Takeaways:
- There isn’t data to help independent brokerages set prices because it could be construed as price fixing.
- Years ago, larger traditional brokerages told agents that if their clients talked them down on commission, they were poor negotiators.
- Buyers don’t understand commission — who pays it and what it pays for.
- Home sellers have a different attitude toward commissions now than they had during the housing market crash.
As the leader of a real estate company, I have to decide what services I want to provide and what to charge for them. Supposedly commissions are negotiable.
But I find that most people won’t negotiate — they will just move on to the next agent if they don’t think my services are worthy of my exorbitant fee, and that fee isn’t the same for everyone.
Real estate agents and companies are not allowed to discuss many specific fees with each other because it could lead to price fixing, which is illegal. There isn’t any data I can use to determine how much the average home seller pays a real estate agent.
When I talk with potential clients, they always seem to know exactly what the going rate is for a real estate agent. So do the news media and others who write about real estate commissions rather than charging them.
I have never been sure exactly what a discount broker is. If there is no standard rate, how can there be a discounted rate?
Here at Inman, there have been reports about “hybrid” real estate companies, and as near as I can figure these are companies that charge flat fees.
Or they charge for individual services rather than charging the more traditional commission based on a percentage of the sale price for providing a “full service,” after the sale closes.
No matter how I look at any of these business models, I get the impression the objective is to make the consumer feel like they are paying less for real estate services or, in some cases, paying only for a few services as they are unbundled.
I have no idea how the average consumer can shop for the best value or if paying less favorably impacts their bottom line.
Many years ago when I was an agent with a larger traditional real estate company, we were told to charge “X” amount even if we had no experience. And we were taught how to sell clients on the idea that we were worth what we were charging because we had a real estate license.
We were taught to tell our clients that if we let them talk us into accepting a lower fee, that would mean that we are poor negotiators, and, as a result, they might end up getting less for their homes.
I won’t even attempt to poke holes in that argument because it is part of the foundation that the full-service real estate business rests upon, and I don’t want to crack it.
Conversely, agents are told that they should accept business even though there is a large referral fee attached to it that goes to the broker or a relocation company, because, after all, 50 percent of something is better than 100 percent of nothing.
Our MLS doesn’t have any data that would show how much we charge home sellers. There isn’t a field for the information anywhere in the database. But it is pretty easy to get an average cooperative payout to a buyer’s agent because it has to be published in the MLS.
I have had buyers explain to me how they will save X percent on the purchase of a home if they buy one without the help of a real estate agent. Some buyers even want me to give them money.
Apparently, they do not understand what it is that we do and that the seller is paying the commission.
They don’t understand that when I represent the buyer it might cost the seller 10 percent or more because they will sell their house for less, which saves the buyer money because of my mad — and sometimes ruthless — negotiating skills.
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Some real estate companies focus on how much or how little they charge. I like to stay focused on how much money I can help my clients make on the sale of their home and on how much I can help my buyers save when they purchase a home.
I can always charge less. I would rather not, but maybe I am charging less.
Business models are emerging, but most or even all that I have seen still use the services of real estate agents — even if the services are unbundled and virtually provided by agents who are salaried or commissioned or both.
There isn’t that much disruption or innovation, just adjustments to accommodate a seller’s market.
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Home sellers have a different attitude toward commissions now than they had during the housing market crash and the Great Recession when we couldn’t give houses away.
Now is the time to exploit the seller’s market because it won’t last forever. But what works in a seller’s market might not function in a more balanced market or a buyer’s market.
Teresa Boardman is a Realtor and broker-owner of Boardman Realty in St. Paul, Minnesota. She is also the founder of StPaulRealEstateBlog.com.
