hourly, so yes our time is money. We have professional photos done of your home, we have flyers printed, host open houses and we host brokers open so that other agents with buyers can immediately tell if this is a home they will be interested in. And who by chance pays for these things?? Us. And if your a buyer, we actively check the market every day to see if that perfect home has appeared. Some homes don’t go on the mls, some opt to go on a private listing network which will make it impossible for you to find on any website and they don’t have a sign in the yard either. If your a fsbo unless someone drives by they will never know, your perfect buyer could be out there and never see your home because they haven’t driven down your street. Have you ever had to deal with a short sale? Its COMPLICATED, BANKERS ARE A PAIN IN THE ASS TO DEAL WITH. Speaking of pain in the ass, you have questions, we get you the answers, you need a roof inspected on new year’s eve in the freezing cold(happened when I bought my first home), we have a guy for that, water problems, we can recommend someone for that too. And yes, we tell people you need to lower the price and we have good reason to do so because most people think that their homes are worth a lot more than the are when you look at the market for that particular area. As for our nominal commission rate, well, let’s say 5% (it does vary) with my particular company, 2.5% of the 5% goes directly to the buyers agent, (you didn’t think they worked for free did you?) And of that now 2.5% that will go to me, anywhere from 30%-50% (depending on brokerage) will go directly to the company that holds my license and then I get the left over. Oh and since taxes aren’t taken out I have to make sure my accountant, that I pay, takes the appropriate amount out so that I’m not owing come tax time. Remember people, we have bills to pay too and just like you our time is valuable and if you wouldn’t work for free, why would you expect someone else too.
Remember people, we have bills to pay too and just like you our time is valuable and if you wouldn’t work for free, why would you expect someone else too.
I would not expect anyone to work for free, but then you have to wonder why real estate agents cost as much as they did 30 years ago in real dollars when we did not have databases, the Internet, and so forth.
Rollinsays:
Due to the increasing costs of online marketing. Many top producers pay upwards of $25,000 month just for marketing. Sellers who try to discount agents believe that all a agent does is hold open houses and send flyers. Wrong. There are professionals who attain more then there commision cost, don’t just hire your cousin! A typical $100,000 home will cost the typical agent $300-900 just in marketing costs for 6 months if it sells or not. Whats the typical wage of a writer nowadays? Should be no cost considering anyone can do it.
Jaredsays:
More information doesn’t necessarily mean it’s good information. For example the “zestimate” on the house for the founder of Zillow was wrong by $20,000!
Janet Bidwellsays:
” you have to wonder why real estate agents cost as much as they did 30 years ago in real dollars”
I bought my first house for 59,000 in 1982. I don’t know how she lived making $885 on a sale (she had one side, based that on a 6% commission). Remember that is before her own Realtor fees and taxes. No wonder it was mostly married women working part time then.
Janet Bidwellsays:
PS to my last answer to “why real estate agents cost as much as they did 30 years ago in real dollars”
One of the main reasons buyers and sellers utilize agents is their distaste for negotiations over price and a multitude of transaction issues.
Jeanette Leesesays:
First of all agents do not often earn $25,000 on a single deal. They also spend a large amount of time coordinate access for buyers and agents to enter a home, deal with title company, organize inspections, discuss issues with the lender, buyer, seller and title company and this can now go on for a single deal for 6 to 8 weeks . They earn their commission and if the buyer and seller have a full time job, they won’t have the time to deal with all the demands. It is a case of you get what you pay for. A licensed Texas agent is also vetted and you are not walking into a home with someone you don’t know anything about which is a safety issue.
if the buyer and seller have a full time job, they won’t have the time to deal with all the demands
I don’t think that’s true. I bought my house without an agent and it was not more difficult than buying a car. We met to sign the paperwork in front of a lawyer, and that was it. And this was years ago… it would be easier today.
We like your thinking! We’re a California startup that lets homebuyers easily create their own offers, represent themselves in a real estate transaction and save the 2.5% commission that would have otherwise gone to their buyer’s agent.
Check out our site (www.homesavi.com) and let us know what your thoughts!
Katie Wagonersays:
Funny, Home Savi even relys on real estate agents. “…constantly seeks to partner Home Savi with the best and brightest in the real estate industry and beyond.” So if the buyer can do it on their own with Home Savi, why does Home Savi seek the best and brightest in the real estate industry? The conclusion would be because they have the knowledge and experience and Home Savi also finds value with the best and brightest in the industry. So even Home Savi is not without seasoned real estate agents on their staff. Then why would a homebuyer not have a real estate agent represent them, especially when the seller pays the buyer commission. With Home Savi, the buyer pays but is self-represented. With a Realtor, the buyer’s agent is not paid by the buyer and the buyer has representation.
There are always exceptions. Agents are paid for what they can take of when things go awry. Just because you bought a house or two and got lucky with zero complications doesn’t mean that is the case most of the time. Over the past 17 years I can recount numerous times when I was the cause of the sale closing. Each transaction is different, just like surgery you don’t know what’s going to happen until you open the transaction. If there are complications you better be prepared with a competent Realtor. It is ignorant to comment on a subject you don’t really know much about unless your involved every day in many different sceneries with different types of people. And don’t forget to mention the weeks and months we work for people and then never get paid because they change their mind or have a personal occurrence and cannot continue with a sale. Most people commenting have a salaried or hourly payment structure in their job. The reason Realtors still exist and get paid 6% is because we are effective. Some are better than others, just like clients.;)
Daniel, one big factor is that realtors are a racket. They’re a licensure racket – the field is closed, by law, to people without a license. This is similar to taxis (and almost all of Uber’s regulatory headaches have been with regulators trying to protect the taxi racket).
Look up the Institute for Justice’s fights for people trying to make a living against various occupational licensure rackets.
Since both parties need to agree to not use realtors, and the profession is protected by licensure laws, we seem to have sticky prices. As others have mentioned, there are some bits of information and some processes that either require realtors or seem smoother with realtors. All these factors together is enough to keep them coddled at artificially high prices, just like psychologists, pharmacists (what do they actually do?), et al.
They’re a powerful lobby too. For example, they always lobby against a flat income tax that would eliminate all deductions, including the mortgage deduction. (Intuit and H&R Block always lobby against the flat tax too, for obvious reasons.)
Tony Naplessays:
Ive heard some good points here, but the fact remains the industry is closed to FSBO. Need flat fee or reduced vost MLS agent to get into MLS. So lets say list side is as low as $149.00
The buy side must be put in so buyers agents will typically accept 2.5% and rarely lower. Realtor.com us great site, but they source only from MLS. So no FSBO on Realtor.com.
Zillow caters to agents. So your FSBO listing has agent ads next to your listing. Owner is 3rd or 4th in list of contacts for Zillow. Bottom line the main sites MLS, ZILLOW, TRULIA and Realtor.com are the internet sources and they are highly skewed to the agents and MlS. Then you have buyers who dont see cost so why not use agent. Consequently if you want traffic and you want agents to include your property in their buyers list then seller must pay buyer agent a minimum of 2.5%.
So overall the sell side is getting cheaper. The buy side went down .5%.
By the way me experience with agents tells me 90% are not informed and the other 10% wont work for free. The industry is expensive to agents since they must split commission with broker and often pay a transaction fee to boot.
My biggest issue is why a percentage? Why should agent get same percent for $150K, $300K, $500K and at $1Million and higher. The added cost to sell home to agent is not linear.
I can get top flight pictures and video tour for $150.00 , at much better quality than most agents who useprofessional photographers. Bottom line traffic is generated by MLS and buyers use agents at no charge.
Janet Bidwellsays:
The higher a home is priced the more photos you’re going to purchase, you may hire a drone, a videographer, virtual staging. Open houses for agents go from Panera sandwiches to sunset cocktail parties with champagne and a rawbar. And if the house doesn’t sell you have more sunset parties. While most buyers find the homes on the internet, you can still promote them and most sellers like to see the homes in print, hence, advertising $$ plus glossy brochures. The higher the home is priced likely it will take longer to sell also, especially if it is in an area like mine where a million plus home can be next to a $350,000 home. It’s great you can take good photos, I can’t spend my time photographing and editing and flying a drone plus servicing my listings and getting them sold. Thanks for your input though, I value everyone’s opinion. And you are correct 90% of agents are uninformed and I don’t work for free. 🙂
Franksays:
The reason the internet has not killed the agent in Canada is primarily because of the monopolistic behaviour if the board. It does not publish or allow agents to publish sold data and other key data except in tidbits provided directly to a party in specific transaction. It has been fought in court for years and still going on. The moment that breaks, and it will, the internet will break the agency into smaller, fee for service parts that better reflect the need of the customer and the value. For now, it is an old guard industry in a zero sum game, favouring the membership and not the customer. Not much longer.
Wrong, everything is published and in public view here. We get paid for what we do and what happens behind the scenes you can’t read about on the internet. For example what would you do with an A paper buyer whose loan falls through on the day before closing?
Rashid khansays:
In India Brokers are under Paid and humiliated by both buyer and seller…
Finding home is not that easy task you need detail Knowledge of surrounding and market to offer best clear properties to buyer in india.
Deal don’t happen every month for real estate agent in india but then also they are paid just 1 % of brokerage on resale properties deal Value…that also if you are lucky enough to get paid 1% brokerage from buyer or seller…people in india buy home worth crores but while paying just 1% brokerage to real estate agent they get heart attack.
They don’t understand how real estate agent suffer and have own responsibility towards life.
Many buyer and seller even don’t give brokerage after meeting each other.
Hope RERA works brokerage fixed payout in interest of real estate agent
And Safe guard there hard earned money.
Open Door charges between 10-15% of the price they will pay you for your home. During the inspection they do their best to bring the price down even more with finding fixes and other reasons to pay you less. It is a sophosticated system for fixing and flipping homes. They say it makes it easier for you but ultimately you pay 10-15% “transaction fee” instead of a Realtor fee that is split between two. Please people, get ALL of the facts before commenting.
ayyappansays:
Even though information are available in internet. Real-estate websites are showing half information and tempting to connect buyer to an agent. Those information does not help buyer to contact seller directly to do transaction.
Every industry has adopted internet and defined new strategy to do online business. But, I agree some industry has fallen or disturbed due to internet.
Vickisays:
Could you please share with me where real estate agents are keeping a full 5% commission for themselves?
Quinnsays:
Total bs. I’ve seen more fsbo lose money on selling a house than any agent makes in commission. This article was obviously written by someone who doesn’t value an agent. I’ve never had a good experience buying a house from the owner. They can’t keep emotion out of it.
If you’re going to sell your house and probably use a zestimate to do so….and are ok with it selling for 7% less, then why would you even assume the liability for less money? That’s dumb. I’ve NEVER Met a smart buyer from random calls on the internet.
I can’t imagine how dumbfounded fsbo must be with the dippy randoms from on-line. Hell I won’t even show them. Anyone calling me and only wanting to speak to the listing agent about the house is stupid. “Hey….I want to talk to the SELLERS fiduciary”. Lol. Idiot
Janet Bidwellsays:
Please don’t take this the wrong way, but you know about as much about how real estate really works as I know about computer science.
Vickisays:
A very good friend of mine called to tell me how proud he was of himself for buying his new home directly from the owner. Without the use of a realtor. Bragged so hard about how much he saved in commissions. A month later he called to ask me what he should do about the $45,000 foundation repair that the house needed that’s a seller neglected to mention to him. Sadly that $6,000 he saved in commissions didn’t even make a dent.
More recently a man in my town closed on his great deal home that he got off Craigslist. Went over a week later to speak with the previous owner about vacating the premises and was met with a shotgun blast to the chest. Funeral services are pending. Once again the amount he saved by not using a realtor isn’t even close to what it cost him to not use a realtor
A month later he called to ask me what he should do about the $45,000 foundation repair that the house needed that’s a seller neglected to mention to him.
So had he gone through a real estate agent, the real estate agent would be funding the foundation repair or would have covered the cost of an inspection?
I don’t think so.
Vickisays:
No, as his real estate agent I would have pointed out that suspicious 3-inch wide crack that the owner had filled with cement in the basement and suggested a foundation inspection.
A home inspection costs a few hundreds, representing something like 0.1% of the cost of the transaction. If it were included in the cost of the agent, it would still account only for a tiny fraction of the agent’s commission but it is not even included in the fees.
This is a typical scare tactic. Go through us, professionals, or else you are in danger.
This makes a lot of sense a lot of time. However, there are limits.
Your risk of death while buying a house is not going to be significantly reduced if you go through a real estate agent. This does not even need to be explained. Real estate agents don’t protect you from shotguns.
In fact, there is no reason to believe that real estate agents are somehow less likely than the rest of society to commit crimes.
“A real estate agent in South Carolina is accused of kidnapping a woman who was found “chained like a dog†inside a metal storage container on his property — and may be responsible for the deaths of at least seven people, authorities said.”
I don’t know why anyone would assume that a real estate agent is more trustworthy than a cab driver, teacher or carpenter. Right?
I guess she wants to allude to the fact that, when buying a house, you have to ensure that the legal contract is binding and that the deed is indeed transferred. But real estate agents are not lawyers, this is a legal issue handled by lawyers.
I would definitively recommend paying a lawyer when buying a house.
House inspections should be done, ideally by someone who is *not* affiliated with a real estate agent. Real estate agents do not generally provide this service, and there is a good reason for that: if they did, the could be considered liable if you buy a broken house. But even if they did, the real estate agent is partial: he wins if the transaction goes through. Thus the real estate agent has a financial interest in getting a clean inspection. As the buyer, your interest is that the inspection reveals every little defect.
Other people have made the point that many buyers do not want to have to deal with the sellers directly. This makes a lot of sense. It is a useful service to act as an intermediary. But the claim that the transactions is “unsafe” if it does not go through a real estate agent (but is supported by lawyers and house inspectors) seems silly on its face.
LeaMariesays:
Following this line of thought…
Go straight to the farm to get your milk from the cow.
Go to the automobile manufacturing plant to get your car.
Go to the pharmaceutical company to get the medications you decided you needed by looking up your symptoms on WebMD.
Go to YouTube to get instructions on how to extract your tooth.
Go to OfficeMax yup buy the fill-in-the-blank form template to file for your divorce.
Go to the Internet to find a FSBO home and purchase the biggest investment you’ll make in your life with the money you saved in your mattress (Why should you use the bank’s money? They did nothing to earn it.)
Do it all on your own. You know everything because you have a pulse and a laptop. You got this, Sport! Good on ya!
(Incidentally, I am a real estate agent. I close several transactions a month and work tirelessly 12+ hours a day, six days a week. I earn every penny I make. Which is NOT even close to 6% but specifically (on most occasions) 70% of 70% of 97% of 3% of the sales price minus my travel expenses, office expenses, photographer expenses, staging expenses, house warming presents, etc.
With all due respect, only a fool represents himself in court.)
I believe the upshot is that, in the US, realtors lobby the government really hard so that nothing changes. Just look at all the realtors who popped up out of nowhere to comment on this post.
Dianasays:
Finally someone Finally wrote this to the public!
Title Companies do All the legal work to protect you!! Not a Realtor!!!
Stop paying Realtors you Equity. It is your money……
Adam Katzenellsays:
It’s more similar to internet stock brokerages. Sure, a lot of people use them. But in no means has it gotten rid of financial advisers.
You have oversimplified the home selling and buying process. A good agent will get clients better results. This blog, however, lumps all agents together. I can show you concrete examples where good agents have outperformed.
As an agent, I fully admit that there pare also a lot of very poor agents in the USA. They give the entire industry a bad image. What we need are tougher licensing standards and minimum performance standards to maintain a license.
Calum Chacesays:
Not sure if anyone has already said this, but it seems to me the reason estate agents are still thriving is that buyers want the reassurance of dealing with an intermediary who sites in an office when they are considering spending the amount of money they spend on a house. I’m pretty sure it is buyers who are driving the decision to allow agents to remain, not sellers. And of course it is not the punters who are paying them (unless sellers are effectively managing to pass on the cost.)
The agents themselves use the internet more than any other medium now to draw the punters in, but the punters want to be shown round by a professional, not the seller.
Whether this is sensible on the punter’s behalf is a tricky question. Having bought and sold a few properties in the UK and Spain over recent years I would say some agents have definitely earned their money and others definitely have not.
Interesting that they get 5% in Canada. In the UK they get between 1 and 2.5%, depending whether they are sole agent or not.
Katie Wagonersays:
I have read through about half the comments to this blog. I apologize in advance if any of the following comments are redundant. But this blog and continued opinions to comments by the author are concerning.
The internet has provided more accessible information on real estate but not all accurate information. And clearly from the comments I read, there are some major differences for agents and client representation in Canada, Europe and the US. In my conservative area in the US Midwest, commissions are 5-7% (yes, 7% paid often, split at 4% to listing broker, 3% to buyer broker). While the author of this article has the opinion real estate agents are not worth this percentage, the majority of consumers obviously see the value since they are contracting real estate agents and paying the commissions.
I have not seen anything mentioned about the referral fees real estate agents pay out of “all” that commission. So on a relocation referral client to my broker that I handle, 40% of the commission goes to a relocation department/company. What’s left of that 3% is then split with my broker at my split agreement. Then my expenses (which others have mentioned in other comments) are deducted before I have actually earned anything. And don’t forget I still have to pay my 35% income tax out of that earned income.
While there is more information available on the internet, it has caused more work for me. I often am having to show more detailed information from the MLS (facts), auditor, etc to disprove inaccurate information found by buyers/sellers on the internet. It’s interesting that the perception of real estate agents is that all we do is sell. That’s like saying all a surgeon does is surgery, or all an attorney does is show up at a trial. (Yes, agents are more like attorneys or doctors than travel agents or taxi drivers. Funny an insurance agent is not mentioned here.) There are always hours of background/research work that the average person does not do, even with all the available information on the internet.
It would be interesting where the opinion on productivity came from. Is there specific data to back this up? Or is this just a perception from the outside looking in? In my opinion, this blog sounds more like opinion than conclusions based on facts. I would also challenge the author to get his real estate license and then assist consumers in listing their house or in buying houses in order to truly understand the industry and how things really work.
PS And the real estate industry in the US works to protect consumers. The NAR has lobbied with the government to keep the mortgage interest tax credit for all homeowners. There is a bigger picture the average consumer doesn’t know or see.
Marksays:
Real estate agents only deal with real estate agents. They own the MLS, and they box out for sale by owners. They get 85% of for sale by owners to give up and come to them, they monitor for sale by owners and pitch them. It’s market control.
In the article it says what if I am off by 5%, well if you didn’t give 6% away to an agent you would still be ahead.
An experienced real estate agent might have a wealth of know-how, especially associated with a selected area. simply putting that down in a chain of posts might be useful for assets buyers.
Brad O.says:
What will truly flip the industry on it’s head is “Buyer/Seller Education”- once they realize that it’s as easy as looking at recently sold properties in the area to determine a competitive market value of said home, and that all of the sage advice a realtor can provide is available online, a realtor’s value goes out the window. It’s not rocket science and is rediculously easy- saving both sides THOUSANDS of dollars in the process. The industry is a HUGE racket and I’m a licensed agent saying this… I’d love nothing more than to expose it for what it is and lead the charge of educating the mass of consumers being screwed over by it.
Goransays:
The elephant in the room is that most real estate is owned by baby boomers and older generations who are used to agents. As real estate transfers down to tech savvy population you will see dramatic change in how this is done.
The elephant in the room is that most real estate is owned by baby boomers and older generations who are used to agents. As real estate transfers down to tech savvy population you will see dramatic change in how this is done.
If this were true, would you not expect that a decline in the reliance on real estate agents would be already measurable?
And finally, somebody gat the nerves to spill the truth…. Nice comments!
Lktsays:
The reason real estate companies, and other similar-in function-companies in other industries, stay in business is because they have established a comprehensive “platform” that make the process of buying and selling much more organized and streamlined.
You can do it yourself but having a realtor takes the hassel and stress out of the equation. For many people this is worth the 6% commission.
The internet has changed forever the markets of the world but some things will stay the same. I would think though the multi-listings would be phased out by now. Why share a commission when most buyers know all properties will be listing on the internet?
Sharon Oliviersays:
Really? Are you going to google how to operate on your own foot? Let me guess, next you will be representing yourself on a trial too? YES, Realtors are still around for a good reason! Just like doctors and lawyers are. We are professionals who have to study real estate law and contract law. I bet you will really wish you had hired a realtor when you go to litigation, which happens ALL the time in real estate transactions. We pay BIG money for E&O insurance and continuing education to keep on top of the ever changing laws, and to help and protect our clients. Good luck to you sir, because something tells me that you are going to need it!
We are professionals who have to study real estate law and contract law. I bet you will really wish you had hired a realtor when you go to litigation, which happens ALL the time in real estate transactions.
I have bought and sold property and simply gone to a lawyer. You can buy insurance if you need to.
Ken Milotasays:
As a former real estate agent, I can tell you that Zestimate is not accurate in the slightest. All it does is take an average of sales prices of houses within a certain radius, and makes pre-determined adjustments based on square footage, bedrooms, bathrooms, and maybe basements.
They do not consider if a property is waterfront or not, granite or wood counter tops, updates made to the property, any liens or encumbrances, etc.
I do agree though that realtors are becoming less needed, which is part of why I quit. The other part is that it seems that everyone knows at least 3 or 4 other realtors, and nearly every conversation I was able to get started ended with people saying they already had 3 or 4 other realtors they were friends with to choose from if they decided to use one.
Many others decided to save money and go to a flat listing service, which for some people who have experience selling houses would work for. The problem with them is that they require sellers to sign a waiver of duties form, which means the states are having to come out with new paperwork allowing agents to get out of performing services that were once required. Those services get people on the MLS though, and that seems to be all that some sellers want, and negotiate for themselves.
Another red flag for those working in real estate is the fact that many of the most successful agents are premiere agents on Zillow getting their leads online. This is a sign that people aren’t looking for a realtor anymore, but just looking for a house, and are using the internet to avoid having to deal with a person. This might work well for agents that are members, but even they convert probably less than 10% of their leads into a sale, and online leads typically aren’t looking to buy until later, sometimes 6-12 months of first contact, meaning an agent who wants to sign up has to pay really high fees for almost a year before getting a return on their investment.
FSBOs, Expired listings, canvassing…. None of those got me squat other than maybe an overpriced listing, or a house that would not sell.
People wanting to enter real estate have a tough hurdle on their shoulders.
It’s common sense that Real Estate is not an easy game to play alone. Every Real Estate Agent/Player need a supportive team for the better future. This really a good info i found by chance. Thank You.
Mike Walkersays:
The education requirements for Realtors are so low. 40 hours of classroom or online instruction and pass a test in most states. It’s an absolute insult / joke.
Don’t even compare Realtor educational requirements on the same level as CPA’s, Doctors & Lawyers.
Lucien Vaillancourtsays:
You should get your license Mike. It’s easy. Start making the big bucks with no skill, effort, or risk at all.
Rick Csays:
Selling your house without a realtor is easy. Post it online ( Zillow, Facebook), put a sign up and wait.
When you have a buyer both parties can sign a simple agreement made by a lawyer ( fee about $1000) and set up settlement with Title Company. Done.
We sold ours in 2 weeks with no realter on either side.
My last experience with a realtor in making an offer was not good. She starting passing papers to be signed by my wife and me. She slipped in an agreement for us to pay her another fee. She never mentioned it before hand. Very upsetting. Almost walked out.
Sell it yourself.
Not a topic agents are allowed to discuss in the US. Price fixing, Department of Justice. Commissions negotiable and offering Co-op commissions as well. Example: 7% list commission co-op commission 3%.
Agents offer many services and many agents do not. Always ask, always read what you sign, always take your time. There is never an emergency to sign a contract or negotiate one as well. Key is to let millions of people know your home is available not the friend of a friend of a friend and you sell it quickly unless you reall fleeced the buyer?
Always thought agents sell at retail FSBO’s wholesale. Advantage buyer, most of the time for sellers not represented.
For uneducated buyers, advantage seller.
Most markets 70-75% sold with agents. Hasn’t changed in my 35+ years. Tech make it all easier and faster. Saves trees too.
Ray Clarksays:
Real Estate agents work very hard for their commission. What happens during inspection? When do the inspection days start? Can you take your TV mounts with you? What happens when issue arise from inspections? What are the lending requirements? What are disclosure laws and how can they effect the transaction? What happens if the appraisal comes back under value with work orders? What happens if something comes up at final walk through? The list goes on. Not using a real estate agent to buy or sell a home is extremely risky and not worth the savings. Also, a large percentage of buyers are represented by real estate agents who have contract terms that buyer is to pay commission and listed inventory already has the agents commission covered so the buyer doesn’t have to pay.
AmeRican tilesays:
Very easy to see which replies come from agents.
Plenty of people work hard for their money, the difference is most people get hundreds, not tens of thousands for a full days work, or maybe a couple days work. Houses hitting the market and pending within 24hrs? Why do you still pay 6-7%? Oh, wait, I don’t pay it, the seller does! Ok, that’s fine 7% sounds reasonable because it’s someone else’s money, right? Wrong, anyone with 2 wits can tell you the seller is a pass thru- the buyer pays, but once it’s listed you have no choice if you want that house. To list, you just tell them to increase the price so the seller pays it.
That’s why it keeps working, people believe it’s someone else’s money.
As for all these “troubles, problems, headaches” agents have, give me a break, I deal with worse daily for so much less money, I could take months off work to sell my house and still be ahead.
Lucien Vaillancourtsays:
With all of the REALTOR bashing on this post about how much money they make I can only ask the most obvious question. Why don’t you all become REALTORS? After all it’s easy money, right?
Those of you who claim to work hard should quit your low paying job, get your real estate license and start making the big bucks. Go ahead! Take the plunge and start making those enormous commission checks. Stop your whining and cash in.
I don’t think the internet is hampering real estate agents as such because many agents make a website and endorse it on the internet making their business stand out.. so I don’t think it that way…
It is definitely not stopping agents who embrace technology and are moving towards new ways advertising and marketing is consumed.
Only those who refuse to change will be greatly replaced.
Real estate is a job that requires alot of human touch, guidance and understanding of local laws and regulations. Until the day AI can replace this totally, it is unlikely that realtors are replaced.
Everyone is complaining about the agent. I’m a Realtor and I know many Realtors who would gladly work for less. It’s the fat cat brokers who charge the 5%. They take most of the commission. If an agent wants to cut there commission or give money back to the seller it’s on them. The broker isn’t going to kick in. The broker gets their cut no matter what. Remember that when you are complaining about how much an agent makes!
ellysays:
Here in the USA, the realtors steering the neighborhoods and low prices. they don’t help the seller who pay then the commission, they
help the criminals move in, for another, and another family to move out of the neighborhood, and the realtor is in constant business.. Every so often you forced to move here in the USA. is not because you want to, is because the realtors reduce the home prices, and criminals move in YOUR NEIGHBORHOOD. If a family wishes to sell their home at low price because they want to move to another state to be with their children, that does not mean All the homes in the neighborhood should be reduced to the low price!
And folks, I will tell you, this steering is a music to the criminal and realtors ears. And Another ghetto was created.
If a home goes for closure for low price, all the homes in the neighborhood are reduced by the realtors. “This home sold for $20k in your neighborhood.” REALLY STUPID?
I am very knowledgeable in real-estate in New York City. Personally have bought and sold 3 condos for myself.
First of all, the agent does not make much. A 5% fee is split 4 ways. There are usually 2 agents, seller’s and buyer’s. There are 2 agencies, remember a real-estate agent works for an agency.
So now that you know that agent takes only 1.25% which you need to pay federal, state and local taxes.
Then there are so many agents, that you will be lucky to get a single house to sell.
Try that and you will see what I mean. In order to make money, you need to find a house so sell, and the only way is if you have connections, people know about you. Try walking around knocking on doors and say, I want to sell your house. See how many doors get slammed in your face.
The only agent that makes money, is the agent with connections. Connections such as knowing a real-estate developer. Do you know any? I don’t. He builds new homes and hires you to sell. While you are selling their homes, people come to see them. You meet those buyers and offer other homes, now you have a client with whom you can walk around and show other homes. Et cetera, et cetera…
So now the mystery of high earner real-estate agents has been debunked.
I doubt real estate agents have their jobs at stake due to the internet, if anything at all, they can leverage the internet to reach out to people in the way they like to be reached. These days people spend more time online so targeting them through catchy content, sponsored social posts, and blogs and paid campaigns on google really helps. Thanks for touching on this topic, it has gotten everyone thinking.
Real estate agents need to update their knowledge and skillset. Technology complements the good work that real estate agent brings. Only those who cannot embrace technology and react to changes will be overtaken.
As for why real-estate agents still exist at all: they are necessary for sales when the seller has already moved out to another town. Huge hassle to set up meetings with multiple prospective buyers to let them into the house or apartment at a time of their convenience. Agents exist primarily to serve that purpose.
Agreed about the ludicrous 5% charge, though. In Germany they charge it because they can: they have respected professional organizations with impressive-sounding professional qualifications, and everyone of course charges the same fee to avoid unseemly competition. Not sure if “rogue agents” with flat fees exist here yet, although I do think they are technically legal.
Yes, it makes sense to pay someone to help you in a large transaction. There is no denying that.
In Germany they charge it because they can
Of course, they do because they can. But that does not explain why they can.
Why is there no pressure for them to lower their fees? Their job is certainly easier than it ever was.
I can only assume it’s because people buy and sell homes so rarely and the overall transaction value is so high, that they don’t care too much about the fees.
I also think there’s a related psychological aspect: those professional qualifications, however phony, instill some degree of confidence when making such a large and rare transaction.
“Agreed about the ludicrous 5% charge, though. In Germany they charge it because they can: they have respected professional organizations with impressive-sounding professional qualifications, and everyone of course charges the same fee to avoid unseemly competition. Not sure if “rogue agents†with flat fees exist here yet, although I do think they are technically legal.”
I’m sorry but this is crap. You are literally describing how Realtor view themselves in America. They have ” respected professional organizations with impressive-sounding professional qualifications” too. Also the vast majority do this “everyone of course charges the same fee to avoid unseemly competition”
I’ve worked and bought homes in the UK and the US. The reason I felt compelled to respond is your comment seemed arrogant and ignorant in the extreme.
You seem to have thoroughly misread my comment. I do not doubt that realtors work in UK and US much like in Germany, but it’s only the latter that I’m personally familiar with. The “respected” etc. was of course ironic. Realtors provide precious little actual value for their high fees, so the facade is a requirement to make the fees seem reasonable.
The reason the internet has not killed the need for a realtor yet is that there has not be developed an easy to use program to take the scary out of selling it FSBO. If someone intelligent would develop a simple program, that any age owner can use to take them step by step in how to sell their home, things will change. Think of “Rocket Mortgage” or online tax programs or even Carvana work. No one enjoys paying to much to sell their home and working with realtors is a real disappointment and frustration. Some very bright person is going to make a lot of money.
Both the buyer and the seller have to decide to forgo using an agent in order to have an agent-free transaction. Perhaps the situation is somewhat like a prisoner’s dilemma. The travel example is not quite analogous, because the choice is entirely up to the traveler.
As far as I can tell, in Canada, the buyer does not have incentives to sign up with an agent, only the seller does. So as a buyer, you can shop around, try agents and also check out the Internet. If, as a buyer, you choose to limit your options to whatever an agent will show you (=sellers that have signed up with an agent), then you are obviously being captured. But why would you do this?
For the seller, it is a bit more complicated since they usually have to sign an exclusivity contract. But why would the sellers agree to such harsh terms?
Why would a buyer not want to have representation, when the buyers’ agent is paid by this listing brokerage as a requirement of MLS participation? Effectively, the buyer’s agent works for the buyer at no cost to the buyer. The listing brokerage’s fee schedule (commission percentage or flat rate) to the seller does not change when an unrepresented buyer shows up, so the only person who benefits from the buyer not using a buyer’s agent is the listing agent.
This actually would be fraud all most everywhere I have heard of in North America at least. The buyers commission can not be pocketed by the selling brokerage. In fact it is never forwarded by the seller’s lawyer, only the funds agreed to in the commission sharing agreement built into the sale agreement (or it’s equivalents)
Actually the listing brokerage and the seller agree on a %. If a buyer uses a different agency, the % is split between the two brokerages. If the buyer is unrepresented, the listing brokerage earns the full % and does not split with anyone. Ps the “agent” doesn’t receive the commission. The brokerage firm does. The agent receives a portion of that based on their ageement with their broker.
I have bought and sold around 10 houses in different states and have never really felt that the realtor was representing me (even when they come with recommendations from acquaintances) – only interested in the transaction going through. I am done with realtors.
I am curious, what could your agent have done to make you feel represented?
I had it with realtors and Realtor.com, and Zillow, and and ReMax. I posted my house few times at craigslist and had more buyers from Craigslist, then from the local realtors.
Realtor.com, have a picture of my house and they posted my house address on pictures are not from my house. They posted filthy bedrooms, trashy rooms, and basements from other filthy homes, with my home address on them and a picture of my house outside. Showing that this is how my house looks at the inside. Zillow, Remax Realtor.com and Trulia, including local realtors, are disaster for my property. This is what I get from local realtors. : Will be glad to get your house off your hands. It will sold very quickly at $29.900″ A $120k house built 1990’s for $30K? Their desperate to steal homes to give it to their children and or to rent them. The Realtors are Unethical people. Don’t put them in your home. They are careless and disrespectful of the seller’s property. Local realtors came to my house with out my knowledge when I had my home listed with them. Many valuable items were missing, they bring big families into my house, and everybody is running loose in it and stealing from the seller. All this Zillow, Realtor.com, Trulia and Remax are crooks! They evaluate and post your property with out your permission at the lowest price possible. Everything they post is out of date. Who are they to tell me how much my house is worth? Here in the USA, you been chased from one neighborhood to another due to the stupid realtors criminal idea. Low pricing your homes, can bring criminals into your neighborhoods. Time to sell it for the crook can make more money in commission. People work hard for their properties, and wishing to leave it to their children, instead to the drug sealers and criminals who move into the neighborhoods. They end up with beautiful homes because the stupid realtors trashed the neighborhood down with low prices of our homes. I put lots of money into my house to keep it up. Realtors can go to hell!
Some crooks end up with beautiful homes, and the owners could not afford a Nursing home to stay. That what is going on. People, you know your home more then a realtor just like you know your body. You price your home, you know how much it worth.!!! If a realtor want to rip you off, shoe him /her the door. I have seen too many crooks rip off hard working innocent peoples money and property.
That is completely incorrect. Buyers in Canada do sign with real estate agents. This in no way limits your options to what an agent will show you. An agent doesn’t get paid unless a deal comes together so it would make zero sense to limit showings at all.
Also an “exclusive contract” doesn’t give the agent complete control, in fact the contract isn’t even between the agent and the homeowner at all.
The analogy with taxis and travel is not quite right. Selling a house with an agent involves two individuals (as opposed to one and one service providers as in taxi or travels)
There might be also a psychological factor because it is — mostly — a once-in-a-lifetime event, and people are willing to pay for it. I would think that the use of agents declines for people buying/selling frequently.
Selling a house with an agent involves two individuals
Doesn’t Airbnb also involve individuals?
There might be also a psychological factor because it is — mostly — a once-in-a-lifetime event
Could be.
people are willing to pay for it
And it does make sense to pay for it… but the amount being paid should be lower today since it is easier to sell and buy.
Here we have a setup where the job of selling and buying houses are never been easier, the information is freely available and easily managed… whereas the commissions are, in anything, increasing.
In effect, I am saying that the Internet should have increased the real estate productivity. It hasn’t.
My wife is a realtor. She has been a realtor since 2002.
What my wife goes through to list or sell a home is not an easy job. She also has to pay for her own training, insurance, automobile, gas, and upkeep out of the 3% commission.
Owners usually have an emotional attachment to their home, therefore, they tend to overpriced their home, which causes it to stay on the market for a longer period of time.
The buyer wants to get the home at the best lowest price. A great realtor then becomes more like mediator. The sell and/or buy of a home is probably one of the largest purchase a person will ever make in their lifetime. I for one am willing to pay the 3% on the buying side to handle all the documents and transactions to be submitted, not to mention a realtor being aware of the home price market for the neighborhood.
I for one am willing to pay the 3% on the buying side to handle all the documents and transactions to be submitted
For an average house in Canada, that’s well over $10,000. I am not sure which paperwork one refers to, but it does not include the deed, which is a separate step with additional fees, nor does it include the financing or payments.
not to mention a realtor being aware of the home price market for the neighborhood
It is trivial, at least in Montreal, to look-up prices online for similar houses in a neighborhood.
The internet has made buying and selling harder.
Most of the data is wrong. I cant count how many times I get a call from someone regarding tax rates for a property they like and zillow has it way low.. Also, Zillow zestimate is off in most markets by 20%+ more then 80% of the time. Why would you risk underpricing your most valuable asset by 20%+? Why would you risk overpaying for your most valuable asset? Why would you risk overhaggling on repair requests, especially if your agent, who has likely spent 10k hours watching the market, touring 1000s of homes, has 100s if not 1000s of closings under their belt is telling you that the price is incredible and if your not more flexible on a 100 dollar repair your going to lose 30k in potential equity. See it happen all the time. Selling and buying is rare and extremely stressful. The internet cant cope with that part of the transaction.
Your edit is correct regarding the travel industry. Early on, I felt like i was finding my own incredible deals, no need for a travel agent. Now those easy deals are gone and so are the traditional agents.
Tech companies have given people who liked the no haggle pricing of the saturn, a way to buy and sell homes.
Lets not forget the actual viewing of homes. I see this in the rental market and it amazes me everytime. Landlords trying to save a fee and list on their own. Tenants who dont know they can use an agent. Months and months of vacancies for landlords in hot markets.. because they arent available 9-9 for showings. They often accept the tenant who is most eager to match the landlords schedule as months if vacancy drags on. These most eager often have issues and hope the inexperienced landlord doesnt do a rental background check, leading to huge risks in the landlord.. costing months of lost rent and eviction costs.. all because they wanted to save 10% annualized.
The tenant side is just as bad.. They often call me 6 months in advance expecting a 3 day rental process to take 6 months. 6 months to do it themselves vs 3 days!! The internet has made it harder to buy and sell.
Probably referring to the purchase offer with contingencies, acceptance, and repair requests. These documents really aren’t that complicated though.
You forgot to mention that,
First: not every listing will give you 3%(or 6% with the buyer side),
Second: you do not make the 3%,
A Little less than Half(depending on your split) goes to the broker, 0.5% goes to marketing,
Net Pay is around 1% of the transaction.
This article messed up when he talks about commissions.
James, Great point. There are tons of fees, licenses, Mls , gas and the list goes on that the realtor has to pay, without mention zero benefits, we are independent contractors.
How about having a professional to help you sell the most expensive item in your portfolio.
Funny that he talks about $25k in commissions, just do the math, you need to sell a over a million dollar home to achieve that. Does not happen every day or year.
While you are right, you forget that the point Daniel is making is that things have gotten easy for the agent with automation, prices of real estate have exceeded inflation, but the commission has not gone down.
Late to the party, Dominic, but you keep mentioning how things have gotten easy for agents, with technology, etc. The same can be said for many industries, yet prices for their services increase. To me, it’s weird that real estate brokerage fees HAVEN’T increased. I had a blood test last week — $800. FOR ONE BLOOD TEST (and that is only the lab’s fee. . .can’t wait to see what the diagnostic aspect will cost). Imagine them demanding that price even a decade ago. The average price of a U.S. home in 1980 was $68,700.00. Today it’s $264,800, yet real estate agents make that same 1980s commission rate. What other industry has an expectation from the public that their pay, be it commission or otherwise, should decrease??? Just curious. And, no, I’m not a real estate agent.
The average price of a U.S. home in 1980 was $68,700.00. Today it’s $264,800, yet real estate agents make that same 1980s commission rate.
If you make the same commission rate and the house prices go up, your income also goes up. So it simply not true that, in nominal dollars, the fees have not increased. They have.
A more interesting question is whether they have increased after accounting for inflation. I would guess not.
The same can be said for many industries, yet prices for their services increase.
Productivity across all industries increases by one or several percentage points every year. That’s why we are much richer today than we were in 1970, and incomparably richer than people in 1900.
Of course you would be willing to pay the fee because your wife is a realtor. Therefore, your opinion is biased and irrelevant.
You are ignorant of what real estate agents actually do. When was the last time you acted as an agent in a real estate transaction? Do you own your own business where you are responsible for your insurance, taxes, benefits, gas, marketing, and all the other aspects of being a small business owner? I think not. I just got into the real estate business. It has become harder since the internet has been invented because people believe everything the read on the internet. 90 percent of the time it is incorrect or inaccurate because they get it from an unreliable or outdated source. Try being an agent someday, you’ll learn through your battle scars like I have.
“Doesn’t Airbnb also involve individuals?”
It does indeed. But look closer at the business model. The company charges the “host” a service fee of 3%. It also charges the traveler a “Guest Service fee” that varies between 6 & 12 %.
Airbnb hasn’t REMOVED a middleman. They’ve simply hidden it so that people forget it’s there.
Neither has Uber, or any of the other rideshare companies. Each of those companies keeps a hefty percentage of the fare paid by the rider. I believe it’s up near 20% in most cases.
Airbnb provides tremendeous value. Cost of short term rentals using an agency exceed 40%.
There are exclusive buyer agent agreements in Canada and people do sign them. Also, if the buyer decides not to use an agent but falls in love with a home such that the seller has an agent, then the buyer must use the seller’s agent. The buyer cannot directly deal with the seller.
Also, if the buyer decides not to use an agent but falls in love with a home such that the seller has an agent, then the buyer must use the seller’s agent.
… because the seller has signed away his right in the first place.
But then, my question is really: “why hasn’t the Internet lowered their power”.
Why would I agree to sign away my rights when doing so, the research shows, is against my own interest?
The real estate market cannot really be compared to the taxi or travel market. I can perfectly go to any place without a travel agent by organizing the trip myself but if I want to have that exact real estate then I will have to buy into the agent no matter if I want to use their services or not. For me it’s pretty much like protection money. In the Austrian rental market usually only the buyer has to pay the agent. Since flats in cities are scarce, it’s a seller’s market for the agents as well.
I can perfectly go to any place without a travel agent by organizing the trip myself (…)
That’s true today with the Internet. However, only 20 years ago, that was not practical. For example, you’d have to track down a hotel in the city you wanted to go. Then you would have to call them (using the phone) to make a reservation. Same with booking a flight. It was time-consuming and required a lot of knowledge.
I will have to buy into the agent no matter if I want to use their services or not
I don’t think that’s true. Look at how I started my blog post, back in 2002, there were already plenty of houses advertised on the Internet. This is even truer today, of course. I bought my current house without a real estate agent many years ago.
The very fact that researchers can compare the degree of satisfaction people have with and without an agent proves that people can manage without an agent. And the research seems to indicate that people who forgo the agent are more satisfied.
In the Austrian rental market usually only the buyer has to pay the agent.
That’s interesting. The reverse is true in Canada.
I would argue that people who bought without an agent would be inclined to say they were satisfied with the process. You might get a different answer if a couple disagreed over whether they should get an agent, went without one, and then asked the person who disagreed.
Also people who paid an agent have a tendency tp question their value since they paid a lot for it. It is like customer satisfaction on high end cars.
People travel more than they buy houses. Fear of the unknown and social pressure.
My expectation is that many people would be willing to go work in a foreign city for a year given a signing bonus equivalent to 5% of a house.
You do realize that not every home is over a million dollars and you do not get the entire commission.
To make what you stated in the article is selling homes over 1.5 million.
you do not get the entire commission
That changes nothing. Even if the agent made 1% out of the 5% charged to the homeowner, the homeowner still pays 5%.
It is tens of thousands of dollars. In comparison, a home inspection will be a few hundreds, a lawyer will charge you a flat fee, maybe as low as $1000. The bulk of the transaction fee is clearly charged by the agent.
To make what you stated in the article is selling homes over 1.5 million.
Real estate agents in the US charge over 5% on average. 5% of $1.5 million is $75,000
If both buyer and seller have agents, the agents split the commission (2.5% each, instead of 5% for one). From the buyer’s point of view, it might seem like the cost of their agent is free, since it does not effect the total price that they pay.
The comparison with the hotel search is good. The typical GDS (=global distribution system, the bakends of Expedia etc) systems charge a fee of 15%-20% of the hotel booking price. AirBnB charges about half that, between 6% to 12%. Still, both the GDS and the AirBnB fees are much higher than the typical real-estate broker fee, which is around 6%.
As in the case of real estate, in principle, hotels would be better off by getting clients directly, bypassing intermediaries altogether. However, this has not happened, due to the highly-fragmented nature of the hotel market. Buyers cannot search the market effectively to find what they need. The case of real-estate agents is similar.
The intermediaries in both real-estate and hotel-search are smart to avoid imposing any fees to the buyers, making the sellers absorb all the visible costs.
If you compare with the airline market, you will see that the intermediaries get, comparably, tiny fees. They are in fact so tiny that one travel site entertained the following: When the user is about to click “confirm” to book a flight, pop-up an ad and send the user to book directly with the airline. The referral advertising fee was competitive with the fee that the travel site could charge for the flight.
Very insightful, thank you.
When I book my travels, I usually go directly to the hotel website. I had not realized the financial impact of my choice.
You’re comparing apples to oranges. Airbnb could be compared to short term rental agencies which charge 40%+ fee. Airbnb, VRBO and others are makin such agencies extinct. Also Airbnb charges the booking fee which pays their commission to buyer.
It is also about trust. A friend in russia sold her appartment, with the money going directly to buy two smaller appartments. There was a huge anxiety regarding being screwed over, when so much cash walks over the table. Stories with people selling appartments, that they do not own, enemy appartment take overs with kicking old people out and so on. If those real estate brokers push such stories, only evil minds would think so. :>
when so much cash walks over the table
At least in Canada, real estate agents do not handle the transactions: banks do. It would be very unusual to buy and sell properties using cash, it is all through bank accounts.
Stories with people selling apartments, that they do not own, (…)
At least in Canada, real estate agents do not handle this part of the business, as they typical do not have any legal stance to do so. There are official registries and you have to pay separately to get the deeds. Legal fees are a fraction of what the real estate agents charge.
In effect, at least in Canada, all that the real estate agent does is to connect the seller and the buyer, everything else (transactions, deed) is separate subject to its own fees.
My accountant actually recently recommended that one of my spouse or I get a real estate license to avoid these fees in the future 🙂 So I am now somewhat up-to-date about this (and you, too, could be for the low low price of $66 and a 75-hour online course).
To be clear: this is all for NY state/USA, so laws in Canada (and to a lesser extent, other states) may be different than what I know. However, to clear up a few misconceptions from the other comments:
* I think the main reason is that most listings are posted on multiple listing services, which, depending on the MLS, may require you to be an agent to participate in. Thus, I think the internet has probably exacerbated the need for agents, since people generally aren’t finding houses by driving around seeing lawn signs or checking the classifieds anymore.
* Brokers that charge flat fees absolutely exist. They are generally called “discount brokers.” Keep in mind agents aren’t keeping the commission, either, it actually goes to their broker, it’s split between the buying and selling brokers, and then the agents get a percentage of it.
* As someone mentioned above, if the seller uses an agent and the buyer does not, the seller’s agent will be a “dual agent” for both parties in the transaction. Now, if the buyer is using an agent and the seller is selling-by-owner, the buyer’s agent isn’t going to be super interested in showing the buyer that property, since they might not going to get a commission for it.
* There are an amazing number of disclosure laws about property condition, history, and rights which are mostly waived when an owner sells a property themselves.
However, going through the course taught me just how many people have their hands in the pie on an average real estate transaction and it’s kind of ridiculous (at least a dozen by my count). I think the industry is ripe for disruption, but it’s also dominated by who owns the listings, which right now is Murdoch (realtor.com).
Fantastic.
Though I am sure that laws and conditions vary quite a bit as you move around the globe, my hasty research seems to indicate that there are many similarities.
Not sure how NY is but in IL your only considered a duel agent IF both parties agree to it and if seller has an agent and the buyer doesn’t it really doesn’t matter. If the buyer has one and the seller doesn’t, you can still show the home, but can choose have the buyers sign that if they choose to buy the fsbo home that they will be responsible for paying the agents commission.
You are right on. My wife is a realtor with 13 years experience selling high end homes ($400k – $1M). For a while, she was helping with VA buyers, but the obstacles and uniformed buyers make it hard to assist the VA buyer, who’s in the market for a $150k home. She actually has to work twice as had to help a first time VA buyer, mostly because they are not savvy on a real estate purchase.
I have been a REALTOR FOR OVER 35 YEARS. I have always put the seller’s interest above my own. I have many times lowered the fee to the seller to make the sale work.
I say to those who think real estate brokerage is so easy, quite your job, get a real estate license, work fulltime and try making a living selling real estate.
It takes a special kind of person to be successful in real estate.
James G Snotherly, REALTOR
Raleigh, NC
919-345-2458
Kristina: * As someone mentioned above, if the seller uses an agent and the buyer does not, the seller’s agent will be a “dual agent†for both parties in the transaction. Now, if the buyer is using an agent and the seller is selling-by-owner, the buyer’s agent isn’t going to be super interested in showing the buyer that property, since they might not going to get a commission for it.
Me: I am a NYS agent. No, that is not how one becomes a “dual agent”. One becomes a dual agent when buyer and seller agree to it. Then the agent becomes a facilitator and the seller loses all the fiduciaries they previously had with the agent. I do not work as a dual agent, if I sell my own listing the buyer understands I am representing the seller and has agreed to use me to purchase. I have a duty to treat the buyer fairly and honestly, and if you think I’m going to screw someone who is going to see me at the supermarket and tell all their friends I screwed them, that’s just silly.
I have sold FSBOs representing buyers and had no trouble having the seller sign a one time fee for that buyer. If they don’t, the buyer is responsibly for the fee and it becomes part of the offer: “buyer offers $X with X% paid to my agent at closing”. If the FSBO fits my buyers needs, I sell it.
Kristina: * There are an amazing number of disclosure laws about property condition, history, and rights which are mostly waived when an owner sells a property themselves.
Me: What makes you think sellers don’t have to disclose if they don’t use an agent? Did you say you got licensed in NYS? @@
Here is the answer from an experienced by owner seller who turned to use the agents: Both buyers and sellers are uneducated as to the mortgage and realestate attorneys who can help. Also EVERYONE personally knows a realestate agent so a LARGE percentage of buyers have agents or should I say the agents exclusively lead them to the highest cost purchases, one can not even list on Zillow without the agents appearing affiliated from the buyer perspective. Thus you reduce dema.d by cutting out agents. $30,000 to sell my house and I paid it because by owner I would not have the same customer base. Now however I would know hiw to advertise it on my own and will do that for my clients as tbeir realtor.
The same is true in many fields. Why do Professors get paid so much! I can look up all the things I want to learn on the internet. No need for universities I can learn it all on my own. (Get the point!)
The same is true in many fields. Why do Professors get paid so much! I can look up all the things I want to learn on the internet.
Actually, you always could look most things up nearly for free. There is a great movie line on this very topic: https://youtu.be/s8KZbov-mD8?t=169 But college professors are not in the “looking things up” business.
Here’s the thing ladies and gentlemen, I’m an agent so I can tell you why we are useful and where that commission check goes. Most companies, not all, will charge a monthly due, that we pay regardless of whether we sold a home that month or not. We don’t get paid hourly, so yes our time is money. We have professional photos done of your home, we have flyers printed, host open houses and we host brokers open so that other agents with buyers can immediately tell if this is a home they will be interested in. And who by chance pays for these things?? Us. And if your a buyer, we actively check the market every day to see if that perfect home has appeared. Some homes don’t go on the mls, some opt to go on a private listing network which will make it impossible for you to find on any website and they don’t have a sign in the yard either. If your a fsbo unless someone drives by they will never know, your perfect buyer could be out there and never see your home because they haven’t driven down your street. Have you ever had to deal with a short sale? Its COMPLICATED, BANKERS ARE A PAIN IN THE ASS TO DEAL WITH. Speaking of pain in the ass, you have questions, we get you the answers, you need a roof inspected on new year’s eve in the freezing cold(happened when I bought my first home), we have a guy for that, water problems, we can recommend someone for that too. And yes, we tell people you need to lower the price and we have good reason to do so because most people think that their homes are worth a lot more than the are when you look at the market for that particular area. As for our nominal commission rate, well, let’s say 5% (it does vary) with my particular company, 2.5% of the 5% goes directly to the buyers agent, (you didn’t think they worked for free did you?) And of that now 2.5% that will go to me, anywhere from 30%-50% (depending on brokerage) will go directly to the company that holds my license and then I get the left over. Oh and since taxes aren’t taken out I have to make sure my accountant, that I pay, takes the appropriate amount out so that I’m not owing come tax time. Remember people, we have bills to pay too and just like you our time is valuable and if you wouldn’t work for free, why would you expect someone else too.
Remember people, we have bills to pay too and just like you our time is valuable and if you wouldn’t work for free, why would you expect someone else too.
I would not expect anyone to work for free, but then you have to wonder why real estate agents cost as much as they did 30 years ago in real dollars when we did not have databases, the Internet, and so forth.
Due to the increasing costs of online marketing. Many top producers pay upwards of $25,000 month just for marketing. Sellers who try to discount agents believe that all a agent does is hold open houses and send flyers. Wrong. There are professionals who attain more then there commision cost, don’t just hire your cousin! A typical $100,000 home will cost the typical agent $300-900 just in marketing costs for 6 months if it sells or not. Whats the typical wage of a writer nowadays? Should be no cost considering anyone can do it.
More information doesn’t necessarily mean it’s good information. For example the “zestimate” on the house for the founder of Zillow was wrong by $20,000!
” you have to wonder why real estate agents cost as much as they did 30 years ago in real dollars”
I bought my first house for 59,000 in 1982. I don’t know how she lived making $885 on a sale (she had one side, based that on a 6% commission). Remember that is before her own Realtor fees and taxes. No wonder it was mostly married women working part time then.
PS to my last answer to “why real estate agents cost as much as they did 30 years ago in real dollars”
Because the cost of living has also gone up.
Great analysis.
From one Realtor to another…Thank You!
One of the main reasons buyers and sellers utilize agents is their distaste for negotiations over price and a multitude of transaction issues.
First of all agents do not often earn $25,000 on a single deal. They also spend a large amount of time coordinate access for buyers and agents to enter a home, deal with title company, organize inspections, discuss issues with the lender, buyer, seller and title company and this can now go on for a single deal for 6 to 8 weeks . They earn their commission and if the buyer and seller have a full time job, they won’t have the time to deal with all the demands. It is a case of you get what you pay for. A licensed Texas agent is also vetted and you are not walking into a home with someone you don’t know anything about which is a safety issue.
if the buyer and seller have a full time job, they won’t have the time to deal with all the demands
I don’t think that’s true. I bought my house without an agent and it was not more difficult than buying a car. We met to sign the paperwork in front of a lawyer, and that was it. And this was years ago… it would be easier today.
Hi Daniel,
We like your thinking! We’re a California startup that lets homebuyers easily create their own offers, represent themselves in a real estate transaction and save the 2.5% commission that would have otherwise gone to their buyer’s agent.
Check out our site (www.homesavi.com) and let us know what your thoughts!
Funny, Home Savi even relys on real estate agents. “…constantly seeks to partner Home Savi with the best and brightest in the real estate industry and beyond.” So if the buyer can do it on their own with Home Savi, why does Home Savi seek the best and brightest in the real estate industry? The conclusion would be because they have the knowledge and experience and Home Savi also finds value with the best and brightest in the industry. So even Home Savi is not without seasoned real estate agents on their staff. Then why would a homebuyer not have a real estate agent represent them, especially when the seller pays the buyer commission. With Home Savi, the buyer pays but is self-represented. With a Realtor, the buyer’s agent is not paid by the buyer and the buyer has representation.
There are always exceptions. Agents are paid for what they can take of when things go awry. Just because you bought a house or two and got lucky with zero complications doesn’t mean that is the case most of the time. Over the past 17 years I can recount numerous times when I was the cause of the sale closing. Each transaction is different, just like surgery you don’t know what’s going to happen until you open the transaction. If there are complications you better be prepared with a competent Realtor. It is ignorant to comment on a subject you don’t really know much about unless your involved every day in many different sceneries with different types of people. And don’t forget to mention the weeks and months we work for people and then never get paid because they change their mind or have a personal occurrence and cannot continue with a sale. Most people commenting have a salaried or hourly payment structure in their job. The reason Realtors still exist and get paid 6% is because we are effective. Some are better than others, just like clients.;)
Daniel, one big factor is that realtors are a racket. They’re a licensure racket – the field is closed, by law, to people without a license. This is similar to taxis (and almost all of Uber’s regulatory headaches have been with regulators trying to protect the taxi racket).
Look up the Institute for Justice’s fights for people trying to make a living against various occupational licensure rackets.
Since both parties need to agree to not use realtors, and the profession is protected by licensure laws, we seem to have sticky prices. As others have mentioned, there are some bits of information and some processes that either require realtors or seem smoother with realtors. All these factors together is enough to keep them coddled at artificially high prices, just like psychologists, pharmacists (what do they actually do?), et al.
They’re a powerful lobby too. For example, they always lobby against a flat income tax that would eliminate all deductions, including the mortgage deduction. (Intuit and H&R Block always lobby against the flat tax too, for obvious reasons.)
Ive heard some good points here, but the fact remains the industry is closed to FSBO. Need flat fee or reduced vost MLS agent to get into MLS. So lets say list side is as low as $149.00
The buy side must be put in so buyers agents will typically accept 2.5% and rarely lower. Realtor.com us great site, but they source only from MLS. So no FSBO on Realtor.com.
Zillow caters to agents. So your FSBO listing has agent ads next to your listing. Owner is 3rd or 4th in list of contacts for Zillow. Bottom line the main sites MLS, ZILLOW, TRULIA and Realtor.com are the internet sources and they are highly skewed to the agents and MlS. Then you have buyers who dont see cost so why not use agent. Consequently if you want traffic and you want agents to include your property in their buyers list then seller must pay buyer agent a minimum of 2.5%.
So overall the sell side is getting cheaper. The buy side went down .5%.
By the way me experience with agents tells me 90% are not informed and the other 10% wont work for free. The industry is expensive to agents since they must split commission with broker and often pay a transaction fee to boot.
My biggest issue is why a percentage? Why should agent get same percent for $150K, $300K, $500K and at $1Million and higher. The added cost to sell home to agent is not linear.
I can get top flight pictures and video tour for $150.00 , at much better quality than most agents who useprofessional photographers. Bottom line traffic is generated by MLS and buyers use agents at no charge.
The higher a home is priced the more photos you’re going to purchase, you may hire a drone, a videographer, virtual staging. Open houses for agents go from Panera sandwiches to sunset cocktail parties with champagne and a rawbar. And if the house doesn’t sell you have more sunset parties. While most buyers find the homes on the internet, you can still promote them and most sellers like to see the homes in print, hence, advertising $$ plus glossy brochures. The higher the home is priced likely it will take longer to sell also, especially if it is in an area like mine where a million plus home can be next to a $350,000 home. It’s great you can take good photos, I can’t spend my time photographing and editing and flying a drone plus servicing my listings and getting them sold. Thanks for your input though, I value everyone’s opinion. And you are correct 90% of agents are uninformed and I don’t work for free. 🙂
The reason the internet has not killed the agent in Canada is primarily because of the monopolistic behaviour if the board. It does not publish or allow agents to publish sold data and other key data except in tidbits provided directly to a party in specific transaction. It has been fought in court for years and still going on. The moment that breaks, and it will, the internet will break the agency into smaller, fee for service parts that better reflect the need of the customer and the value. For now, it is an old guard industry in a zero sum game, favouring the membership and not the customer. Not much longer.
Wrong, everything is published and in public view here. We get paid for what we do and what happens behind the scenes you can’t read about on the internet. For example what would you do with an A paper buyer whose loan falls through on the day before closing?
In India Brokers are under Paid and humiliated by both buyer and seller…
Finding home is not that easy task you need detail Knowledge of surrounding and market to offer best clear properties to buyer in india.
Deal don’t happen every month for real estate agent in india but then also they are paid just 1 % of brokerage on resale properties deal Value…that also if you are lucky enough to get paid 1% brokerage from buyer or seller…people in india buy home worth crores but while paying just 1% brokerage to real estate agent they get heart attack.
They don’t understand how real estate agent suffer and have own responsibility towards life.
Many buyer and seller even don’t give brokerage after meeting each other.
Hope RERA works brokerage fixed payout in interest of real estate agent
And Safe guard there hard earned money.
I read about Opendoor(https://stratechery.com/2016/opendoor-a-startup-worth-emulating/) They seem to be trying to disrupt that market but it won’t be easy…
Open Door charges between 10-15% of the price they will pay you for your home. During the inspection they do their best to bring the price down even more with finding fixes and other reasons to pay you less. It is a sophosticated system for fixing and flipping homes. They say it makes it easier for you but ultimately you pay 10-15% “transaction fee” instead of a Realtor fee that is split between two. Please people, get ALL of the facts before commenting.
Even though information are available in internet. Real-estate websites are showing half information and tempting to connect buyer to an agent. Those information does not help buyer to contact seller directly to do transaction.
Every industry has adopted internet and defined new strategy to do online business. But, I agree some industry has fallen or disturbed due to internet.
Could you please share with me where real estate agents are keeping a full 5% commission for themselves?
Total bs. I’ve seen more fsbo lose money on selling a house than any agent makes in commission. This article was obviously written by someone who doesn’t value an agent. I’ve never had a good experience buying a house from the owner. They can’t keep emotion out of it.
If you’re going to sell your house and probably use a zestimate to do so….and are ok with it selling for 7% less, then why would you even assume the liability for less money? That’s dumb. I’ve NEVER Met a smart buyer from random calls on the internet.
I can’t imagine how dumbfounded fsbo must be with the dippy randoms from on-line. Hell I won’t even show them. Anyone calling me and only wanting to speak to the listing agent about the house is stupid. “Hey….I want to talk to the SELLERS fiduciary”. Lol. Idiot
Please don’t take this the wrong way, but you know about as much about how real estate really works as I know about computer science.
A very good friend of mine called to tell me how proud he was of himself for buying his new home directly from the owner. Without the use of a realtor. Bragged so hard about how much he saved in commissions. A month later he called to ask me what he should do about the $45,000 foundation repair that the house needed that’s a seller neglected to mention to him. Sadly that $6,000 he saved in commissions didn’t even make a dent.
More recently a man in my town closed on his great deal home that he got off Craigslist. Went over a week later to speak with the previous owner about vacating the premises and was met with a shotgun blast to the chest. Funeral services are pending. Once again the amount he saved by not using a realtor isn’t even close to what it cost him to not use a realtor
A month later he called to ask me what he should do about the $45,000 foundation repair that the house needed that’s a seller neglected to mention to him.
So had he gone through a real estate agent, the real estate agent would be funding the foundation repair or would have covered the cost of an inspection?
I don’t think so.
No, as his real estate agent I would have pointed out that suspicious 3-inch wide crack that the owner had filled with cement in the basement and suggested a foundation inspection.
A home inspection costs a few hundreds, representing something like 0.1% of the cost of the transaction. If it were included in the cost of the agent, it would still account only for a tiny fraction of the agent’s commission but it is not even included in the fees.
Please post a link to the new story that most assuredly will have been at least one of your stories.
I have searched for the craigslist shooting over a home purchase, and drawn a blank.
This is a typical scare tactic. Go through us, professionals, or else you are in danger.
This makes a lot of sense a lot of time. However, there are limits.
Your risk of death while buying a house is not going to be significantly reduced if you go through a real estate agent. This does not even need to be explained. Real estate agents don’t protect you from shotguns.
In fact, there is no reason to believe that real estate agents are somehow less likely than the rest of society to commit crimes.
One guy in South Carolina was pretty brutal:
“A real estate agent in South Carolina is accused of kidnapping a woman who was found “chained like a dog†inside a metal storage container on his property — and may be responsible for the deaths of at least seven people, authorities said.”
I don’t know why anyone would assume that a real estate agent is more trustworthy than a cab driver, teacher or carpenter. Right?
I guess she wants to allude to the fact that, when buying a house, you have to ensure that the legal contract is binding and that the deed is indeed transferred. But real estate agents are not lawyers, this is a legal issue handled by lawyers.
I would definitively recommend paying a lawyer when buying a house.
House inspections should be done, ideally by someone who is *not* affiliated with a real estate agent. Real estate agents do not generally provide this service, and there is a good reason for that: if they did, the could be considered liable if you buy a broken house. But even if they did, the real estate agent is partial: he wins if the transaction goes through. Thus the real estate agent has a financial interest in getting a clean inspection. As the buyer, your interest is that the inspection reveals every little defect.
Other people have made the point that many buyers do not want to have to deal with the sellers directly. This makes a lot of sense. It is a useful service to act as an intermediary. But the claim that the transactions is “unsafe” if it does not go through a real estate agent (but is supported by lawyers and house inspectors) seems silly on its face.
Following this line of thought…
Go straight to the farm to get your milk from the cow.
Go to the automobile manufacturing plant to get your car.
Go to the pharmaceutical company to get the medications you decided you needed by looking up your symptoms on WebMD.
Go to YouTube to get instructions on how to extract your tooth.
Go to OfficeMax yup buy the fill-in-the-blank form template to file for your divorce.
Go to the Internet to find a FSBO home and purchase the biggest investment you’ll make in your life with the money you saved in your mattress (Why should you use the bank’s money? They did nothing to earn it.)
Do it all on your own. You know everything because you have a pulse and a laptop. You got this, Sport! Good on ya!
(Incidentally, I am a real estate agent. I close several transactions a month and work tirelessly 12+ hours a day, six days a week. I earn every penny I make. Which is NOT even close to 6% but specifically (on most occasions) 70% of 70% of 97% of 3% of the sales price minus my travel expenses, office expenses, photographer expenses, staging expenses, house warming presents, etc.
With all due respect, only a fool represents himself in court.)
And you my friend… are a special kind of dumb!
I recall a “60 minutes” segment from 10 years ago asking the same question and found it here:
http://www.cbsnews.com/videos/hi-tech-real-estate-moves-in/
I believe the upshot is that, in the US, realtors lobby the government really hard so that nothing changes. Just look at all the realtors who popped up out of nowhere to comment on this post.
Finally someone Finally wrote this to the public!
Title Companies do All the legal work to protect you!! Not a Realtor!!!
Stop paying Realtors you Equity. It is your money……
It’s more similar to internet stock brokerages. Sure, a lot of people use them. But in no means has it gotten rid of financial advisers.
You have oversimplified the home selling and buying process. A good agent will get clients better results. This blog, however, lumps all agents together. I can show you concrete examples where good agents have outperformed.
As an agent, I fully admit that there pare also a lot of very poor agents in the USA. They give the entire industry a bad image. What we need are tougher licensing standards and minimum performance standards to maintain a license.
Not sure if anyone has already said this, but it seems to me the reason estate agents are still thriving is that buyers want the reassurance of dealing with an intermediary who sites in an office when they are considering spending the amount of money they spend on a house. I’m pretty sure it is buyers who are driving the decision to allow agents to remain, not sellers. And of course it is not the punters who are paying them (unless sellers are effectively managing to pass on the cost.)
The agents themselves use the internet more than any other medium now to draw the punters in, but the punters want to be shown round by a professional, not the seller.
Whether this is sensible on the punter’s behalf is a tricky question. Having bought and sold a few properties in the UK and Spain over recent years I would say some agents have definitely earned their money and others definitely have not.
Interesting that they get 5% in Canada. In the UK they get between 1 and 2.5%, depending whether they are sole agent or not.
I have read through about half the comments to this blog. I apologize in advance if any of the following comments are redundant. But this blog and continued opinions to comments by the author are concerning.
The internet has provided more accessible information on real estate but not all accurate information. And clearly from the comments I read, there are some major differences for agents and client representation in Canada, Europe and the US. In my conservative area in the US Midwest, commissions are 5-7% (yes, 7% paid often, split at 4% to listing broker, 3% to buyer broker). While the author of this article has the opinion real estate agents are not worth this percentage, the majority of consumers obviously see the value since they are contracting real estate agents and paying the commissions.
I have not seen anything mentioned about the referral fees real estate agents pay out of “all” that commission. So on a relocation referral client to my broker that I handle, 40% of the commission goes to a relocation department/company. What’s left of that 3% is then split with my broker at my split agreement. Then my expenses (which others have mentioned in other comments) are deducted before I have actually earned anything. And don’t forget I still have to pay my 35% income tax out of that earned income.
While there is more information available on the internet, it has caused more work for me. I often am having to show more detailed information from the MLS (facts), auditor, etc to disprove inaccurate information found by buyers/sellers on the internet. It’s interesting that the perception of real estate agents is that all we do is sell. That’s like saying all a surgeon does is surgery, or all an attorney does is show up at a trial. (Yes, agents are more like attorneys or doctors than travel agents or taxi drivers. Funny an insurance agent is not mentioned here.) There are always hours of background/research work that the average person does not do, even with all the available information on the internet.
It would be interesting where the opinion on productivity came from. Is there specific data to back this up? Or is this just a perception from the outside looking in? In my opinion, this blog sounds more like opinion than conclusions based on facts. I would also challenge the author to get his real estate license and then assist consumers in listing their house or in buying houses in order to truly understand the industry and how things really work.
PS And the real estate industry in the US works to protect consumers. The NAR has lobbied with the government to keep the mortgage interest tax credit for all homeowners. There is a bigger picture the average consumer doesn’t know or see.
Real estate agents only deal with real estate agents. They own the MLS, and they box out for sale by owners. They get 85% of for sale by owners to give up and come to them, they monitor for sale by owners and pitch them. It’s market control.
In the article it says what if I am off by 5%, well if you didn’t give 6% away to an agent you would still be ahead.
An experienced real estate agent might have a wealth of know-how, especially associated with a selected area. simply putting that down in a chain of posts might be useful for assets buyers.
What will truly flip the industry on it’s head is “Buyer/Seller Education”- once they realize that it’s as easy as looking at recently sold properties in the area to determine a competitive market value of said home, and that all of the sage advice a realtor can provide is available online, a realtor’s value goes out the window. It’s not rocket science and is rediculously easy- saving both sides THOUSANDS of dollars in the process. The industry is a HUGE racket and I’m a licensed agent saying this… I’d love nothing more than to expose it for what it is and lead the charge of educating the mass of consumers being screwed over by it.
The elephant in the room is that most real estate is owned by baby boomers and older generations who are used to agents. As real estate transfers down to tech savvy population you will see dramatic change in how this is done.
The elephant in the room is that most real estate is owned by baby boomers and older generations who are used to agents. As real estate transfers down to tech savvy population you will see dramatic change in how this is done.
If this were true, would you not expect that a decline in the reliance on real estate agents would be already measurable?
And finally, somebody gat the nerves to spill the truth…. Nice comments!
The reason real estate companies, and other similar-in function-companies in other industries, stay in business is because they have established a comprehensive “platform” that make the process of buying and selling much more organized and streamlined.
You can do it yourself but having a realtor takes the hassel and stress out of the equation. For many people this is worth the 6% commission.
The internet has changed forever the markets of the world but some things will stay the same. I would think though the multi-listings would be phased out by now. Why share a commission when most buyers know all properties will be listing on the internet?
Really? Are you going to google how to operate on your own foot? Let me guess, next you will be representing yourself on a trial too? YES, Realtors are still around for a good reason! Just like doctors and lawyers are. We are professionals who have to study real estate law and contract law. I bet you will really wish you had hired a realtor when you go to litigation, which happens ALL the time in real estate transactions. We pay BIG money for E&O insurance and continuing education to keep on top of the ever changing laws, and to help and protect our clients. Good luck to you sir, because something tells me that you are going to need it!
We are professionals who have to study real estate law and contract law. I bet you will really wish you had hired a realtor when you go to litigation, which happens ALL the time in real estate transactions.
I have bought and sold property and simply gone to a lawyer. You can buy insurance if you need to.
As a former real estate agent, I can tell you that Zestimate is not accurate in the slightest. All it does is take an average of sales prices of houses within a certain radius, and makes pre-determined adjustments based on square footage, bedrooms, bathrooms, and maybe basements.
They do not consider if a property is waterfront or not, granite or wood counter tops, updates made to the property, any liens or encumbrances, etc.
I do agree though that realtors are becoming less needed, which is part of why I quit. The other part is that it seems that everyone knows at least 3 or 4 other realtors, and nearly every conversation I was able to get started ended with people saying they already had 3 or 4 other realtors they were friends with to choose from if they decided to use one.
Many others decided to save money and go to a flat listing service, which for some people who have experience selling houses would work for. The problem with them is that they require sellers to sign a waiver of duties form, which means the states are having to come out with new paperwork allowing agents to get out of performing services that were once required. Those services get people on the MLS though, and that seems to be all that some sellers want, and negotiate for themselves.
Another red flag for those working in real estate is the fact that many of the most successful agents are premiere agents on Zillow getting their leads online. This is a sign that people aren’t looking for a realtor anymore, but just looking for a house, and are using the internet to avoid having to deal with a person. This might work well for agents that are members, but even they convert probably less than 10% of their leads into a sale, and online leads typically aren’t looking to buy until later, sometimes 6-12 months of first contact, meaning an agent who wants to sign up has to pay really high fees for almost a year before getting a return on their investment.
FSBOs, Expired listings, canvassing…. None of those got me squat other than maybe an overpriced listing, or a house that would not sell.
People wanting to enter real estate have a tough hurdle on their shoulders.
It’s common sense that Real Estate is not an easy game to play alone. Every Real Estate Agent/Player need a supportive team for the better future. This really a good info i found by chance. Thank You.
The education requirements for Realtors are so low. 40 hours of classroom or online instruction and pass a test in most states. It’s an absolute insult / joke.
Don’t even compare Realtor educational requirements on the same level as CPA’s, Doctors & Lawyers.
You should get your license Mike. It’s easy. Start making the big bucks with no skill, effort, or risk at all.
Selling your house without a realtor is easy. Post it online ( Zillow, Facebook), put a sign up and wait.
When you have a buyer both parties can sign a simple agreement made by a lawyer ( fee about $1000) and set up settlement with Title Company. Done.
We sold ours in 2 weeks with no realter on either side.
My last experience with a realtor in making an offer was not good. She starting passing papers to be signed by my wife and me. She slipped in an agreement for us to pay her another fee. She never mentioned it before hand. Very upsetting. Almost walked out.
Sell it yourself.
Not a topic agents are allowed to discuss in the US. Price fixing, Department of Justice. Commissions negotiable and offering Co-op commissions as well. Example: 7% list commission co-op commission 3%.
Agents offer many services and many agents do not. Always ask, always read what you sign, always take your time. There is never an emergency to sign a contract or negotiate one as well. Key is to let millions of people know your home is available not the friend of a friend of a friend and you sell it quickly unless you reall fleeced the buyer?
Always thought agents sell at retail FSBO’s wholesale. Advantage buyer, most of the time for sellers not represented.
For uneducated buyers, advantage seller.
Most markets 70-75% sold with agents. Hasn’t changed in my 35+ years. Tech make it all easier and faster. Saves trees too.
Real Estate agents work very hard for their commission. What happens during inspection? When do the inspection days start? Can you take your TV mounts with you? What happens when issue arise from inspections? What are the lending requirements? What are disclosure laws and how can they effect the transaction? What happens if the appraisal comes back under value with work orders? What happens if something comes up at final walk through? The list goes on. Not using a real estate agent to buy or sell a home is extremely risky and not worth the savings. Also, a large percentage of buyers are represented by real estate agents who have contract terms that buyer is to pay commission and listed inventory already has the agents commission covered so the buyer doesn’t have to pay.
Very easy to see which replies come from agents.
Plenty of people work hard for their money, the difference is most people get hundreds, not tens of thousands for a full days work, or maybe a couple days work. Houses hitting the market and pending within 24hrs? Why do you still pay 6-7%? Oh, wait, I don’t pay it, the seller does! Ok, that’s fine 7% sounds reasonable because it’s someone else’s money, right? Wrong, anyone with 2 wits can tell you the seller is a pass thru- the buyer pays, but once it’s listed you have no choice if you want that house. To list, you just tell them to increase the price so the seller pays it.
That’s why it keeps working, people believe it’s someone else’s money.
As for all these “troubles, problems, headaches” agents have, give me a break, I deal with worse daily for so much less money, I could take months off work to sell my house and still be ahead.
With all of the REALTOR bashing on this post about how much money they make I can only ask the most obvious question. Why don’t you all become REALTORS? After all it’s easy money, right?
Those of you who claim to work hard should quit your low paying job, get your real estate license and start making the big bucks. Go ahead! Take the plunge and start making those enormous commission checks. Stop your whining and cash in.
I don’t think the internet is hampering real estate agents as such because many agents make a website and endorse it on the internet making their business stand out.. so I don’t think it that way…
It is definitely not stopping agents who embrace technology and are moving towards new ways advertising and marketing is consumed.
Only those who refuse to change will be greatly replaced.
Real estate is a job that requires alot of human touch, guidance and understanding of local laws and regulations. Until the day AI can replace this totally, it is unlikely that realtors are replaced.
A career in real estate remains one of the best ways of entrepreneurship!
Everyone is complaining about the agent. I’m a Realtor and I know many Realtors who would gladly work for less. It’s the fat cat brokers who charge the 5%. They take most of the commission. If an agent wants to cut there commission or give money back to the seller it’s on them. The broker isn’t going to kick in. The broker gets their cut no matter what. Remember that when you are complaining about how much an agent makes!
Here in the USA, the realtors steering the neighborhoods and low prices. they don’t help the seller who pay then the commission, they
help the criminals move in, for another, and another family to move out of the neighborhood, and the realtor is in constant business.. Every so often you forced to move here in the USA. is not because you want to, is because the realtors reduce the home prices, and criminals move in YOUR NEIGHBORHOOD. If a family wishes to sell their home at low price because they want to move to another state to be with their children, that does not mean All the homes in the neighborhood should be reduced to the low price!
And folks, I will tell you, this steering is a music to the criminal and realtors ears. And Another ghetto was created.
If a home goes for closure for low price, all the homes in the neighborhood are reduced by the realtors. “This home sold for $20k in your neighborhood.” REALLY STUPID?
I am very knowledgeable in real-estate in New York City. Personally have bought and sold 3 condos for myself.
First of all, the agent does not make much. A 5% fee is split 4 ways. There are usually 2 agents, seller’s and buyer’s. There are 2 agencies, remember a real-estate agent works for an agency.
So now that you know that agent takes only 1.25% which you need to pay federal, state and local taxes.
Then there are so many agents, that you will be lucky to get a single house to sell.
Try that and you will see what I mean. In order to make money, you need to find a house so sell, and the only way is if you have connections, people know about you. Try walking around knocking on doors and say, I want to sell your house. See how many doors get slammed in your face.
The only agent that makes money, is the agent with connections. Connections such as knowing a real-estate developer. Do you know any? I don’t. He builds new homes and hires you to sell. While you are selling their homes, people come to see them. You meet those buyers and offer other homes, now you have a client with whom you can walk around and show other homes. Et cetera, et cetera…
So now the mystery of high earner real-estate agents has been debunked.
I doubt real estate agents have their jobs at stake due to the internet, if anything at all, they can leverage the internet to reach out to people in the way they like to be reached. These days people spend more time online so targeting them through catchy content, sponsored social posts, and blogs and paid campaigns on google really helps. Thanks for touching on this topic, it has gotten everyone thinking.
Real estate agents need to update their knowledge and skillset. Technology complements the good work that real estate agent brings. Only those who cannot embrace technology and react to changes will be overtaken.