Do Brokers Deserve Their Fat Commissions?

MLS and other issues

Chet of ME says that the consumers should have access to the MLS. You do. Free. There are thousands of websites out there that pull thier listings directly from the hundreds of MLS boards in this country. Hmmm--I wonder who pays for those boards in the form of dues, fees, etc? I wonder who pays the cost of acquiring those listings, and I wonder who pays to maintain those listings, and I wonder who pays FOR THE MLS SERVICE TO BEGIN WITH, and I wonder who pays the fees associated for listing on/selling a property through an MLS service? You, know what I'm talking about--that MLS service the consumer wants access to for free? Who pays the piper? Could it be your lazy, overpaid real estate agent who does nothing to earn her seemingly high commission?

Oh, and what about all those secondary sites that pull thier listings from the various MLS systems so the consumer can see them--for free? These sites then hit up the individual listing agents to the tune of THOUSANDS of dollars a year to allow them to "enhance" their own listings on their service. If the agent doesn't "enhance," then the lead they have worked so hard to get and maintain will go to an agent other than the listing agent. They will go to an agent who has--hold on to your hat--PAID A FEE--to get those leads.

So, let me lay this out for you in simple terms. I, as an agent, advertise for leads. I get a lead, I do a presentation. I get the listing. I then process the listing myself (and am therefore not able to be soliciting new business because I've become my own administrative assistant). Or, I pay staff to process the listing. I hire the photographer. I order the virtual tour for the consumer to view online for free. I do flyers, signs, open houses, ads, agent luncheons, enhance websites, maintain office and personal websites and post my listing there, post online classifieds (or pay someone to do it--it's very time consuming). I'll then have to repost these classifieds, some weekly. Have I mentioned that as the agent, I've not been paid a dime for this listing and everything I've mentioned above costs money and time?

Then, the property doesn't sell. Or the contract falls through due to financing. Or the seller decides that he wants a new REALTOR because the home has not gotten an offer. The agent gets nothing for all her time and money spent on the listing. When listings fail to sell or close it can be for thousands of reasons, rarely of which is the lack of a professional agent doing her job.

So, to address the issue of commision rates remaining consistent while the prices of homes have gone up, therefore allowing the individual agents to make a killing for doing next to nothing, I beg to disagree. As the home prices have risen, so has everything else. I bet most people reading this have had a pay raise during the last ten years. I bet it's been more than a few dollars, too. Why arn't realtors allowed a pay raise? Gone are the days of pocket listings (in most markets). An agent can no longer take a listing, do nothing more than post a sign in the yard and tell a few buddies in the office about their great new listing and then cruise to the closing table.

Good agents must be on the front edge of the latest technology (and therefore pay the price that's associated with that), have a very efficient office staff (that the agent, not the broker, pays for), and still maintain all the necessary subscriptions, memberships, educational requirements, advertising, and lead generation tools that were unheard of in real estate years ago. It all costs. So, in brief, the expenses an agent pays per transaction has skyrocketed in recent years as the available (and necessary) auxillary services he/she must subscribe to and provide to the client have increased. So, expenses are WAY up over what they were when I got into real estate twelve years ago.

Also, another problem is the influx of agents into the business. When times get tough economically, historically there has been a rush of newbies in the business. Of course, we're seeing the opposite now, but in a normal business economy anyone who can fog a mirror and needs a few extra dollars or a career change would jump on the real estate band wagon in search of quick big bucks having no idea of what is takes to be a real estate professional. How this hurts us all (agents and the public) is this: these thousands of agents who give real estate "a try" take thousands of transactions away from the serious agents in the market. Gee, if each professional, serious, full time agent could maintain a steady inventory of listings and ready buyers, then economics would prevail. But instead, so many transactions are lost to "part time" agents or those agents who are "just giving real estate a try" that it cuts into the income stream of the "real agents." Hence, professional agents have to maintain their commission rate instead of cutting it in order to stay afloat. The agent's personal cut of the commision pie after everything is said and done has actually gone down over the years as expenses have skyrocketed. Add to that more agents competing for the pie and you can see the problems that have developed. I'm all for new agents and will help one whenever I can. I'm talking about the new agents who just "dabble" in the market. They are doing a disservice to their clients by not providing top notch service, a disservice to the other agents by taking business and a disservice to the public by keeping the real estate commissions in an area higher than they need to be.

Also, in response to Chet of ME and those high salaries SOME agents make: in GA last year the average commission earned was in the upper $30K range. That's before taxes and expenses. Those huge commissions are statistically made by 2% of the agent population according to NAR (I think that's where I got that stat!). So, as with other professionals, some thrive while others don't. The middle ground agents, like myself, just want to do a good job and keep ourselves in business. If I cut commissions to say 4% total, then I'd have to cut service, increase listings and buyers and overall do LESS for my clients because I have to focus on QUANTITY, not QUALITY. So I have to work more, work harder just to maintain my business. Would you want your financial planner, accountant or attorney working under that premise?

The public continues to demand more from thier agents. But the public is not willing to recognize that "more" comes with a price.

Oh, and to the issue of higher dollar homes being just as easy to sell as a low dollar home. Think again. Some of that is true, but not all. A lot of the realtor's fees are price based. As the price of the home goes up, so do the fees the realtor pays. Also, high end properties require more "high end" advertising and white glove treatment. It's nothing for a serious agent to drop $10K to advertise a $3,000,000 home in a glossy magazine, hire someone to develop a website dedicated to just that home, do extensive mail and internet advertising, etc. Get the picture? For a truely unique home the advertising can be regional, not just local. Then the price just skyrockets.

An agent is just like any other professional service. You get what you pay for. You want less, go with a fee based broker or do it yourself. And remember, you don't know what you don't know. And what you don't know can hurt you.

BTW--as a word of warning to the unaware: Some of you have proposed that negotiating the fee should be done, after all it's a competitive market. To that I say fine. If you're fee shopping, shop around. You'll find a desparate, hungry agent who'll take whatever crumbs she can get. Of course, that agent won't have the financial means to provide the services you want, but you won't know that when you sign on the dotted line. Experienced agents have figured out that fee cutting is the fast track to going out of business. Better to not take the business than give away services.

Also, those agents who take your listing at a reduced rate may have no intention of selling your home. You're jerking her around, so she's going to do the same to you in a very subtle way. After all, leads and new buyer clients are generated off of posted listings. If she picks up a buyer or a lead from your listing that results in a closing for her (but not for you), then she's won the game and you're still sitting there, waiting for your home to sell. If your home happens to sell, great! It's an unexpected bonus. If you're not willing to pay 100% of your agent's commission rate, then what right have you got as a seller to demand that your agent give you 100% of her time, talent, expertise and professionalism? You get what you pay for, after all. If you want the BMW of real estate, don't expect to get it for the price of a KIA.

Along these lines: listing machines. Agents will quote a reduced rate and put the seller on their "sales program." It's all a numbers game. Get lots and lots of listings, do as little as possible for these sellers (and have that done by administrative staff), but run to the bank with the buyers and leads that are generated by the multitude of listings.

In real estate, bigger is not always better. Shop carefully for your agent but be willing to pay for one who is willing to work hard for you. The agent/seller relationship (and agent/buyer relatonship) is a partnership. It takes both parties working together to sell a property. If you undermine your agent from the start, you're only undermining yourself.

Lori of GA @ Mar 05, 2008 16:53:25 PM