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Let's change the real estate industry

10,368 Views | 96 Replies | Last: 5 yr ago by BrazosDog02
mazag08
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We have threads monthly on here that end up boiling down to a handful of people saying that the format for paying commission rates to Realtors is dated and that change is coming. Some have said Realtors just flat aren't worth the money, and some have pointed to flat fee as a potential solution. We now have technology that attempts to replace the Realtor as well.

This is not a thread to start an argument. If you want to argue for or against Realtors please take it to one of the previous threads.

I want to give those of you out there who have claimed that change is coming, and those of you who are in the industry that (like me) have seen first hand how many bad apples there are that give the rest a bad name a place to share your ideas.

So let's discuss what we might see in the future, the viability of it, the opportunities, and the potential downfalls. Let's think it through as it regards to TREC, NAR, TAR, and the lobbyists on the side of the industry who will fight tooth and nail to keep things status quo.

My background:
  • I worked for an apartment complex as a leasing agent in college.
  • After college I started as a licensed leasing agent in College Station.
  • I was a full time Realtor in College Station with Houston as my secondary market.
  • I've done residential and commercial appraisal of all property types save for high rise office.
  • I spent two years in acquisition and development for a large grocery retailer.
  • I'm now doing multifamily acquisitions and underwriting and I'm a Realtor on the side for close friends and family.

My stances:
  • I believe a good Realtor is invaluable to the average buyer.
  • I believe an educated and/or experienced seller absolutely does not NEED to use a Realtor.
  • I have no idea why any buyer wouldn't hire a good Realtor. A good Realtor can net you the same amount that you think you will receive in price deductions from not using a Realtor, and you will have someone looking out for your interests and not the seller's.
  • I think standard commission rates (seller pays 6% split evenly between the buyers agent and sellers agent) are fair at most transaction levels.
  • I believe that a commission of 2%-2.5% for each side is fair for higher valued homes.
  • I don't think we will ever see transactions again where each side pays their own Realtor. Free market and capitalism is why sellers starting paying both in the first place as a way to entice buyers agents to favor showing their listing over other listings.
  • I realize the benefits of flat fee Realtors to all parties but would like to make sure people understand that as a buyer, your agent is still getting 3% unless you've made an agreement for them to kick back a portion to you.
  • I believe good flat fee Realtors who offer full service are great free market reaction to experienced sellers who don't see the value in standard Realtors.
  • I absolutely loathe Zillow and any website that uses anything other than verified sales to estimate value.
  • I think the new trend of apps and websites that let you in houses is interesting, but I see way too many potential abuses and needs for future regulation in the industry for me to get behind it.
  • It annoys me when people fail to understand that a seller has a contract with their Realtor for a specified time period that discusses how commissions will be paid out, and that 99% of the time in a situation of a buyer coming without a Realtor, the listing agent get's the whole 6%.
  • I'm excited about the future of technology in the industry, but I don't think it will ever cater to more than maybe 30% of people as far as industry change goes. The rest simply don't understand real estate and need good representation that a lawyer, loan officer, or title company cannot provide.

Let's hear some thoughts!
SquirrellyDan
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I'm in your corner, but you've basically stated what everyone knows.
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schwack schwack
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Quote:

We have seen it in other industries where technology or other changes have made a lot of jobs obsolete or at least dramatically reduced need.

We were talking about travel agents the other day........
The Original AG 76
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Just sold my house in Houston and had to give over $25000 of my money to a couple of realtors who absolutely did not earn a fraction of my money. This system is as antiquated and disgusting as car buying but sadly we just can't seem to force thru any meaningful reforms. The wink wink collusion and silent boycott of FSBO's and discount agencies have effectively crippled a viable alternative to the realtor cabal.
$25000+ for a MAX 10 hours work ( including the 4 Hour open house ) is insane.
jja79
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I'm not a Realtor but maybe the selling agent had shown the buyers 25 houses over a period of time and spent some time researching which houses to show them. They probably have some expenses for access to MLS, insurance, licensing, etc.
scrap
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I'm sorry for the die hard realtors who don't want change, but the truth is change is happening now and moving in the direction of reduce commissions to realtors.

The old system of how realtors were paid is antiquated. Before the internet and apps, consumers were totally reliant on the realtor for finding and showing the properties as well as listing the properties. But due to the technology advancements with the internet and applications available to everyone, the total reliance on a realtor has been marginalized.

Most people that I know that have bought homes in the last 5 year working with realtors, did their own research and told the realtor which homes they want to see. The days of driving around and looking at 15 homes in a day are pretty much gone. This of course reduces the work load on the realtor and makes for a more pleasant buying experience. From an efficiency point of view, everyone wins, but consumers are rightly asking "why am I paying a realtor so much?".

The OP posted two points that need to be focused on:
  • I believe an educated and/or experienced seller absolutely does not NEED to use a Realtor.
  • I have no idea why any buyer wouldn't hire a good Realtor. A good Realtor can net you the same amount that you think you will receive in price deductions from not using a Realtor, and you will have someone looking out for your interests and not the seller's.

The first point I am in total agreement with. But the second point contradicts the first point for a very experienced consumer and here is why.
1st we throw around the term "Good Realtor". That is a major issue within the Realtor career field. There is not much of a barrier to entry into the career field and there are more part time realtors than full time. The quality of realtors is all over the place.....it is a disaster!! Until this gets fixed, there will ALWAYS be a lot of bad experiences out there for consumers and it does a disservice for the truly good realtors out there.

Here is why an experienced buyer should not use a realtor to buy. Aside from your assertion that a "Good Realtor" can save me the same amount of money and maybe your right sometimes. The reason an experienced buyer would not use a realtor is that it gives him/her a distinct advantage of getting the deal regardless of price!!!!!! How about that as the reason!!!!!

Here we are talking about commissions, and we are talking about it BECAUSE MONEY TALKS!!!! There is a conflict of interest if there is only one realtor involved in a transaction and 6% is being paid out!!! The last six deals I have done with properties listed on the MLS have been with only one realtor involved. Out of the six only one realtor reduced his commission to 3% to the seller. All of the others took 6%, they did it legally and I encouraged it as the buyer. By doing so, I flipped them from being the advocate for the buyer and de facto they became my advocate to the seller to take my deal. Why, BECAUSE MONEY TALKS! As a buyer, I like the idea that there ist a conflict of interest, if for no other reason it helps me get the deal in a very competitive situation.

Good Realtor is a subjective term and logic given to the seller is subjective as well. I know realtors out there say I have disclosures that put me as an intermediary so I can do both.....right on, only if I am on the buying side, I would never allow it on the sellers side! But the real estate industry doesn't care. You have to give the selling realtor a bone to persuade the seller. I simply say, "tell the seller your dealing with an experienced investor who has no problem qualifying and is not going to nickel and dime him on an inspection. Hell he might not do an inspection." Whether true or not that is enough logic to persuade a seller who is hearing that from his trusted advisor to sell to me, the investor. Most of the time the realtor is willing to recommend my offer over others because 6% is better than 3%. Now don't get me wrong, all the offers may be close to each other, if my offer is way of of line even this strategy may not work, but it has served me well.

Change is needed and it is coming!
evestor1
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I am in the "it won't change much" crowd.



For sake of the thread...Here is what bothers me about current setup:

Brokers. Regular John Doe agent makes about 50% of what most think he does. The other 50% goes to a mega corporation and his broker. The mega corporation is supposed to support infrastructure, etc. The broker is supposed to give guidance and help facilitate the sale (rarely does this happen.) if we all dealt with experienced brokers/realtors the sentiment of the above average clients (like in Texas) would change for the better. Instead brokers are busy signing up new agents to get their 20% cut for very little work.


As always...the average buyer/seller is not as easy to help as you think. The smart ones use the realtor to get the job done and don't assume they know everything (so often personalities of clients hurt all parties.)

With regards to FSBO. Agents shy away from these because FSBO sellers are stereotyped as clowns. It isn't worth dealing with someone that makes a process impossible (usually bc of bad price evaluation.) so in my opinion,FSBO is more about not dealing with jerks than it is "don't rock the plantation system."


Last. Barrier to entry is on par with other jobs...bad hires happen all the time. If you had a bad experience. Point some of the blame on yourself for choosing a bad realtor for your needs.

Disclosure. I have a license, And as hard as it is to believe...I've actually hired a realtor at 3% to help me on the buy side before. He did the job better than I ever could have due to my time commitments/etc.

So in short. I don't like the broker setup and often see blame of a poor deal pointed in the wrong direction.

The Original AG 76
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jja79 said:

I'm not a Realtor but maybe the selling agent had shown the buyers 25 houses over a period of time and spent some time researching which houses to show them. They probably have some expenses for access to MLS, insurance, licensing, etc.
You mean the BUYERS agent I believe...
but..NOPE. I talked to the buyers several times. They were pretty nice folks and have the same opinion of realtors and the process as many of us do . As is usual with damn near everybody I know who has bought property in the last few years they did virtually 100% of their own research and TOLD their agent which homes they were interested in. Their agent simply contacted the showing service which contacted us and then stood in the living room playing with our cat while the buyers toured the property and as usual for 7 out of the 10 showings FORGOT to LOCK the damn back door !!!! ( I know since i was watching on my spy-cams as I did during ALL showings)

It is soo damn easy of you have even the slightest knowledge of an area. They looked a grand total of 3 homes , ours was the first . By their own estimate their agent spent about 2 hours TOTAL with them and maybe 15 minutes sending and receiving the various e-mails and cookie cutter premade fill in the blank documents.
The industry is a GIANT SCAM with jihad inspectors, phony appraisers ( whole different topic) and far too complicated useless CYA documents ( many caused by the nanny state government garbage) .
A realtor can be a great asset for someone moving into unfamiliar areas or hoods or very young rookie buyers but , like many believe, are a total waste of time for experienced buyers and sellers.
evestor1
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Original,

You predicted an Oil crash...perhaps you are smarter than the usual home owner. Just maybe!

This is the equivalent of you (as a former manufacturing company??) being told by your clients that any moron can fabricate a vessel. Then they call you to ask what ASME and API standards are.

The Original AG 76
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evestor1 said:

Original,

You predicted an Oil crash...perhaps you are smarter than the usual home owner. Just maybe!

This is the equivalent of you (as a former manufacturing company??) being told by your clients that any moron can fabricate a vessel. Then they call you to ask what ASME and API standards are.




Nice attempt but I , and millions of others, have bought and sold numerous properties and have yet to run across a single real estate code , document, procedure, requirement, regulation or anything resembling a single API , ASME or AWS document, code or regulation.
I understand what you are trying to say but I'm afraid that your argument just doesn't hold water .
jja79
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Was your house listed with an agent? If so why did you put yourself in a position to have to pay out $25K?
The Original AG 76
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jja79 said:

Was your house listed with an agent? If so why did you put yourself in a position to have to pay out $25K?


Same reason I had to deal with a damn car salesman and dealership to buy my new ride. Thanks to the collusion and corruption of the real estate cabal you are damn near forced to use the system. But you already knew that .
Diggity
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ATM9000
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The Original AG 76 said:

Just sold my house in Houston and had to give over $25000 of my money to a couple of realtors who absolutely did not earn a fraction of my money. This system is as antiquated and disgusting as car buying but sadly we just can't seem to force thru any meaningful reforms. The wink wink collusion and silent boycott of FSBO's and discount agencies have effectively crippled a viable alternative to the realtor cabal.
$25000+ for a MAX 10 hours work ( including the 4 Hour open house ) is insane.

So what do you think their services were worth and had the realtors not been involved, how much time and money do you estimate would it have taken for you to find a buyer and what would the replacement value have been after finding the buyer to get all the paper done to close?

I think the issue people have with realtors is they conflate their individual work with the hours they work with you alone. Truth is, realtors have to eat too and much of their time and effort isn't spent just directly on closing but also on client acquisition too. Just the nature of the beast and not really different than anything else. I am eating some Graham Crackers right now. The box of graham crackers costs like $3 probably... the crackers themselves are worth maybe $1. But I paid more than that because they had to spend to make me aware of their product, package it where I'd see them in the store, etc... but I don't feel like I got ripped off because I'm eating them now and enjoying them.

That might seem like an odd diversion but it really is no different when it comes to realtors and their fees. Nobody is making you use them and the idea that there are so many individual brokers and realtors in the business and so few are filthy rich makes your idea that it is an industry ripe with corruption and collusion laughable.

Now I do think technology will change real estate substantially eventually, but I think you'll see that start with block chain on title companies before realtors go.

I have never enjoyed paying 6% of realty fees when selling. I get it... that part stings. But I'd much rather do that than spend all of my time marketing my home when I have a day job that pays me more that I need to focus on.

I am not a realtor or have an occupation in the real estate business.
mazag08
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The Original AG 76 said:

Just sold my house in Houston and had to give over $25000 of my money to a couple of realtors who absolutely did not earn a fraction of my money. This system is as antiquated and disgusting as car buying but sadly we just can't seem to force thru any meaningful reforms. The wink wink collusion and silent boycott of FSBO's and discount agencies have effectively crippled a viable alternative to the realtor cabal.
$25000+ for a MAX 10 hours work ( including the 4 Hour open house ) is insane.


You signed a contract with them.

Did they meet your needs and deliver the results, and receive pay based on the terms of the contract? If they sold your house for what it was worth, in the timeframe you were hoping for, sounds like they were worth the money you agreed to hire them for.

Did you bring up these frustrations with them and try to negotiate commission on the front end?

What it sounds like to me is that you agreed to use them before you did the math on how much it would cost, and after looking at the closing statement you were alarmed at their commissions.

$25,000 split evenly to each party is $12,500.

After taking out average broker commission of 25%, each side makes $9,365.

Realtors are self employed and must pay any and all taxes, retirement savings, insurance, licensing fees, MLS fees, Supra fees, desk fees at their office, continuing education, etc out of their check. In my experience this would equate to around 40%. So now we're at $5,619.

A good realtor tracks their expenses and sets aside a portion from every check to pay for things that you, as a salaried worker, have the benefit of a company to pay for. Gas, office supplies, advertising, those photos they had professionally done for you (I always paid for these myself), etc, etc. for me that average to about 10% per closing. More closings meant more expenses to get them. Now we're at $5,057.

And this is me estimating conservatively. Each side of the transaction takes home the equivalent of a $60,000 salary if they sell your house once a month (the average realtor averages 10 sales a year).

If you want to discuss whether that is fair or not go for it, but you did sign yourself up for it and should have known on the front end what the financial obligation was going to look like. If you weren't made aware, then next time I would make sure that your Realtor gives you a very specific home value quote that discusses all of the potential fees, as well as breaks down a closing statement. At that point you can determine what is fair to you and negotiate on your behalf.


mazag08
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scrap said:

I'm sorry for the die hard realtors who don't want change, but the truth is change is happening now and moving in the direction of reduce commissions to realtors.

The old system of how realtors were paid is antiquated. Before the internet and apps, consumers were totally reliant on the realtor for finding and showing the properties as well as listing the properties. But due to the technology advancements with the internet and applications available to everyone, the total reliance on a realtor has been marginalized.

Most people that I know that have bought homes in the last 5 year working with realtors, did their own research and told the realtor which homes they want to see. The days of driving around and looking at 15 homes in a day are pretty much gone. This of course reduces the work load on the realtor and makes for a more pleasant buying experience. From an efficiency point of view, everyone wins, but consumers are rightly asking "why am I paying a realtor so much?".

The OP posted two points that need to be focused on:
  • I believe an educated and/or experienced seller absolutely does not NEED to use a Realtor.
  • I have no idea why any buyer wouldn't hire a good Realtor. A good Realtor can net you the same amount that you think you will receive in price deductions from not using a Realtor, and you will have someone looking out for your interests and not the seller's.

The first point I am in total agreement with. But the second point contradicts the first point for a very experienced consumer and here is why.
1st we throw around the term "Good Realtor". That is a major issue within the Realtor career field. There is not much of a barrier to entry into the career field and there are more part time realtors than full time. The quality of realtors is all over the place.....it is a disaster!! Until this gets fixed, there will ALWAYS be a lot of bad experiences out there for consumers and it does a disservice for the truly good realtors out there.

Here is why an experienced buyer should not use a realtor to buy. Aside from your assertion that a "Good Realtor" can save me the same amount of money and maybe your right sometimes. The reason an experienced buyer would not use a realtor is that it gives him/her a distinct advantage of getting the deal regardless of price!!!!!! How about that as the reason!!!!!

Here we are talking about commissions, and we are talking about it BECAUSE MONEY TALKS!!!! There is a conflict of interest if there is only one realtor involved in a transaction and 6% is being paid out!!! The last six deals I have done with properties listed on the MLS have been with only one realtor involved. Out of the six only one realtor reduced his commission to 3% to the seller. All of the others took 6%, they did it legally and I encouraged it as the buyer. By doing so, I flipped them from being the advocate for the buyer and de facto they became my advocate to the seller to take my deal. Why, BECAUSE MONEY TALKS! As a buyer, I like the idea that there ist a conflict of interest, if for no other reason it helps me get the deal in a very competitive situation.

Good Realtor is a subjective term and logic given to the seller is subjective as well. I know realtors out there say I have disclosures that put me as an intermediary so I can do both.....right on, only if I am on the buying side, I would never allow it on the sellers side! But the real estate industry doesn't care. You have to give the selling realtor a bone to persuade the seller. I simply say, "tell the seller your dealing with an experienced investor who has no problem qualifying and is not going to nickel and dime him on an inspection. Hell he might not do an inspection." Whether true or not that is enough logic to persuade a seller who is hearing that from his trusted advisor to sell to me, the investor. Most of the time the realtor is willing to recommend my offer over others because 6% is better than 3%. Now don't get me wrong, all the offers may be close to each other, if my offer is way of of line even this strategy may not work, but it has served me well.

Change is needed and it is coming!

Good and informative post. I'll stick to discussing your two main points.

First of all..

Quote:

The OP posted two points that need to be focused on:
  • I believe an educated and/or experienced seller absolutely does not NEED to use a Realtor.
  • I have no idea why any buyer wouldn't hire a good Realtor. A good Realtor can net you the same amount that you think you will receive in price deductions from not using a Realtor, and you will have someone looking out for your interests and not the seller's.

The first point I am in total agreement with. But the second point contradicts the first point for a very experienced consumer and here is why.

Focus on the bolded words and tell me they still contradict. I was very clear in my differentiation between using a Realtor as a BUYER and using one as a SELLER.

Quote:

1st we throw around the term "Good Realtor". That is a major issue within the Realtor career field. There is not much of a barrier to entry into the career field and there are more part time realtors than full time. The quality of realtors is all over the place.....it is a disaster!! Until this gets fixed, there will ALWAYS be a lot of bad experiences out there for consumers and it does a disservice for the truly good realtors out there.

That's why I put emphasis on the word GOOD. It was my biggest complaint when I was in the industry. The test is only a barrier against complete fools, and even some of them can slip through the cracks. I'm all for increased education requirements (in a classroom setting with a real teacher), but I don't think the powers that be are interested in the loss of income that comes with less Realtors paying dues and fees. If you want to see this changed, your going to have to fight against people at the state level whose entire interest lies in there being a constant growth in the number of licensed Realtors.

That's why I'm all for the general public being better educated. The first step is for the average client to be able to realize when they are being pitched by someone who hasn't a clue what they're doing.

But is this any different than any other field? Insurance? Wealth management? Pest control? Engineers? My previous company paid hundreds of thousands of dollars to an engineering company that routinely screwed up, wasted our time, and were headache to deal with. But we had entered into a contract with them and didn't have a LEGAL recourse against them. It happens in EVERY industry. This industry is just super PUBLIC and something that EVERYONE has experience with from the client side.

Quote:

Here is why an experienced buyer should not use a realtor to buy. Aside from your assertion that a "Good Realtor" can save me the same amount of money and maybe your right sometimes. The reason an experienced buyer would not use a realtor is that it gives him/her a distinct advantage of getting the deal regardless of price!!!!!! How about that as the reason!!!!!

Here we are talking about commissions, and we are talking about it BECAUSE MONEY TALKS!!!! There is a conflict of interest if there is only one realtor involved in a transaction and 6% is being paid out!!! The last six deals I have done with properties listed on the MLS have been with only one realtor involved. Out of the six only one realtor reduced his commission to 3% to the seller. All of the others took 6%, they did it legally and I encouraged it as the buyer. By doing so, I flipped them from being the advocate for the buyer and de facto they became my advocate to the seller to take my deal. Why, BECAUSE MONEY TALKS! As a buyer, I like the idea that there ist a conflict of interest, if for no other reason it helps me get the deal in a very competitive situation.

That's fantastic that you are happy with that strategy. But you aren't always getting what you think you are getting. You are just winning the deals, so your happiness is on the fact that you got what you wanted, not that you saved money. You have no idea what a GOOD agent could have negotiated on your behalf.

Look at it this way.. why would a Realtor ever need to make less when buyers like you exist who can help them make 6%. If anything, you are doing the most damage to reforming the industry with that strategy.

But I'm glad it works for you. If there was a rule that every Realtor make the same flat fee no matter what, you now have no strategy.. and no representation.

Quote:


Change is needed and it is coming!

I still haven't seen one thing you've said that needs to be changed.. nor any ideas on what kind of changes. You are a very informed customer in the industry. 75% of people out there are not you.
dallasiteinsa02
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The system is going to be really hard to change on the lower end since most buyers are trying to scrap together every penny to bring to the down payment. The buyers just can't afford to pay a commission to their own agent and thus they are pretty much financing their agents commission. For a dramatic shift to occur, banks are going to have to allow a financed payment to the buyers agent.

I have thought about the entire system and how it could be revolutionized. Sellers are wiling to market their own homes that has been proven. The hurdle is the showings. The current system at least protects the sellers against a showing that has a malicious intent on the part of the buyers.

I think Zillow or another internet based option could cut the costs down dramatically. Charge the seller a base fee for a listing with options based upon how much the seller wants to pay for marketing. You want to take your own pictures fine. You want to pay a professional, click here to schedule. You setup a uber type system that has background checked access assistants. The buyers pay a fee to access a home with a large portion going to the access assistants. When you find a property you want, the buyer can pay nominal fees for a contract to be drawn up, value research, and all the other buyer agent typical duties. The internet site can handle inspections and provide a portal for negotiations. Heck they could open an online title company and handle that as well.
mazag08
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Oh and..

Quote:

The wink wink collusion and silent boycott of FSBO's and discount agencies have effectively crippled a viable alternative to the realtor cabal.

Most Realtors arent going to waste their time looking up, contacting, and showing homes from FSBO sellers.

1. There's a big chance they won't pay. 95% of FSBO's go that route because they don't want to spend money on commissions. My first step if I decide to show a FSBO home is to negotiate my compensation. What is enticing me to do that if there is already a platform full of listings with a known pay structure?

If I had a buyer that specifically wanted to see a FSBO house, I would always show it if the FSBO was willing to pay at least 1%. My duty was to my client. If they wouldn't pay at all and my buyer wouldn't budge, then they were free to look at it on their own. I do not have to represent someone with a gun to my head. If I'm not going to get paid, then it's a waste of my time. Find me one industry where that standard is different.

2. There's no collusion. Unless you call any industry that has a professional organization and a platform for consolidating resources collusion.

3. Nobody is forcing you to use a Realtor who ignores FSBO's and discount agencies. If you know they aren't looking at those and you want them to, how about firing them and finding a Realtor who will represent your best interests? There isn't a single situation in the world that says a Realtor is forced to do things a certain way and you are a sucker and have to agree. You have the freedom to set your own terms. You are also welcome to go it alone. But if you determine you don't want to or its too hard or time consuming, then you are by default finding value in the need for a Realtor.
mazag08
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dallasiteinsa02 said:

I think Zillow or another internet based option could cut the costs down dramatically. Charge the seller a base fee for a listing with options based upon how much the seller wants to pay for marketing. You want to take your own pictures fine. You want to pay a professional, click here to schedule. You setup a uber type system that has background checked access assistants. The buyers pay a fee to access a home with a large portion going to the access assistants. When you find a property you want, the buyer can pay nominal fees for a contract to be drawn up, value research, and all the other buyer agent typical duties. The internet site can handle inspections and provide a portal for negotiations. Heck they could open an online title company and handle that as well.
I think in theory this is fantastic. But there is going to be a lot of headache when you really dig into it. It's a system where the client becomes a number in line and there is no personal connection (thats completely fine if you are ok with it). It's a system that requires a lot of regulation and has a lot of potential for the client getting taken advantage of. Then what do they do? Call a customer service line, file their grievance, and wait for an hourly paid representative to get back with them and hope they understand whats going on? There would be a lot of growing pains.. but hell.. lets try it.
mazag08
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NM
evestor1
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This thread is finally going somewhere past complaints.


Quote:

I think Zillow or another internet based option could cut the costs down dramatically. Charge the seller a base fee for a listing with options based upon how much the seller wants to pay for marketing. You want to take your own pictures fine. You want to pay a professional, click here to schedule. You setup a uber type system that has background checked access assistants. The buyers pay a fee to access a home with a large portion going to the access assistants. When you find a property you want, the buyer can pay nominal fees for a contract to be drawn up, value research, and all the other buyer agent typical duties. The internet site can handle inspections and provide a portal for negotiations. Heck they could open an online title company and handle that as well.


This is an interesting. It would take a very sophisticated platform to get that done well enough to take flight. On average it would probably make 75% of transactions more expensive (as all a'la carte cost adders usually do.) The other 25% of folks that are easy to deal with and knowledgeable would walk away with a decent cost savings compared to current setup. It also encourages "hurry up and make a decision" ... which i think is a poor choice in real estate.
Martin Q. Blank
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I know a realtor in Houston (a very good one) who rebates buyer's commission based on how many houses he shows. 1.5% if he opens the doors for less than 5 houses. 1% if 5-10. 0.5% if 11-15. 0% if 16+. I think it's a great business model.
evestor1
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That is a good model.
mazag08
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Martin Q. Blank said:

I know a realtor in Houston (a very good one) who rebates buyer's commission based on how many houses he shows. 1.5% if he opens the doors for less than 5 houses. 1% if 5-10. 0.5% if 11-15. 0% if 16+. I think it's a great business model.
When a Realtor reaches a certain scale of business, something like this is very possible.

But it can't work for everyone.

Going off of statistics from NAR.com, the average Realtor grossed about $42,500 in 2016. After you account for brokers fees, that means their total commissions totaled approximately $56,000. That would indicate a total sales volume of approximately $1,866,667 (which would equate to 13 sales at an average sale price of $150,000, or 10 sales at an average sale price of $200,000).

So taking those numbers, if you reduce the average commission to 2% from 3%, that means their gross commission before brokers fees and taxes would come out to about $37,333 per year, a loss of about 12% before take home pay. After brokers fees and taxes and cost of doing business.. the average Realtor would be looking at somewhere between $25,000 - $30,000 in take home pay.

Now.. a Realtor who grosses $80,000 per year could still take home over $50,000 if they reduced their average sale rate to 2%. So it can work at higher levels.
one MEEN Ag
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The industry won't change itself-why would it? Its going to take a company to convince sellers, not buyers to use their service. A buyers agent is mostly useless in this day and age, but the sellers contract already has the commissions laid out before a buyer walks in the door. No buyers agent = sellers agent keeps all the commission. So the buyers basically have to suck it up. And they normally do, because its 'no skin off their back.'

Give it a few more years. Commodity style homes are going to be a big target for market upheaval.



evestor1
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Quote:

Give it a few more years. Commodity style homes are going to be a big target for market upheaval.

This quote gives me heartburn b/c I despise a the idea of real estate being a commodity...it seems so personal to me. Even my rental homes have showings where the people "love" and "feel comfortable" rather than "bedroom-check....bathroom-check...divided light window-check....I'll take it b/c i am required to do so"


That said - you are correct on the idea of commodity homes in certain suburban areas and or land purchases. Price/ft is 90% accurate and has little variance.
ATM9000
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evestor1 said:

Quote:

Give it a few more years. Commodity style homes are going to be a big target for market upheaval.

This quote gives me heartburn b/c I despise a the idea of real estate being a commodity...it seems so personal to me. Even my rental homes have showings where the people "love" and "feel comfortable" rather than "bedroom-check....bathroom-check...divided light window-check....I'll take it b/c i am required to do so"


That said - you are correct on the idea of commodity homes in certain suburban areas and or land purchases. Price/ft is 90% accurate and has little variance.


Maybe initially but I don't like when people say 'commodity style' homes because that's an impossible feat when you consider you can't move real estate, there's no liquidity, and every house eventually customizes so much from the homes around it. You combine those 3 things and you realize the market will always nearly have to involve heavy brokerage between buyers and sellers.
HeightsAg
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mazag08 said:

Martin Q. Blank said:

I know a realtor in Houston (a very good one) who rebates buyer's commission based on how many houses he shows. 1.5% if he opens the doors for less than 5 houses. 1% if 5-10. 0.5% if 11-15. 0% if 16+. I think it's a great business model.
When a Realtor reaches a certain scale of business, something like this is very possible.

But it can't work for everyone.

Going off of statistics from NAR.com, the average Realtor grossed about $42,500 in 2016. After you account for brokers fees, that means their total commissions totaled approximately $56,000. That would indicate a total sales volume of approximately $1,866,667 (which would equate to 13 sales at an average sale price of $150,000, or 10 sales at an average sale price of $200,000).

So taking those numbers, if you reduce the average commission to 2% from 3%, that means their gross commission before brokers fees and taxes would come out to about $37,333 per year, a loss of about 12% before take home pay. After brokers fees and taxes and cost of doing business.. the average Realtor would be looking at somewhere between $25,000 - $30,000 in take home pay.

Now.. a Realtor who grosses $80,000 per year could still take home over $50,000 if they reduced their average sale rate to 2%. So it can work at higher levels.

This is 100% irrelevant. Why are realtors entitled to a certain level of income? Shouldn't the discussion be completely oriented around the value-add of their services and if that amount only justifies earning $25k per year, then so be it. Free market would dictate that as a result, there will be less realtors on the market and the ones that exist will have more volume and hence higher earnings.

Instead, you are using a certain required level of income to justify and validate the existing compensation structure that many people feel is unfair but is largely protected and monopolistic. People understand the value that realtors provide but is questioning the flat percentage approach that is agnostic of effort. Is selling a million dollar house 10x the effort as a 100k house? If not, then why should the seller pay 10x more?

Substitute realtors for waiters and you'd see the absurdity of your argument. For example, what if all customers were mandated to add 40% on top of their bill regardless of service or effort so that we can ensure that everyone at the restaurant is able to make a "fair living wage" of at least $40k.) Okay.
ATM9000
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HeightsAg said:

mazag08 said:

Martin Q. Blank said:

I know a realtor in Houston (a very good one) who rebates buyer's commission based on how many houses he shows. 1.5% if he opens the doors for less than 5 houses. 1% if 5-10. 0.5% if 11-15. 0% if 16+. I think it's a great business model.
When a Realtor reaches a certain scale of business, something like this is very possible.

But it can't work for everyone.

Going off of statistics from NAR.com, the average Realtor grossed about $42,500 in 2016. After you account for brokers fees, that means their total commissions totaled approximately $56,000. That would indicate a total sales volume of approximately $1,866,667 (which would equate to 13 sales at an average sale price of $150,000, or 10 sales at an average sale price of $200,000).

So taking those numbers, if you reduce the average commission to 2% from 3%, that means their gross commission before brokers fees and taxes would come out to about $37,333 per year, a loss of about 12% before take home pay. After brokers fees and taxes and cost of doing business.. the average Realtor would be looking at somewhere between $25,000 - $30,000 in take home pay.

Now.. a Realtor who grosses $80,000 per year could still take home over $50,000 if they reduced their average sale rate to 2%. So it can work at higher levels.

This is 100% irrelevant. Why are realtors entitled to a certain level of income? Shouldn't the discussion be completely oriented around the value-add of their services and if that amount only justifies earning $25k per year, then so be it. Free market would dictate that as a result, there will be less realtors on the market and the ones that exist will have more volume and hence higher earnings.

Instead, you are using a certain required level of income to justify and validate the existing compensation structure that many people feel is unfair but is largely protected and monopolistic. People understand the value that realtors provide but is questioning the flat percentage approach that is agnostic of effort. Is selling a million dollar house 10x the effort as a 100k house? If not, then why should the seller pay 10x more?

Substitute realtors for waiters and you'd see the absurdity of your argument. For example, what if all customers were mandated to add 40% on top of their bill regardless of service or effort so that we can ensure that everyone at the restaurant is able to make a "fair living wage" of at least $40k.) Okay.

Monopolistic? Give me a break with the dramatics. Do you even know what monopolistic means?

The idea that realtors are protected is ridiculous too. They are commonly used because it is the easiest way to broker a transaction but the bottom line is millions of people wouldn't sell their homes annually and pony over 6% if they had a better alternative on their sale. I think people take for granted or don't think about what the alternative would be if they had to sell a place and there were no realtors to effectively broker it all.

And where the hell do you even read that he's saying anybody is entitled to an income level? All he's saying is a realtor has to make a living too. I don't know what you do but you aren't entitled to a certain level of income either and if your occupation didn't pay you enough to live on, you'd move on to something else.
HeightsAg
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Yes - I do know what monopolistic means and a textbook example is the National Association of Realtors admitting to antitrust behaviors aimed at blocking online competition in a suit that they settled with the DOJ. See link below if interested in more detail.

https://www.law360.com/articles/57440/doj-realtors-settle-antitrust-suit

And "where the hell do you even read that he's saying anybody is entitled to an income level?" Well, let's see - in response to a tiered compensation model based on number of showings, OP replied, "After brokers fees and taxes and cost of doing business.. the average Realtor would be looking at somewhere between $25,000 - $30,000 in take home pay. Now.. a Realtor who grosses $80,000 per year could still take home over $50,000 if they reduced their average sale rate to 2%. So it can work at higher levels."

Basic reading comprehension leads me to believe that OP is saying a tiered approach wouldn't work for the average Realtor because they would only be "looking at somewhere between $25,000 - $30,000 in take home pay." so it isn't a viable option. All I was arguing is that if the services provided by the average realtor only justifies $25,000 - $30,000, then it is all they should get.

You can call it "entitled to an income level" or "has to make a living" but they are two of the same thing. And I agree with you 100% that I am not "entitled to a certain level of income either". I am a management consultant that works with c-suites to shape and develop long-term corporate strategies. The average rate for our services is between $6000 to $8000 per day. Some may say that is absurd but our ability to charge these prices is 100% contingent on our ability to deliver tangible business value, nothing more and nothing less.

Regardless of whether you like it or not, change will be coming. And it is coming not because people want to put poor Realtors out of business but rather, many people do not believe they are getting full value for what they are paying for (which is why we are conversing about this in the first place). So if I were a large real estate agent franchise like Century 21, I'd embrace the digital revolution rather than fight it, get more creative with the commercial model, and/or find ways to use AI or other means to provide more value to the customer. Otherwise, realty will become the latest in a line of industries that didn't evolve and got left behind.
Scientific
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evestor1 said:

It also encourages "hurry up and make a decision" ... which i think is a poor choice in real estate.

Real estate has been in that space the last 5 years without that type of platform. Offers within an hour of listing & the buyer never stepping foot onto the property. I'd assume the appraisal process remains intact.
Diggity
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Don't assume your market is every market
mazag08
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HeightsAg said:

mazag08 said:

Martin Q. Blank said:

I know a realtor in Houston (a very good one) who rebates buyer's commission based on how many houses he shows. 1.5% if he opens the doors for less than 5 houses. 1% if 5-10. 0.5% if 11-15. 0% if 16+. I think it's a great business model.
When a Realtor reaches a certain scale of business, something like this is very possible.

But it can't work for everyone.

Going off of statistics from NAR.com, the average Realtor grossed about $42,500 in 2016. After you account for brokers fees, that means their total commissions totaled approximately $56,000. That would indicate a total sales volume of approximately $1,866,667 (which would equate to 13 sales at an average sale price of $150,000, or 10 sales at an average sale price of $200,000).

So taking those numbers, if you reduce the average commission to 2% from 3%, that means their gross commission before brokers fees and taxes would come out to about $37,333 per year, a loss of about 12% before take home pay. After brokers fees and taxes and cost of doing business.. the average Realtor would be looking at somewhere between $25,000 - $30,000 in take home pay.

Now.. a Realtor who grosses $80,000 per year could still take home over $50,000 if they reduced their average sale rate to 2%. So it can work at higher levels.

This is 100% irrelevant. Why are realtors entitled to a certain level of income? Shouldn't the discussion be completely oriented around the value-add of their services and if that amount only justifies earning $25k per year, then so be it. Free market would dictate that as a result, there will be less realtors on the market and the ones that exist will have more volume and hence higher earnings.

Instead, you are using a certain required level of income to justify and validate the existing compensation structure that many people feel is unfair but is largely protected and monopolistic. People understand the value that realtors provide but is questioning the flat percentage approach that is agnostic of effort. Is selling a million dollar house 10x the effort as a 100k house? If not, then why should the seller pay 10x more?

Substitute realtors for waiters and you'd see the absurdity of your argument. For example, what if all customers were mandated to add 40% on top of their bill regardless of service or effort so that we can ensure that everyone at the restaurant is able to make a "fair living wage" of at least $40k.) Okay.


That's not what I've done at all.

Show me one transaction where someone was forced to pay a realtor. Just one.

It is a free market. If you do t tho it heyre worth the money. Hen don't use one. It's really not a hard concept. You are the one trying to regulate an industry because you can't stand the stink of your own decisions.

My post did nothing but rationalize why a realtor might or might not want to WILLINGLY rebate commission.
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