Comments on: Disintermediation – Say Good-Bye to the 6% Commission Rule. http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/ A Future Look at Today Fri, 03 Feb 2012 22:38:37 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: Ken Smith http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/comment-page-1/#comment-22301 Ken Smith Wed, 17 Oct 2007 21:23:31 +0000 http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/#comment-22301 There is no such thing as a standard. What you will find most of the time is you get what you pay for. An agent that spends $5-10k a month in marketing homes can not afford to do so at a discount. Agents that spend money to advertise sell homes faster and typically for a higher dollar amount then one that just sticks the home in the MLS and calls it a day. One other thing that nobody ever wants to talk about is that the agent doesn't get the whole X%, Lets us 6% as an example. Half will go to the agent that brings in the buyer, now the listing agent is down to 3%. From that 3% the agent pays for all marketing and has 100% of the risk as they only get paid when a listing sells and closes, which in the current market means many times the agent has spent hundreds if not thousands of dollars to get nothing in return. But the agent doesn't even get to keep the whole 3% as most have a split with their office. The office will keep 30-50% of the 3% with no allowance for all of the marketing costs the agent incurred. Plus we get hit with the wonderful self employment tax so that by the end of the day we end up paying over 50% in taxes between State, Federal, and self employment tazes. Heck someone has to pay for all those wonderful government programs. Anyways the sad reality is that the median annual income of real-estate sales agents in 2004 was only $37,600, down from $39,300 in 2002, according to NAR. (couldn't find newer numbers quickly, but they are actually lower in '05). There is no such thing as a standard. What you will find most of the time is you get what you pay for. An agent that spends $5-10k a month in marketing homes can not afford to do so at a discount. Agents that spend money to advertise sell homes faster and typically for a higher dollar amount then one that just sticks the home in the MLS and calls it a day.

One other thing that nobody ever wants to talk about is that the agent doesn’t get the whole X%, Lets us 6% as an example. Half will go to the agent that brings in the buyer, now the listing agent is down to 3%. From that 3% the agent pays for all marketing and has 100% of the risk as they only get paid when a listing sells and closes, which in the current market means many times the agent has spent hundreds if not thousands of dollars to get nothing in return. But the agent doesn’t even get to keep the whole 3% as most have a split with their office. The office will keep 30-50% of the 3% with no allowance for all of the marketing costs the agent incurred.

Plus we get hit with the wonderful self employment tax so that by the end of the day we end up paying over 50% in taxes between State, Federal, and self employment tazes. Heck someone has to pay for all those wonderful government programs.

Anyways the sad reality is that the median annual income of real-estate sales agents in 2004 was only $37,600, down from $39,300 in 2002, according to NAR. (couldn’t find newer numbers quickly, but they are actually lower in ‘05).

]]> By: Stuart http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/comment-page-1/#comment-10326 Stuart Sat, 30 Jun 2007 13:02:52 +0000 http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/#comment-10326 David, ...one thing to consider: the best agents will get their traditional "6%" if they can build a niche around people selling or buying their house who want "peace of mind" that ALL is taken care of and they do not need to do anything, an outsourced approach. Trust me, with three children under the age of six, running my own business that includes extensive travel, we do not have the time nor desire to do the work. There are a few of us "dinosaurs" that appreciate the full service agent and are willing to pay. David,

…one thing to consider: the best agents will get their traditional “6%” if they can build a niche around people selling or buying their house who want “peace of mind” that ALL is taken care of and they do not need to do anything, an outsourced approach. Trust me, with three children under the age of six, running my own business that includes extensive travel, we do not have the time nor desire to do the work. There are a few of us “dinosaurs” that appreciate the full service agent and are willing to pay.

]]> By: Rob http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/comment-page-1/#comment-10288 Rob Sat, 30 Jun 2007 06:05:19 +0000 http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/#comment-10288 We never had a hyper market like the coasts did these last few years. We've always had a steady 3-4-5% annual rate of appreciation and are not really feeling the effects of the "bubble burst" here. Our market doesn't heat up that fast it seems. Our average commission is low simply we've got too many hungry agents who will cut costs, corners, and ultimately commissions to win business - any business. Most communities nearby charge an average of 6% and some even are averageing 7%. Other than, say, the top 10% of local agents, most os us make between $20-30K per year gross. Chop off taxes, MLS and Realtor fees, supplies, gas and car expenses, technology (phones, computers, etc.) and lots of us are well down into the teens for annual income. We never had a hyper market like the coasts did these last few years. We’ve always had a steady 3-4-5% annual rate of appreciation and are not really feeling the effects of the “bubble burst” here. Our market doesn’t heat up that fast it seems. Our average commission is low simply we’ve got too many hungry agents who will cut costs, corners, and ultimately commissions to win business – any business. Most communities nearby charge an average of 6% and some even are averageing 7%. Other than, say, the top 10% of local agents, most os us make between $20-30K per year gross. Chop off taxes, MLS and Realtor fees, supplies, gas and car expenses, technology (phones, computers, etc.) and lots of us are well down into the teens for annual income.

]]> By: Rob http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/comment-page-1/#comment-10287 Rob Sat, 30 Jun 2007 05:56:29 +0000 http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/#comment-10287 David, our market is very competitive between the agents and has been for a number of years. We've always been, on average, charging less than communities near ours. With sooooo many agents in our market it is career suicide to run things a 6%. You can charge that in some instances, but I estimate 90% of us charge 5% commission with half of that paid out to the buyers agent. Other than the top 15 out of 300 agents in our town, nobody is getting rich out here. Most agents see no more than 10 transactions per year. With a market average sales price of $140K, and after buyer's agent and brokerage splits, the average agent makes between $20K and $30K. And that's before taking off for taxes, gas, supplies, MLS and Realtor fees. David, our market is very competitive between the agents and has been for a number of years. We’ve always been, on average, charging less than communities near ours. With sooooo many agents in our market it is career suicide to run things a 6%. You can charge that in some instances, but I estimate 90% of us charge 5% commission with half of that paid out to the buyers agent. Other than the top 15 out of 300 agents in our town, nobody is getting rich out here. Most agents see no more than 10 transactions per year. With a market average sales price of $140K, and after buyer’s agent and brokerage splits, the average agent makes between $20K and $30K. And that’s before taking off for taxes, gas, supplies, MLS and Realtor fees.

]]> By: david http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/comment-page-1/#comment-10254 david Sat, 30 Jun 2007 00:24:21 +0000 http://www.evolutionshift.com/blog/2007/06/26/say-good-bye-to-the-6-commission-rule/#comment-10254 Rob- I have no problem at all with your rationale. The logic inherent in you position suggests that in a strong market you would lower your commissions since it takes less time to go from listing to closing. Would you agree? So if 6 or 7% works in a slow market, and you are at 5%, in a fast market the commissions would go down to 3 or 4%, right? David Rob-

I have no problem at all with your rationale. The logic inherent in you position suggests that in a strong market you would lower your commissions since it takes less time to go from listing to closing. Would you agree? So if 6 or 7% works in a slow market, and you are at 5%, in a fast market the commissions would go down to 3 or 4%, right?

David

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