The 6% Real Estate Commission is Doomed

[tvguy]

Most people aren't buying a house often enough to care about repeat business.

I think word of mouth referrals are what they are counting on from their customers. The Realtor who we used 40 years ago was referred to us by a co-worker, and she also helped 6 other co-workers buy houses.
I referred my neighbors to the Realtor I used to sell my mom's house, and then my daughter used her to buy her house.

 

[china mom]

It's the difference between $15,000 and $0 that matters though. I've always treated offer advice from my buying agent with skepticism as they are highly incentivized to have me offer enough to guarantee acceptance.

Most people aren't buying a house often enough to care about repeat business.

Maybe I am the exception buy my realtor has helped me purchase 3 and sell 3 but he has also handled both buy and sell for a friend, 2 BILs and my parent in laws.

He has listed my rental house for free in MLS and most recently, walking me through selling a house by myself and looking over the offers for free because he knows he has my good will and will get future business.

And before you say that the last house shows that we don't need agents, it was an unusual situation where I pretty much posted on a FB investors group that I was holding an open house on a Sat and would take cash offer bids until Monday.

 

[gmi3804]

I've always treated offer advice from my buying agent with skepticism as they are highly incentivized to have me offer enough to guarantee acceptance.

You might have trust issues. How are they "incentivized?" Why would it matter a bit to them if you buy House X or House Y? Isn't their incentive to get you into a house that you want? Presenting an offer that's going to be treated seriously and ultimately get you to the closing table after showings, negotiations, inspections, paperwork, loan application, etc., is why they're working for you.

Any good broker knows that, for long-term business, no current transaction is more lucrative than the referrals that come from satisfied clients. I don't advertise my services, and rely 100% on referrals (friends, families, networking with out-of-town broker friends). I never do Open Houses on my listings, as I believe they're done primarily for agents to find new buyer clients; houses rarely find their buyers from random nosy strangers, and the few ones that do don't justify my time or effort. I have zero interest in working with strangers who have similar trust issues as yours.

 

[Cannot_Wait_4Disney]

OOOO A zombie thread. You know what that means.

It's time for another zombie poll. We work hard to poll zombies so you don't have to.

6 out of 10 zombies polled said they don't want to give up 3% of their brains to a buyer's agent.
3 out of 10 zombies would rather eat brains then sell them.
And one zombie just drooled and said Brains, yum. So we high tailed it back to the poll mobile.

 

[NYCgrrl]

I have never paid a 6% broker’s fee to buy, sell or rent however all my domestic transactions have been in the NE

 

[tvguy]

OOOO A zombie thread. You know what that means.

It's time for another zombie poll. We work hard to poll zombies so you don't have to.

6 out of 10 zombies polled said they don't want to give up 3% of their brains to a buyer's agent.
3 out of 10 zombies would rather eat brains then sell them.
And one zombie just drooled and said Brains, yum. So we high tailed it back to the poll mobile.

View attachment 852535

Ah, YOU were the one who revived it. And six months is not even close to a Zombie thread. But very current since it was only 5 weeks ago that the final decision came down eliminating the 6% commission.

 

[gmi3804]

I agree that word of mouth is crucial in real estate. When we bought our first home, we went with a Realtor who came highly recommended by a friend. That same Realtor ended up helping several of our friends and family over the years. It's amazing how a good recommendation can build trust.

The most important part of any transaction is the referrals that will come from it.

 

[DawnM]

Can't remember the name of the company, but they advertise on national TV that their agents work for as little of a 2% commission.
Not sure I agree that the MLS having requirements to use their service in a certain manner is collusion. As others have pointed out, you don't need MLS to sell a house and you can negotiate commissions.

They must mean for THEIR portion of the commission. The buying agent will still expect 3%.

 

[DawnM]

We paid 5% on our last sale. Next sale I do hope to pay less, but we aren't selling for a good long while at this point. We are pretty set.

 

[gmi3804]

One potential solution, especially as the industry is likely to shift towards lower commissions, is to start negotiating directly with agents on a flat fee or hourly basis. This can help you ensure that you're only paying for the services you truly need and that there's no conflict of interest driving up home prices. Also, focusing on agents who offer transparent, a la carte services could be a more equitable way to approach your real estate transactions.

Good luck finding a reputable brokerage firm that will allow one of their brokers to work under this kind of pay structure. While commissions are always negotiable, most firms will not allow brokers to work under any other pay structure. Of course, if you're a broker/owner, you can charge whatever you want, however you want.

 

[china mom]

I am currently on the market and my contract with my selling gent is 2.5% and I am fine with that. Under the new rule that just went into effect, we had to re-do our listing to not include a buyers agent fee but I will happily pay a 2.5% buyer agent fee on behalf of the buyer. The other alternative would be for them to negotiate 2.5% off the sales price so that they can pay their agent. If I pay it, they can roll it into their financing and not need as much cash at closing. (prior to t the change, I was in a contract for 5% with a 2.5/2,5 split).

There is no way I would commit to an hourly fee structure. While that sounds enticing at first, my house has been on the market for over 30 days now and during that time, my realtor and I have had several phone calls, a price adjustment, he has reworded the listing a couple of times and he has held 3 open houses and 2-3 site visits. Once we receive an offer, he will negotiate the contract, get all the signatures and make sure that the buyers agent completes all of the inspection nd meets all deadlines. He will also attend closing.

I prefer knowing my selling price upfront. I consider the percentage of the selling price to be the negotiated flat fee but where they have an interest in negotiating the highest sales price possible rathe then attempting to reduce the price for a quick sale..

On the buying end, I want a realtor who will charge a negotiated flat fee contingent on the purchase going through. With an hourly rate, I would feel like I could not look at all of the houses that I want to.

 

[barkley]

One potential solution, especially as the industry is likely to shift towards lower commissions, is to start negotiating directly with agents on a flat fee or hourly basis. This can help you ensure that you're only paying for the services you truly need and that there's no conflict of interest driving up home prices. Also, focusing on agents who offer transparent, a la carte services could be a more equitable way to approach your real estate transactions.

i remember back in '05 and '06 when the market was red hot there were some little 'a la carte' real estate buisnesses that opened where we lived in northern california. they promoted themselves as saving sellers 'tens of thousands' by providing a pick and choose/customized 'just the elements of a realtor you REALY need' model. our neighborhood was selling and reselling like mad during this period and 9 times out of 10 everyone who bought or sold with those places ended up dealing with some kind of mid or post sale fallout. a good experienced realtor knows to look at so many aspects during marketing (like not promoting a specific highly desirable nearby elementary school which in reality has had a many years wait list due to school choice in that district), knows if a particular housing development has had any building problem trends over the years-and to make sure to investigate it to remedy or address it before it becomes a price lowering tool for the buyer. they look at the whole picture of the transaction.

yeah, we paid a chunk of change in commissions (5%) but when we closed the deal it was done, over-no more having to go back and bicker months into years after the fact like some of our former neighbors were dealing with.

 

[tvguy]

Good luck finding a reputable brokerage firm that will allow one of their brokers to work under this kind of pay structure. While commissions are always negotiable, most firms will not allow brokers to work under any other pay structure. Of course, if you're a broker/owner, you can charge whatever you want, however you want.

We will see come this Saturday when the rules change. This article seems to think the transition will be easier for established "reputable" brokerages. My daughter is in the middle of the sale of a home, listed July 1, with an established (30 years experience) realtor and a major firm. The commission they proposed and was agreed to is 4%. The Agent said the owner of the agency will certainly be paying attention to how things shake out after August 17th, but believes the reality is, compensation will be dropping across the board. And the offer that is about half way through the escrow process includes the buyers agent kicking back a portion of his commission to the buyer.

https://www.cnn.com/2024/08/12/economy/nar-realtor-settlement-august-commissions/index.html

 

[gmi3804]

We will see come this Saturday when the rules change. This article seems to think the transition will be easier for established "reputable" brokerages. My daughter is in the middle of the sale of a home, listed July 1, with an established (30 years experience) realtor and a major firm. The commission they proposed and was agreed to is 4%. The Agent said the owner of the agency will certainly be paying attention to how things shake out after August 17th, but believes the reality is, compensation will be dropping across the board. And the offer that is about half way through the escrow process includes the buyers agent kicking back a portion of his commission to the buyer.

https://www.cnn.com/2024/08/12/economy/nar-realtor-settlement-august-commissions/index.html

I was addressing the poster who proposed negotiating for a flat fee or a per-hour rate.

Will your daughter's broker be paying a co-op to a buyer's brokerage, if any?

 

[china mom]

We will see come this Saturday when the rules change. This article seems to think the transition will be easier for established "reputable" brokerages. My daughter is in the middle of the sale of a home, listed July 1, with an established (30 years experience) realtor and a major firm. The commission they proposed and was agreed to is 4%. The Agent said the owner of the agency will certainly be paying attention to how things shake out after August 17th, but believes the reality is, compensation will be dropping across the board. And the offer that is about half way through the escrow process includes the buyers agent kicking back a portion of his commission to the buyer.

https://www.cnn.com/2024/08/12/economy/nar-realtor-settlement-august-commissions/index.html

Just curious, what is the split on th4e 4% commission?

I don't think this change will affect houses under contract. I thought it had more to do with advertising commission splits.

I am not under contract but have a sellers agent agreement with my agent It was a 5% commission with a 50/50 split with the buyer broker but he just had me singer a new agreement for 2.5% to him and nothing to the buyers agent. But with the understanding that me paying the buyers agent is something that will be negotiated in the sale.

 

[tvguy]

Just curious, what is the split on th4e 4% commission?

I don't think this change will affect houses under contract. I thought it had more to do with advertising commission splits.

I am not under contract but have a sellers agent agreement with my agent It was a 5% commission with a 50/50 split with the buyer broker but he just had me singer a new agreement for 2.5% to him and nothing to the buyers agent. But with the understanding that me paying the buyers agent is something that will be negotiated in the sale.

2 1/2 sellers agent, 1 1/2 buyers agent. And like I said, the buyers agent is kicking 1/2 percent to his client. This is an entry level home, half a duplex priced at $365,000 and word is the buyers agent is kicking in part of his commission to help make sure his clients qualify for the mortgage.

 

[tvguy]

I was addressing the poster who proposed negotiating for a flat fee or a per-hour rate.

Will your daughter's broker be paying a co-op to a buyer's brokerage, if any?

1 1/2 % According to the article I posted, the expectation is for a lot of brokerages to go flat rate.

 

[china mom]

1 1/2 % According to the article I posted, the expectation is for a lot of brokerages to go flat rate.

And, I do not necessarily have a problem with flat rate. The idea being that it does not cost any more or less to market a $3000K home versus a $500K home but I wonder if they will have tiers. By this I mean that an agent will spend more time and resources selling a $2M than a $200K home so maybe not a flat rate but a couple of different flat rates based on the expected marketing expenses.

 

[tvguy]

And, I do not necessarily have a problem with flat rate. The idea being that it does not cost any more or less to market a $3000K home versus a $500K home but I wonder if they will have tiers. By this I mean that an agent will spend more time and resources selling a $2M than a $200K home so maybe not a flat rate but a couple of different flat rates based on the expected marketing expenses.

The comments we got from people who toured my daughter's house all centered on how small it is. 919 square feet, 3 bedroom 1 bath 1 car garage. Funny thing is, this is the big floor plan. Half the houses in her subdivision at 2 bedroom, 1 bath 1 car garage and 888 square feet. They were built in 1980 when land prices soared, so new homes were smaller. As a matter of fact, one developer in another part of town of that time was building condos the size of a two car garage, yup, 400 square feet. They featured half sized appliances, and murphy beds.
So marketing the houses is just a portion of what a realtor does. They have to get people to realize what they can afford,, and to realize what realistically that kind of money will buy.

 

[china mom]

The comments we got from people who toured my daughter's house all centered on how small it is. 919 square feet, 3 bedroom 1 bath 1 car garage. Funny thing is, this is the big floor plan. Half the houses in her subdivision at 2 bedroom, 1 bath 1 car garage and 888 square feet. They were built in 1980 when land prices soared, so new homes were smaller. As a matter of fact, one developer in another part of town of that time was building condos the size of a two car garage, yup, 400 square feet. They featured half sized appliances, and murphy beds.
So marketing the houses is just a portion of what a realtor does. They have to get people to realize what they can afford,, and to realize what realistically that kind of money will buy.

Yes, 100%. My house has the incurable defect of being a split foyer with 2 beds up and two down. No one with small children will want that layout so he has been trying out different wording in the listing hoping to get new views.

He has also spent time interviewing other relators who have shown the house to see what potential purchasers are saying to see if there is something we can fix.

I wonder if people who are hoping for an hourly rate think that realtors will be charging $20 and hour. I expect to see something more like $125/hr plus expenses and fees. And don't forget, realtors are not actually making the 2.5 or 3% commission. They usually make 1% and the broker makes 2% to cover office expenses and such.