Why cant we solve the real estate agent 6% ripoff?

[JEDI]

$500k house
6% = $30k

all the agent did was take a pic and list it, plus be there a couple of days for an open house.
plus a few min of negotiations. and a few min with you at the lawyers office for the closing.

no way did the agent do $15k worth of work. (other $15k went to the buyer's agent.)

So why is 6% still the rule of thumb, and how do we fix it?

One solution is for the govt to tax anything over $5k commission.
every $5k in commission is a 10% tax, max at 50%.

might encourage $4995 flat fees for full service?

 

[Engineer]

So why is 6% still the rule of thumb, and how do we fix it?

Start your own service and charge a flat fee. Solved.

Sell it yourself. Solved.

Negotiate fees with realtor. Solved.

 

[nickbits]

Everything based on a percentage is a scam like tips and taxes.

The solution for real estate is to not use an agent. However buyers will low ball your property because they know you're getting a 6% discount.

 

[gorcorps]

The only way to stop it is to refuse to sign a contract you don't agree with. Enough people do that and only agree to a lower price, maybe that'll be the new norm. It's only gotten so high because people keep agreeing to it.

 

[T9D]

As I've said before. Like anything else in America you can blame the damn lobby payoffs. The government blocks certain ways to lower it by requiring certain things to do real estate business.

It should be that you only need one broker, and he has some low wage people he sends out to show the house. If you like it, he signs the paper work and only takes a normal flat fee. Instead we get this rip off system where everyone who shows a house has to be an agent and get a huge cut.

 

[dougp]

Unless that REA owns their brokerage, they're not getting that full 3% - they're probably looking at .5% to 1%.

 

[Greenman]

Start your own service and charge a flat fee. Solved.

Sell it yourself. Solved.

Negotiate fees with realtor. Solved.

The first two don't work well because a lot of agents refuse to work with a discount listing agency, and want a full cut when dealing with an owner selling. Negotiating a lower rate or fixed fee is possible, but in a hot market most won't cut prices at all.

Someone will come along with a fixed fee web based service at some point. It will be slow to start but my guess is the days of the 6% fee are numbered.

 

[WilliamM2]

What about the 150K house, that sits on the market for a year or two. There are plenty in this area. Does the agent earn $4500 after showing the house dozens of times.

Most real estate agents I know have not been making a whole lot the last 6-7 years.

 

[JEDI]

The first two don't work well because a lot of agents refuse to work with a discount listing agency, and want a full cut when dealing with an owner selling. Negotiating a lower rate or fixed fee is possible, but in a hot market most won't cut prices at all.

Someone will come along with a fixed fee web based service at some point. It will be slow to start but my guess is the days of the 6% fee are numbered.

it's been 6yrs since the 2008 real estate meltdown.
and the 6% is still here

 

[KLin]

#firstworldproblems

 

[Leyawiin]

#firstworldproblems

You can apply that trite remark to everything in these forums. /shrug

 

[mmntech]

Real estate agents are making a killing here for very little work. Houses usually sell within a week. Not unheard of for them to be pulling over $100k. Keep in mind though that any expenses are taken from that 6%, so it's not all profit. Things like dressing the house for selling, showings, paper work, travel, etc.

 

[boomerang]

What about the 150K house, that sits on the market for a year or two. There are plenty in this area. Does the agent earn $4500 after showing the house dozens of times.

Most real estate agents I know have not been making a whole lot the last 6-7 years.

This. In a hot market you should be able to negotiate the percentage. They will bargain to get their share of the business. In a cold market, they barely make any money. It's like any other business, there are associated costs that may not be readily apparent to the consumer.

In a hot market, sell it FSBO and have an attorney do the closing and you should come out ahead. But the caveat is that if you have an agent that is doing his or her job, the people that see your home are able to purchase your home and are able to qualify for financing. Do it FSBO, and you'll be spending your time showing the place to every Tom, Dick and Harry and you'll never be certain until late in the game that they are able to actually complete the purchase. You will also be making a million phone calls to make sure they are moving along in the purchase process and doing it in a timely manner. Your RE agent is the middleman that makes sure everyone involved in the purchase/sale is doing what they need to do, in the right order and in a timely fashion. You are hiring a professional to do what they do and there is a value in that for many people.

I sold RE eons ago. I was totally amazed at how many times I was lied to, how many people had no clue of what they could afford or qualify for. I qualified everyone. They knew what income they needed what down payment they needed, what the total payment was going to be before I ever showed them a single home. But nowadays, it's typical to have buyers that are pre-approved so that makes the process easier. It was unheard of then. Pre-approval hadn't even been thought of.

 

[MrSquished]

you have no idea how much work realtors do. at all. i do. the good agents bust their asses. we can work with buyer's for months and months to make a sale, researching comps so they pay a fair price, showing them places, we do open houses, we are there during home inspections, we preview properties, and on and on and on. especially with first time homebuyers there is a ton of work involved. renters are also a bunch of work for very little money.

we also make sure we bring you qualified buyers, pre-approved for the purchase price, so we don't waste our time or your time. we do a lot of work behind the scenes to make sure things move along as the poster above said.

and you are completely oblivious to the commission process which puts your entire premise in a shady light because when you come from ignorance, your general point is already on loose ground.

the agent doesn't get the full 3%. that money goes to their brokerage firm who then takes a cut. newer agents work on a 50/50 cut so half that goes to the broker. some firms charge fees as well - for example one agency i knows first takes 6% of the commission brought back to them to cover marketing costs, then does the split with the agent. and that money is taxed FYI. so it whittles away. so take that 15K, take out 6%leaves you with 14k. divide that by 2 for the split with the agency, leaves you with 7K. which is taxable. so at the end of the day, yeah, it's closer to your 5k number that you think they deserve for a sale on a home of that price.

also what you get when you work with an agency is promotion. we list something and it gets pushed to hundreds of sites.

and like the poster above said we filter out the idiots for you. that's a fucking pain in the ass.

good agents also spend additional money such as hiring a photographer if they are a good agent. they pay for marketing materials, firms cover only so much.

and in a hot market, like now in jersey city, with the marketing power of a good agent and agency, you will get so many more offers. 1/3 of condo sales recently in JC have sold for over asking price. and the realtors juggle all that as well.

and in my recent searches for buyers, you are starting to see a 5% commission one some listings.

and you think agents do a few minutes of work after an offer is accepted? most closings take 5-6 weeks. what do you think is going on during that time? yeah, work. for the agent. if it was a simple few minute process closings would take a day. you are clueless brother.

 

[Imp]

Real estate agents are making a killing here for very little work. Houses usually sell within a week. Not unheard of for them to be pulling over $100k. Keep in mind though that any expenses are taken from that 6%, so it's not all profit. Things like dressing the house for selling, showings, paper work, travel, etc.

There are about 40k agents in Toron'a.

http://www.huffingtonpost.ca/2014/05/13/real-estate-agent-bubble-canada_n_5315259.html

I don't see 40k listings in the GTA right now.

 

[MrSquished]

I sold RE eons ago. I was totally amazed at how many times I was lied to, how many people had no clue of what they could afford or qualify for. I qualified everyone. They knew what income they needed what down payment they needed, what the total payment was going to be before I ever showed them a single home. But nowadays, it's typical to have buyers that are pre-approved so that makes the process easier. It was unheard of then. Pre-approval hadn't even been thought of.

yep that is the process now. depending upon the agent, how much they have going on, we try not to show a single property until we have pre-approval. if you are just starting out as an agent like me, or it's slow, i'll show one property before a pre-approval.

we do a buyer's consultation for every potential buyer at my agency where we go over the entire process. that's 30 minutes for every buyer you work with, and that's before you've even hit the pavement or start doing searches for them. you can easily spend a couple hours looking at listings for a buyer the first time to find one that fits all their demands. then arrange showings. then do more searches if they don't like them, then show more. rinse and repeat. and because the market is hot where I am, there is a great chance that all that work goes poof cause you get outbid. dozens of hours of work gone.

then you may get that winning offer if they pick a place, then the 30-45 day closing process starts, of which you are heavily involved in. also you are on the clock all the time. you work daytimes, evenings, weekends - buyers and sellers call at anytime. you are on call almost 24/7

i thought RE must have been easy money too, until i started working in RE this year. people don't have a clue.

 

[Markbnj]

Yeah I don't see a problem here. You don't have to use a realtor. Whether the commission is at the right level or not is best decided by the market. I think they do a crapload of footwork behind the scenes, and they probably have a relatively low success rate, like most salespeople.

 

[FelixDeCat]

you have no idea how much work realtors do. at all. i do. the good agents bust their asses. we can work with buyer's for months and months to make a sale, researching comps so they pay a fair price, showing them places, we do open houses, we are there during home inspections, we preview properties, and on and on and on. especially with first time homebuyers there is a ton of work involved. renters are also a bunch of work for very little money.

we also make sure we bring you qualified buyers, pre-approved for the purchase price, so we don't waste our time or your time. we do a lot of work behind the scenes to make sure things move along as the poster above said.

and you are completely oblivious to the commission process which puts your entire premise in a shady light because when you come from ignorance, your general point is already on loose ground.

the agent doesn't get the full 3%. that money goes to their brokerage firm who then takes a cut. newer agents work on a 50/50 cut so half that goes to the broker. some firms charge fees as well - for example one agency i knows first takes 6% of the commission brought back to them to cover marketing costs, then does the split with the agent. and that money is taxed FYI. so it whittles away. so take that 15K, take out 6%leaves you with 14k. divide that by 2 for the split with the agency, leaves you with 7K. which is taxable. so at the end of the day, yeah, it's closer to your 5k number that you think they deserve for a sale on a home of that price.

also what you get when you work with an agency is promotion. we list something and it gets pushed to hundreds of sites.

and like the poster above said we filter out the idiots for you. that's a fucking pain in the ass.

good agents also spend additional money such as hiring a photographer if they are a good agent. they pay for marketing materials, firms cover only so much.

and in a hot market, like now in jersey city, with the marketing power of a good agent and agency, you will get so many more offers. 1/3 of condo sales recently in JC have sold for over asking price. and the realtors juggle all that as well.

and in my recent searches for buyers, you are starting to see a 5% commission one some listings.

and you think agents do a few minutes of work after an offer is accepted? most closings take 5-6 weeks. what do you think is going on during that time? yeah, work. for the agent. if it was a simple few minute process closings would take a day. you are clueless brother.

blah blah blah

$500 + documented expense receipts, take it or leave it

 

[MrSquished]

blah blah blah

$500 + documented expense receipts, take it or leave it

the blah blah was a brilliant and intelligent counter.

no agent will take that because they actually know the work that goes into the process. they'll take that on a rental because that's what it is. but most rentals are for new agents to bring in a little bit of cash to make do while they build their buyer and seller clients. only higher end rentals do seasoned successful agents do. they money is quick. you get a rental signed you get your check soon after, not the 1-2 months after a closing on a sale.

but go ahead and offer it, cause the market has and is speaking, your proposal is basically worth horseshit. ultimately the market decides what is fair. and your proposal is so far off the market value right now that it's just laughable.

 

[JEDI]

for example one agency i knows first takes 6% of the commission brought back to them to cover marketing costs, then does the split with the agent. and that money is taxed FYI. so it whittles away. so take that 15K, take out 6%leaves you with 14k. divide that by 2 for the split with the agency, leaves you with 7K. which is taxable. so at the end of the day, yeah, it's closer to your 5k number that you think they deserve for a sale on a home of that price.

not my problem that they work for a lousy agency that charges them back ad costs. sounds like a shady car dealership with doc fees.

and lets compare aples to aples shall we?
my $5k number is also pretax. so after taxes that's $3.5k

and what does it freaking matter about taxes? not my problem either
in the end, how much $/hr I'm paying? I'm betting well over $250/hr pretax for that $15k

 

[MrSquished]

not my problem that they work for a lousy agency that charges them back ad costs. sounds like a shady car dealership with doc fees.

and lets compare aples to aples shall we?
my $5k number is also pretax. so after taxes that's $3.5k

and what does it freaking matter about taxes? not my problem either
in the end, how much $/hr I'm paying? I'm betting well over $250/hr pretax for that $15k

your hours per calculation is just magical numbers, since you have no idea how many hours went behind finding the winning bidder for your property. in many cases the hours behind the buyer end up in nothing because only one wins.

yeah taxes are your problem. when you want to pretend income is tax free but it's not, you are basically lying through your teeth. since you proposed anthing 5k or under should be taxable, means you think otherwise it's not. which is pretty much retarded.

and you are already contradicting yourself. you proposed 5k as tax free. which is already bullshit. cause 0 is tax free.

go FSBO. let the market decide if you can pull it off. you may do it. FSBO is notoriously unsuccessful for most of the time but it can work.

i see the actual work it takes to close deals, you don't. but please continue to preach how you are a know it all.

 

[fralexandr]

Unless that REA owns their brokerage, they're not getting that full 3% - they're probably looking at .5% to 1%.

Most real estate agents around here get 70-85% of the commission.
Most properties are sold at ~5% = 2.5% per agent = 2% to the agent
then the agent has to pay ~1.2k/year to local/state/federal associations & mls & suprakey
some brokerages charge additional fees like pixelsquish says.

The main reason why real estate agents try to do the least possible is to prevent themselves getting sued.
The work pays well, but there's a lot of risk and time involved (must work weekends, odd hours, etc).
I think the money is taxed as self employment, but there's lots of things that can be deducted if you bother to do that.
Real estate agents only get paid when a transaction completes successfully.
you may be paying them "$250/hr" but they're mostly not getting "$250/hr"
working with sellers is a lot easier than working with buyers, but the commission split is the same.
only so many houses get sold/bought.

 

[LongIslandTech]

$500k house
6% = $30k

all the agent did was take a pic and list it, plus be there a couple of days for an open house.
plus a few min of negotiations. and a few min with you at the lawyers office for the closing.

no way did the agent do $15k worth of work. (other $15k went to the buyer's agent.)

So why is 6% still the rule of thumb, and how do we fix it?

One solution is for the govt to tax anything over $5k commission.
every $5k in commission is a 10% tax, max at 50%.

might encourage $4995 flat fees for full service?

6% is a ripoff. 4% is pretty standard by me. You can even get 3% but they wont work that hard and bottom line your house to make a quick buck.

 

[Phoenix86]

the agent doesn't get the full 3%. that money goes to their brokerage firm who then takes a cut. newer agents work on a 50/50 cut so half that goes to the broker. some firms charge fees as well

also what you get when you work with an agency is promotion. we list something and it gets pushed to hundreds of sites.

6% is a lot of cash for the work provided, people attribute that to the realtor, but that's not fair. The realtor does most of the work, but often gets less than half the pay. Most people don't know that so they bitch about realtors.

I cut out everything you said a realtor does and left what the broker/agency does and takes. 50% isn't even the worst, I know some brokers that take 70/30 or 50%+fees.

So the broker/agency takes half or more and they "push a listing to a bunch of sites". They do a little more than that, they basically guarantee the realtor's work. This is the fat in the process, not necessarily the realtors, although they don't always do everything you said. That's what a good realtor does, a bad one can do much less and still make enough money to stay in business.

 

[Imp]

Anyone have the stats on non-real estate agent sales?

Last I heard, people who don't use agents end up selling for less. Wouldn't be surprised if that were true.