Author Topic: Problem with agent commissions  (Read 2516 times)

HAL9000

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Problem with agent commissions
« on: January 07, 2015, 08:58:16 AM »
/Rant On/
I am having a problem in general with real estate agents commissions. We are selling our current home in Phoenix, AZ and buying multiple other properties as well.

I look at the NAR and it's members as a monopoly that provides questionable value for the commissions they receive. It's always a good time to buy or sell.  They own the MLS, most buyers/sellers use the MLS because its the most consolidated way to get your house advertised. The expected commissions are arbitrary at 6%, 3% seller broker and 3% buyer broker.

What value do Real Estate agents provide?

- Take the specs on your house and input them into the MLS.
- Order pictures taken to put on MLS.
- Put up a sign in your front yard.
- Possibly list the house with a few Real Estate magazines/websites.
- Periodically have showings of the house.
- Play middle man between buyer and seller.

Take a $500k property @ 3% = $15k

Does all the work really provide $15k in value?

I am a wage slave so I look at it in terms of hours worked. Lets say they made $30 an hour (generous based on skill set), that would equate to 500 hours of labor or 12.5 weeks of full time work. No buyer/seller real estate agent works that much that for a listing. I know they do not get that much directly as they have to pay for costs and their broker fees, but they receive the majority of it.

Did I get this all wrong, do they provide equal value for their expected commissions, or is this a monopoly that tries to exploit the buyers/sellers?

I do not have a problem paying a lot of money for value, but this doesn't add up to me. It appears to make more sense to just find a discount seller broker that can do the same work for a fixed price or commissions of .5%-1.5% and list the house with a 2% buyer commission. How many people actually take that path?
/Rant off/
« Last Edit: January 07, 2015, 09:04:13 AM by HAL9000 »

waltworks

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Re: Problem with agent commissions
« Reply #1 on: January 07, 2015, 09:10:58 AM »
Sounds like you should become a realtor and make that easy money!

-W

GoldenStache

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Re: Problem with agent commissions
« Reply #2 on: January 07, 2015, 09:12:09 AM »
Use Redfin if you can. 

Lower % for buying and selling, and agent is paid a salary.  The agents are not trying to get a house bought/sold as quickly as possible to move on to the next one.

OR

Tell your agent that you want a part of that $15k going towards closing.  I was able to get $3k of my agents commission for buying a house going towards closing.  Be upfront at the very beginning, my agent was very happy to do it instead of me going through USAA and getting USAA to refer the agent (USAA would get 1.5% of the 3%) and USAA would give me $1,500.     

Or

Get your own license.  If you are buying and selling in AZ, and using the BPF (ball park figure) of $500k * X, it might be worth your time and money to do it yourself.

shotgunwilly

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Re: Problem with agent commissions
« Reply #3 on: January 07, 2015, 09:56:58 AM »


What value do Real Estate agents provide?

- Take the specs on your house and input them into the MLS.
- Order pictures taken to put on MLS.
- Put up a sign in your front yard.
- Possibly list the house with a few Real Estate magazines/websites.
- Periodically have showings of the house.
- Play middle man between buyer and seller.

Take a $500k property @ 3% = $15k

Does all the work really provide $15k in value?


No.

Jack

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Re: Problem with agent commissions
« Reply #4 on: January 07, 2015, 10:24:22 AM »
First of all, most sales aren't for $0.5M homes. When I bought my house, my buyer's agent's 3% commission came to about $3K.

Second, that fee is gross, and includes all the overhead of running a business. I actually felt a little bad for my realtor: not only did his broker get a big chunk (50%?) off the top, he had to incur all the expenses of driving me around to view dozens of houses, dealing with the seller (who was a little ridiculous, and trying to sell the house before her bankruptcy had been closed out), buying me a fridge to close the deal (the FHA mortgage required a fridge to be included, but the seller didn't realize that and sold it a few days before closing), etc. He earned the $1000 or so he netted for his four months (part time) of work.

Third, the 3%-regardless-of-property-value "rule" is indeed stupid. There are realtors around here advertising on the radio that they'll do the stuff you listed for something like 1% + a fixed $500 fee (not including the buyer's agent's fee, I assume), which makes much more sense as a pricing model.

waltworks

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Re: Problem with agent commissions
« Reply #5 on: January 07, 2015, 10:32:03 AM »
OP: The MLS and associated hoops associated with listing on it is a scam. But realtors in general don't make tons of money and most of them work their asses off for it like everyone else.

Whether you're better off using Redfin or a discount broker or FSBO is a different question. If you've got a nice place and you want to get top dollar, a well-connected and competent agent will probably net you more money in the end. But maybe not.

-W

RH

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Re: Problem with agent commissions
« Reply #6 on: January 07, 2015, 10:59:49 AM »
When we were looking to buy our current house, it took about 3 months and 20 showings. Our agent was flexible and picked us up each time too. And she helped negotiate an extra $5,000 credit @ closing. All that and her commission was probably $8K (before taxes). That has to cover her monthly desk fees, business expenses, dues, etc... It's sink or swim in real estate.

ShoulderThingThatGoesUp

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Re: Problem with agent commissions
« Reply #7 on: January 07, 2015, 11:26:23 AM »
When I sold my house, the agent was a skilled negotiator and was able to pretty accurately gauge the offers coming in. She handled some surprises along the way very competently. So, I'd say she was well worth it.

Fishingmn

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Re: Problem with agent commissions
« Reply #8 on: January 08, 2015, 06:50:15 AM »
Full disclosure - I'm a Realtor.

First off, I'm interested in your belief that real estate agents are at best worth $30/hour based on our skill set. That's approximately $60k/year. Personally, I have an Business degree from a highly regarded school and MBA. I was paid well over 2x that amount in my previous career in technology sales.

But lets just assume $60,000 is the right number (even though you suggest that's too high).

Out of that an agent, who is an independent contractor, must pay for -

- Both sides of SSDI
- MLS Fees ($500/year)
- Association Fees (NAR, State/local - $600/year)
- E&O Insurance ($400/year)
- Broker Desk Fees (mine is $300/mo)
- Broker Splits (anywhere from 5-50% of the commission to the broker)
- National Franchise Fee ($495/year to RE/MAX corporate)
- All our own marketing costs to find clients
- All of our own travel/entertainment fees (gas is cheap now but this still adds up with 20k miles/year)
- Cost of taking on listings - I usually spend about $400 in staging/photographer/sign install/marketing
- Risk of taking listing that doesn't sell and that $400 comes out of pocket with no income
- All of this with no benefits - no healthcare, paid vacations/days off, 401k, nothing

Add it all up and that $60k in income comes out to maybe $30k in actual take home pay and you still get no benefits and paying for healthcare out of pocket. Many Realtors couldn't do the job unless they have spouse with healthcare (like me).

I personally don't charge 6% as I think that's a little high too but I am just doing this job as a semi-retirement filler to mostly family, friends & referrals while I manage my rental properties. DW retires in 2 years and then I'll be done. But I don't begrudge those who do charge that much because I know first hand that many Realtors are skilled people who don't end up making anywhere near as much as people seem to think.