Author Topic: Why does a realtor get paid so much?  (Read 4043 times)

Half-Borg

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Why does a realtor get paid so much?
« on: September 11, 2013, 08:43:57 AM »
I was looking for a new flat recently.
I live in a city with lots of students. Most landlords get a realtor to rent out there propertys.
The fee is usally 2.5 rents or 1500 for the places I looked at, to be paid by the future tenant.
So the realtor snaps some pics (or doesn't) post the flat online with a remark that there is a public showing in three weeks. There are usally about 50 students desperatly looking for a place to live.
Someone gets it and the realtor gets a lot of money for something, that seems like half-a-day-job to me.

Am I missing something or is realtor a instant cash job?

NumberCruncher

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Re: Why does a realtor get paid so much?
« Reply #1 on: September 11, 2013, 08:55:22 AM »
I would love to know the answer to this. I've had some horrible experiences with realtors in the past.

My most recent apartment had a 1/2 fee (still almost $600) for showing us the apartment twice and causing horrible miscommunication that made us really unsure if the apartment was ours or not up until the day before the lease started.

mpbaker22

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Re: Why does a realtor get paid so much?
« Reply #2 on: September 11, 2013, 09:18:06 AM »
I was looking at buying a house recently.  An agent spent at least a few hours on the phone with me, spent a few hours going to places, spent a few more hours on the phone with me.  Probably spent a few more hours on the phone with the sellers.  I ended up backing out, and the sale didn't go through.  The realtor didn't get paid.
There are also a lot of people who will try a few different realtors.  While a good idea, it's ultimately a waste of time for the ones you don't use.

They have to make up for all the non-sales, so you're paying them not just for work done on your behalf, but on all those people's behalf as well.

And usually 1/2 the agent's fee goes to their parent company.  For example, you buy a $200K house.  Each agent gets $6,000.  Each parent gets $3,000 and each agent goes home with $3,000 (sometimes less).  And they might only sell one house a month.

NumberCruncher

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Re: Why does a realtor get paid so much?
« Reply #3 on: September 11, 2013, 09:31:56 AM »
It seems slightly different for those who sell houses as opposed to facilitate renting.

In the OP's case (and mine), the demand for good apartments far exceeds the supply. In general, it's also way easier to sell an apartment as opposed to a house.

rockstache

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Re: Why does a realtor get paid so much?
« Reply #4 on: September 11, 2013, 09:47:13 AM »
I have never heard of an apartment realtor. Are you in the U.S.? Since you used the word flat, I am guessing not?

mpbaker22

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Re: Why does a realtor get paid so much?
« Reply #5 on: September 11, 2013, 10:06:59 AM »
I have never heard of an apartment realtor. Are you in the U.S.? Since you used the word flat, I am guessing not?

They exist in the US.  My perception is they are especially used by large corporations that relocate employees.  But also for hire by individuals.  I'm not sure why one would hire an apartment realtor other than for the fact the apartment usually pays the realtor out of rent (but a lot of apartments won't rent  to realtors so it limits the apartments you can look at).  This is all my perception, so maybe not rooted entirely in reality, but I know for sure they exist in the US.

Half-Borg

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Re: Why does a realtor get paid so much?
« Reply #6 on: September 11, 2013, 10:41:14 AM »
I'm very pleased that my give-away is flat/apartment. I'm in Germany.

I get that buying a house is another business, with more work involved. Still you paid someone like 10000$ for a couple of days work.
I don't care how much time the realtor spends with someone else, why should I?

FastStache

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Re: Why does a realtor get paid so much?
« Reply #7 on: September 11, 2013, 10:59:47 AM »
You pay for more than the realtor's time.

You also get a lot of advertising done for you.

NumberCruncher

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Re: Why does a realtor get paid so much?
« Reply #8 on: September 11, 2013, 11:50:34 AM »
I have never heard of an apartment realtor. Are you in the U.S.? Since you used the word flat, I am guessing not?

They exist in the US.  My perception is they are especially used by large corporations that relocate employees.  But also for hire by individuals.  I'm not sure why one would hire an apartment realtor other than for the fact the apartment usually pays the realtor out of rent (but a lot of apartments won't rent  to realtors so it limits the apartments you can look at).  This is all my perception, so maybe not rooted entirely in reality, but I know for sure they exist in the US.

They're really popular in certain regions. Most of the apartments on Craigslist in my region (in the US) are put up by realtors. Their fee is typically paid for by the new tenant (or half paid for that way). The only benefit I see on the tenant side is for stuff like background checks and the like you go through someone who is licensed by the state.

KingCoin

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Re: Why does a realtor get paid so much?
« Reply #9 on: September 11, 2013, 11:56:17 AM »
In NYC, rental brokering is very common and is kind of a shady business. The typical fee is 1mo-1.5mo rent which amounts to $3000-5000 for a no-frills 1-bedroom.  The fee is absurd relative to the service rendered (often little more than opening a door for you). This crazy fee structure attracts tons of minimally qualified people into a fairly low barrier to entry business, looking for the occasional score. The result is a free-for-all with tons of bait and switching, misrepresentations, and other shady sales tactics. New Yorkers in-the-know typically try to contact building management directly to cut out the middle man, but sometimes apartment owners give exclusives to brokers and you have no choice but to pony up the ridiculous ransom.

An hourly fee structure would be much more sensible. Picky customers who need to see 30 apartments would pay more, focused customers who only need to see 1 or 2 would need to pay less. If the customer felt like the broker was wasting their time, they could walk away at a minimum of expense. I'm amazed that we haven't migrated away from the current model in one way or another. I guess the lack of a centralized market availability website doesn't help.

Interesting discussion on more traditional real estate broker price structure here:
http://marginalrevolution.com/marginalrevolution/2013/04/the-real-estate-commission-puzzle.html