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A Discounter Defends High Commissions - Why A Smug Attitude Doesn't Make You Right!

I don't know if you've read any of what has been written here on AR recently about Jennifer Allans appearance on the internet radio show, "Real Estate Radio USA", but Jennifer has written about it as has Broker Bryant (of course his got featured! ;-) and after reading a comment by Brett Wilson on Jennifer's original post, "Why Our Commissions Are So High" I felt like I had to jump in and call a spade a spade.

While I'll admit that I'm not familiar with Mr. Wilson's radio show, having worked in radio before and having some close friends who are involved with television production, I am familiar with how radio and tv shows work. I'm familiar with some of the tricks that are used to make it appear that the host always has the upper hand, such as turning the guest's microphone down or simply talking over them.

I've never listened to Mr. Wilson's show, so I don't know that he does this or not, but I did notice in his comment (that was in response to a comment that I had made) that he attempted to do something similar to me. That is, he attempted to dismiss me and what I was saying by adopting a smug, know it all attitude.

Well, one advantage that a forum such as AR has over going on an obscure internet radio show is that I have the ability to stand up to the challenge without having my microphone turned down!

The funny thing about this whole episode is that I agree with a lot of what Mr. Wilson has to say. If I didn't, I wouldn't have started my DISCOUNT real estate company back in 1995. I do think that MOST real estate agents aren't truly professional. I also think that real estate commissions have gotten out of hand.

As I've written about before, I've never been able to have someone justify why it costs three times as much to sell a $300,000 home as it does a $100,000 home. Is there 3 times as much work involved? I don't think so.

But even with that said, I think that Mr. Wilson's position that all Realtors are pretty much idiots who are stealing from the public is simply not founded (my words not his - at least not that I could find). I personally know a great number of Realtors who do an excellent job of justifying their commissions and whom their clients hold in high regard.

As I pointed out on Jennifer's post, I personally have been involved in transactions where I had to stand toe to toe with attorneys representing numerous parties and utilize my skills to keep the entire transaction moving forward. I did so as an equal to the attorneys involved.

Simply because being a real estate agent doesn't require the education that being an Attorney or a Doctor does, doesn't mean that we are any less professional as a matter of course. While I would love to have the educational requirements to be a real estate agent raised and to make it harder for an agent to keep a real estate license, I don't think that this precludes an agent from being able to obtain the status of being considered a true professional.

So, Mr. Wilson, while I don't mean to attack you personally, I do wish to attack your message. Please consider what I'm saying here and please don't attempt to dismiss me by being smug.

R.B. "Bob" Mitchell

ValueList Real Estate Services, Inc.

Bob Mitchell is president of ValueList Real Estate Services, St. Louis' largest discount/full-service real estate and mortgage company. If you would like to find out more about Bob, ValueList or our flat-fee listing program, please feel free to visit our web site at valuelistre.com

Posted by Bob Mitchell - Realtor St. Louis on 07/03/2008 01:55 AM

Comments (74)

real radio usa, why commissions are so high, real estate commissions, real estate agents as professionals

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74 Comments on A Discounter Defends High Commissions - Why A Smug Attitude Doesn't Make You Right!

JUL

2008

I don't believe in discounting. I won't show discounted listings. If you want to discount your paycheck that is fine, but don't discount my paycheck. Don't get me wrong, I have discounted in the past. However, I worked just as hard ... if not harder for those looking for the break. After a while I decided to no longer do that. The sellers don't appreciate it at all. I do a lot that other agents simply do not do, do not know how to do. I don't need to justify what I earn, only how I earn it. I always say, let's worry about what you will walk away with, not what I will walk away with. Besided, if I can't stand up for my price how can I stand up for their price. Just my opinion.

Hi Patrick: First, thanks for the comment. Second, I do only discount my paycheck, not the other agents. One of the requirements of my program is that the sellers offer a "full" commission to the selling agent.

Regarding my being a discounter, I'm proud of the fact and think that my programs are equal to or better than just about any other Realtor out there. That said, I don't begrudge anybody what they are able to negotiate as their compensation. My business plan is built around a different business model that's all.

My main point here was that all real estate agents aren't a bunch of uneducated swine who are out there stealing from homesellers, which appears to be the position that some folks are taking. Again, thanks for the comment.

Bob Mitchell

ValueList Real Estate Services, Inc.

Bob:

Thanks for alerting me to this debate. I read Jennifer's blog and the comments attached. Mr. Wilson's style is so aggressive that despite his assertions to the contrary, he does not welcome debate that does not reflect his point of view. I've copied the comment I left on Jennifer's blog because it reflects my opinion on the matter. I have not had an opportunity to listen to the Show, so I can't comment on it:

Jennifer, Brett, Bob et al.,

Interesting conversation going on here. I thought I'd add a few comments from an attorney's point of view, since we were indirectly brought into the fray.

First, there are as many BAD attorneys/doctors as there are BAD real estate agents. Check out the Errors and Omissions premiums if you doubt me. In many professions the large majority or the most inept get the attention and their ineptitude is attributed to the whole industry.

Second, Brett, in many of your comments above, you do not rely on facts but rather on name calling and denigration. You do not directly address the points raised in the comments but rather flamboyantly dismiss them.

I think the group gets your point "you do not believe real estate agents earn their commission." Your dismissal of some very valid points that are raised i.e., 1) good agents earn their commission by knowing their market; 2) facilitating the deal when parties are at odds (and many times the attorneys have thrown a wrench in the negotiations); 3) educating their clients regarding the worth of their property or the worth of property they are contemplating purchasing; and 4) acting as the agent (see the legal definition of agency below) of the buyer or seller.

Third, as an attorney, I feel that a GOOD real estate agent is worth their weight in gold (not to mention commission) for interviewing me and learning what it is that I want, searching the available databasee and other networking connections to winnow the chafe from the properties that meet my requirements, providing third party input during the negotiation process, liasing with the escrow and title company and a variety of other services.

The legal definition of "agency:"

A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal.

Many agents DO NOT understand the legal nature of their relationship with a buyer and seller and the fiduciary duties that accompany it. The GOOD agents do understand it and exceed expectations. The consumer must do their own due diligence (the same as they would to select a good doctor or attorney) to find the best agent for their purposes.

As an attorney, I do take issue with agents "double-ending" deals because essentially they are agreeing to be an agent to two masters. It is impossible to meet their fiduciary obligations to both the buyer and the seller. I know there are agents who disagree but it is because they don't understand the fiduciary requirements their agency status demands.

I think that high commissions do reflect the agent's cost of doing business and their requirements to pay the brokerage. Bob had a good point there but that's for another day.

In typical attorney fashion, I have belabored the point. Bottom line, most of the agents' comments above are not "blather," "lame" or "baseless." And lastly, an opinion that someone "was ganged up on" does not constitute disrespect.

Lisa

I think the discussion is getting off track....The question is....how do we decide how to do business. For some the discount model works. For some, a total flat fee for listing in the MLS works. But for many, it simply doesn't work. Now, there are also a ton of people who shouldn't be practicing that are indeed selling real estate. What I am also finding is that competence does not appear to be based on SALES VOLUME. There are plenty of very competent people who are watching theif fiduciary duty that are being overlooked while one "loud mouth" that throws truckloads of money at their marketing and lies through their teeth about how wonderful the market is - walks away with most of the business. That's what we have in our neck of the woods.

BIG money to start up - BIG lies to get the sucker factor to sign on the dotted line. This has clouded the issue of what value an agent brings to the table - becuase it depends on one thing: THE AGENT HIM/HERSELF!!!! One of the bigger problems is that sellers and buyers tend to belive what they want to hear - so the get themselves entangled with the wrong agent.

For some - discount works. For me, with the service I provide, I can't do discount because I'd be making $1/hour. I just can't say - "no can do" when that person needs help that is time consuming. But this past 2 weeks, I've been working on a rental. It's ridiculous! I have just counted the number of emails back and forth and we don't even have a binder ....26 emails...God only KNOWS how many phone calls. Not to mention previews by long distance, photos sent back and forth. Floor plans. No one makes a bundle on a rental..I'm almost operating at a loss now. But since these people were not local and had move-in requriements, I'm doing a lot more for them.

On my last sale there were a ton of issues. Everyone got stalled over $3000.00 Had it been left to the buyers and sellers, the deal would have fallen apart. THREE days of back and forth to get to the contract point. Several issues including how to fix a leather floor and what to do about a bathroom renovation came up. The leather floor required an afternoon of research alone. It was an interesting education. There were issues with the appliances in th kitchen and Bose surround sound system. There were problems with the board application deadlines which meant I was physically chasing piles of paper. This was all AFTER the initial showings and decision making process. It took 3 months to close. So HOLDING the deal together is no small issue. And if it had fallen apart - what about all the time I spent? I took a big risk UP FRONT for a check at closing and ONLY at closing. If you provide that kind of service, with that kind of RISK - its going to cost more than up-front fees.

P.S. I flagged it for a feature - let's see what happens....

Ruthmarie:

You have identified the problem to which I was alluding: "the loudmouths getting all the press and doing a ton of advertising are "branding" the entire profession" and getting business through name recognition.

Part of the blame lies on the state Departments of Real Estate, which are state agencies subject to state legislatures and lobbying. I think NAR is a fine organization whose lobbying efforts result in positive outcomes but many times it fights changes that may actually improve the profession.

This is where the GOOD agents need to make their voices heard on a state and national level with your Associations.

One of the great advantages of AR is that it is really difficult for an agent to conceal their true nature over time. It comes through. GOOD Agents need to support other GOOD Agents.

Lisa

Ruthmarie reminded me to tell you that I flagged this post to be featured when I made my first comment. It's a great post Bob.

Bob, OK I did flag you for a feature so will see. I flagged it AND you have my name in it so maybe that will work:)

Brent Brett, has no desire to understand what we do. That's a fact. He ants a line item list and he ain't gettin' it so he's no happy. Not much anyone can do about that. But last I checked he's not looking for a REALTOR(R) to work with so it truly doesn't matter. I only justify my commission for folks who are looking to hire me and they NEVER have an issue. In fact I put up a chart earlier this week showing 45% of my business coming from referrals and repeat business. That's pretty good considering almost all of my sellers are moving out of state. If I worked with Buyers more often I'm sure that percentage would be much higher.

As you know I have no problem with any business models. Folks need discounters. If they didn't you wouldn't be in business.

I read your comment when you first posted and also read how Brett blew you off. I guess he didn't really read it.

Very good post Bob.

Lisa, thanks for backing me up on Jennifer's blog. You have a way with words that I really admire! The fact that you have the credentials is great too. The fact that you're good looking doesn't hurt either (that didn't have anything to do with anything, but I thought I would throw that in). Again thanks!

Ruthmarie: You're right...I know some agents who are great and a pleasure to work with, but who don't do a bunch of volume. I also know some that are big time agents who I almost hate to have to deal with. It's not a question of volume.

Regarding your point about being $3,000 apart and you bringing the people together, I have a similar story. I had a client (who happened to be an attorney, btw) who was selling a $400,000 home. He and his wife had already purchased another home and had attempted to sell their old home FSBO.

I listed the property and we got an offer on the property. During negotiations, we got to the point where we were $500.00 apart when my client dug his heels in and said no! No more!

I looked at him and asked him where I was going to sleep tonight and what was for dinner! He looked at me with a puzzled look on his face and I told him that I wasn't going to leave until we worked this $500.00 out. When I pointed out to him that the $500.00 was .00125% of the value of his property and that I would even split it with him, he smiled and thanked me as he accepted the offer.

At closing he tried to give me my $250.00 back.....Lisa, can you imagine that? An attorney trying to give someone the money that they had agreed to pay back???? ;-).....

Thanks for the comments!

Bob Mitchell

ValueList Real Estate Services, Inc.

Ruthmarie, Lisa and Bryant: Thank you for the flaggs and the kind words!

Bryant: Thanks for catching my typo! ;-)

Bob Mitchell

ValueList Real Estate Services, Inc.

JUL

2008

I really enjoyed reading your post and some of the questions like, why does it cost more to sell a 300k home vs a 100k home, it shouldn't.

There are so many agents out there that some times ruin it for others.

Like in Las Vegas we have agents that get licensed that are from other countries and they wil list a home and or find a buyer for one & half percent commission.

God post!

Robert Swetz

Bob: You better be careful. If you get too many featured articles, you'll become a golden child, and then I'll have to stop featuring your articles! :)

Another Joe talking about being a PRO and Flat fee listings in the same post??? I'm done!

Here is a view from the "low man on the totem pole" (loan officer) discounting is sometimes necessary to get the deal. I don't like it and i feel it de-values my side of the transactions but i also have to pick up the slack on some transactions lately. For many years "some" realtors did very little work, now its a whole new ball game and they are lost. Thanks for the article and keeping integrity in our business. Remember its a little secret that no one wants to see us fail more than the public does!!!

Well, I haven't heard the show, but as a marketer and strategist I have to say that to say the higher priced homes are not 3 times as much work misses the mark. In every sales job where you sell more volume you get paid more. If you sell used car for $1000 do you think you should make more if you make a bigger sale of a mercedes, of course. If it was about man hours we would get paid hourly. That's like saying a doctor who does heart surgery should make the same as the clinic doctor,

Plus as home prices go up our commissions go up, so does the cost of living, so does the cost of everything. In a normal job they get raises as the economy changes so why shouldn't we. I just had a client tell me that all the talk about high commission was wrong, He was happy to look at the closing statement and know he hired the right person who was worth every penny. Ultimately you make what you are worth.

This has been a very interesting blog to read...and some of the contributions are so well thought out and articulated that it's actually reinstilled some confidence that there are AR'ers who are obviously capable of writing more than the requisite "I agree. Happy selling."

I also understand each point of view.

I sometimes believe the way that Bob does. If an agent has a $400,000 listing, takes it at 6% (with 3% offered as a co-broke)...and is on an 80% split, they'll earn $9,600.00 If, however, that same agent, with his/her exact same morals, ethics, professionalism, attention to details and willingness to go the extra mile, takes a $2,400,000 listing (given the same commission percentages), they'll make $57,600.00 at closing. You can argue all you want that there was $50,000 more in advertising, or in your "cost of living", or in gas, or time, or whatever...but I see the exact same flyers, the exact same Homes and Land ads, and the exact same Just Listeds on both properties. I see the same amount (or fewer) calls made. I see the same (or less) gas used...and I'm not convinced the Diet Coke you bought to keep you company at the Open House was any more expensive on the $2.4 million dollar home than it was on the $400,000 one.

You may have had to market the higher-priced listing a little longer (maybe not?)...but you'd have a hard time identifying where the extra $50,000 went in expenses versus your pocket.

By the way...prior to starting my real estate marketing and training firm, I spent 10 years as a top agent in my community...so trust me...I am NOT anti-making-a-good-living.

But it's the average everyday people of our community who determine value for our services...(not us). They're the same ones who went by the droves to buy Subway's FIVE DOLLAR footlong, when the normal price was only $2.50 more. Subway's sales were boosted so much within the 90-day test campaign that they added the $5.00 footlong as an everyday menu item....and forced Quiznos to do exactly the same thing. They changed the entire sandwich industry in only 90-days simply by lowering the price three bucks. By the way, Subway didn't change it....PEOPLE DID!

It's those same everyday people who are causing Starbucks to close nearly 1,000 stores. Why?? Because they simply can't afford to buy gas AND pay $3.99 for a Venti Iced Mocha. Take four bucks for an afternoon treat, and match it with the consumer's unwillingness to pay it...and one of our country's great success stories is forced to close tons of stores.

I believe if we're not careful...it'll be these same people who will one day overrun NAR's power in the industry and let banks and other players enter our protected playground...which will put a lot of people "out of commission".

If the average American's annual salary is $35,000, it won't take long for them to shun the idea of a Realtor making twice that on one sale. Just wait til "Walmart Real Estate and Loan" becomes a reality and adds credence to the whole Discounter mentality. They've done it with everyday goods, they've done it with $4.00 prescriptions...and they'll do it with real estate.

Meanwhile...Bob's Hardware can try as they may to justify charging $18.00 for a rake that Walmart sells for $6.99...and Walgreen's can argue all they want about their Motrin prescription selling for $12.00 when Walmart only charges $4.00.

Oh....by the way, Bob's hardware is closing its doors soon....and Walgreen's is facing Quizno's fate. Match the offer or go out of business.

Just a little food for thought.

Dave

Very interesting discussion. I believe if you can defend your pricing model, then you deserve the fare. Full fare or discount, you have to do your thing! I respectfully disagree with not showing discounted listings, as that is a disservice to your client and I think you could be sued if the buyer found out your actions caused them to pay more for a property that didn't suit them well and you have a propensity for such actions, that could be demonstrated in court.

I would appreciate an attorney commenting on this if this is not true. As a buyer if I later found out that there was a discounted commission property was on the market that my agent had knowledge of that was superior in meeting my demands and price point and I was steered to a inferior so my agent could earn a larger commission, I'd be ready to visit Judge Whopner, Judge Judy or Judge Somebody!

I think irrespective of the fees to be earned, an agent is to take the fiduciary obligation seriously and not allow the fees he or she expects to earn to dictate which property to show or not show a client.

I continually declare that many are in this business for the money and not to serve the best interest of their client. I get slammed every time I make that comment, so be it. Best interest of the client should always trump everything else. That discounted property may be the perfect property for the client. The client in all likelihood gave you a boundary in which they want to live. You've had them pre-qualified for a respective loan amount and selling price, and they have given you the specs, features and amenities they require and/or want in the property, why not show the property if it fit their criteria? Oh, I forgot it is listed at a discounted commission.

I believe it is your choice to not take a discounted listing, but never to fail and show a property on the market, irrespecitve of the if it is list at a discounted fee.

Seeing as tomorrow is July 4th, this is what is great about the United States. We can have different opinions, we can voice those opinions, and we don't go to jail over it.

Lisa, you are ever so correct! You can't serve two masters. It is always preferable to have two distinct agents in a transaction.

I know you can sue anyone for anything, but in my scenario above, would my lawsuit under the conditions mentioned, have merit.

My agent steered me to an inferior property because of his/her disposition to showing discounted listings while have knowledge of a property the specifically matched my needs and demands.

BOB - Fortunately, I've only had him appear on a few of my posts, and it hasn't been for a long time, but I feel the exact same way as you do. We're all entitled to our opinions, and often times we will disagree. But there is a way to disagree with someone without resorting to bullying tactics, and that is just the way that he was on my post. He tried to make sure that his "expert" opinion was the right one, and the dissenting opinions were ignorant. Good for you for calling this out.

Robert: Thanks for the comment and that's wild about folks getting licensed for just one deal...Seems like a lot of work to go through for a 1.5% commission!

Rich: I KNEW that was going to come up when I saw Ruthmarie, Lisa and Byrant flagging the post....I do appreciate the star though. Thanks.

Cameron: I don't quite get what you're getting at??? If you're point is that discounters can't be professional, then I totally disagree with you. I've been doing this since 1984 and have almost put two kids through college doing it.

I've also participated (as an agent, loan officer, manager and owner) in thousands of transactions with only one complaint (which was dismissed) to my real estate commission or board. I would think that would substantiate that a discounter can indeed be a PRO! Thank you for your comment though and if I misinterpreted your comment, I apologize.

Bristol: Interesting comment...personally, I've always felt that the loan officer was the, or should have been at least, the high man on the totem pole in a transaction because of the Golden Rule (he/she with the gold, makes the rules). Actually, the clients should be high man, but you get my point!

Regarding discounting, to me, it's the basis of my business model and I feel that if it's done right, that it turns out to be a win/win. That said, I lose out to traditional brokers all the time and if they make a better case to the client than I do, then that is how it should be!

I also agree with you that there is at least a sizable part of the general population that wants our industry to fail. That's ashame because what we do in it's purest form is actually a pretty idealistic thing. Too bad that the way that the industry is structured causes folks to feel this way about us. Thanks for your comment.

Ross: I'm going to defer to David Daniels and his comment below yours to counter your argument that I'm wrong with my question about percentage based commissions. I understand where you're coming from and in fact, my "flat-fee" is actually tiered with the lesser expensive homes paying less than the more expensive homes. To be honest, part of this is because the market will bear it and part of it is because I've found that the more expensive homes do require a bit more work than the lessor expensive homes due to the client's expectations...let's say that the more expensive homes owner's tend to be a bit higher maintenance than the less expensive home's owners.

That said, David's point about not being able to justify a $50,000 difference in commissions holds true to me. Thanks for your comment!

David: Great Comment!!! I'm trying like a dickens to be that Walmart of real estate! Not there yet, but it's not for a lack of trying!

Regarding your point about Walmart on the prescriptions, I inherited a 16 year old Siamese cat with kidney problems from my mother. Coco's prescription at the Mom and Pop pharmacy was costing me $29.00 a month, I switched it to Walmart and only paid $6.00 for a ninety day supply.

I'm on for the little guy, but there has to be some kind of justification in my mind as to the $82.00 difference. I would gladly pay the additional amount if that pharmacist was doing something that added value to the transaction, but on a reoccurring prescription that the cat will be on for the rest of his life, I don't see anything that he was doing that justified the difference in price.

Which is the perfect analogy to the traditional broker vs. the discounter. If that pharmacist could have convinced me of the value of his particular service over Walmart's pharmacy, then he would have deserved to have made the additional money. In my case, he couldn't do it.

Notary: I agree with you about the client's needs coming first, but I also disagree with discounters who discount the buyer's agent's commission. To me, it's one thing to cut my paycheck, it's another to ask or almost force another agent to cut theirs.

When working with buyers I explain to them up-front that I won't work for less than a certain percentage when working as a buyer's agent and that if the home that they buy isn't paying that, then they will have to make up the difference or protect me by making my receiving a full-commission part of any contract that we may write. As long as this is done ahead of time and my buyer's agree to it, then I don't see a problem with it. Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Russ: What are you doing up so early! My excuse is that I couldn't sleep! ;-) Anyway, Amen to your comment! Happy 4th of July! and thanks for the comment!

Notary: In Missouri we have a thing called "Disclosed Duel Agency" which is kind of like a hybrid of agency and transactional brokerage. With both parties permission, the terms of my agency agreement are modified to where both parties acknowledge that I won't tell them anything that may hurt the other party...ie that I won't play favorites. It works pretty well and I've never had a problem with it, but I can see Lisa's and your concerns. Thanks again for you comment!

Adam: You're exactly right! There is a way to disagree with someone without resorting to name calling. The fact that he pretty much attempted to dismiss me as if saying that his opinion was the ONLY opinion that mattered pissed me off! As I pointed out in the post, the funny thing is that I actually agree with the guy on a lot of his points.

He seems like a smart guy and I wish the best for him, but I wonder how happy he could be going around with that kind of attitude. Maybe if he reads this and other comments that have been made, he might reconsider the whole "Rush Limbaugh" approach to debate. Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Compensation is not a measurement of labor. If it were, the CEO of a company who makes $250,000 would have to work 5 times as much as the employee who makes 50k. The CEO cannot work a 200 hour week. However, he or she oversees the exchange of large amounts of money; that, the commerce, is the point. A CEO oversees millions changing hands and to a degree is less replaceable than a grunt. A rank and file employee oversees their limited duties and is replaceable to the extent that their job can be performed. Anyone can make a widget. Not anyone can run the company. Anyone can sell a $1000 used car out of their driveway. Not everyone can sell a mansion. Compensation, therefore, is measured by the amount of money one can affect to change hands.

If an agent brokers a $1,000,000 transaction he or she is absolutely entitled to a proportionately larger compensation than in a $200,000 deal. More money has changed hands, more commerce has been engaged in, more title insurance has been sold, more homeowners insurance has been brokered, more taxes have been paid, more upkeep will be paid, more mortgage money has been sold, more money has been deposited and subsequently invested, more cars will be parked in the driveway, more amenities like pools, media rooms, & upscale appliances will be consumed, and, in short, everyone going forward will reap more from the million dollar deal than the 200k deal. The agent should not be exempt from this.

There is also an issue of liability and exposure to risk, errors and ommissions that is magnified in a larger transaction. Again, the greater the risk, the greater the reward.

I won't go into detail about the feeding and care for a million dollar client as opposed to a $100,000 client. There are two different universes. I have yet to have the attorney for a starter home purchaser send me on a wild goose chase to ascertain the HOA and subdivision rules on mineral rights.

Far be it from me to second-guess Mr. Mitchell's chosen way of doing business. Anyone who has lasted in their current model for 13 years is certainly credible. That said, Mr. Mitchell is paid what he believes he is worth on a given transaction. I am paid what I am worth. If and when Mr. Mitchell decides he is worth more, there are certainly examples out there, myself included, who will give him ample justification.

Bob,

I appreciate this other post on this matter.

I agree we all have our own opinions and people are entitled to run their own business model as they please and the public has the choice of who they want and the services they want but until their in our shoes. I agree that some agents are terrible at what they do and don't deserve the commission they are paid...as a matter of fact I have suggested a clause in the sales contract getting compensated based on the other agents performance. But no reason to think that there are some that deserve what we command. We might as well all be attorneys if we have to justify our fees and our performance.

For the most part, a consumer gets what they pay for. Not always, of course, and sometimes a rake from WalMart will do the job (while one from the Smith & Hawkins store in Georgetown, D.C. is just not a "must have").

Today's market offers consumers many options, and they can perform their own due diligence to choose a "$295-throw it in the mls" agent or a seven-percenter or whatever. Some consumers prefer the do-it-yourself approach, with minimal professional help, and others want the highest and best quality of credentials and experience, marketing, and service.

I'm looking at funiture right now for my daughter's new house, and discount prices at the Room Store just don't motivate me to settle for their quality (or LACK of quality), yet they obviously have a very successful business model. Fortunately, there are still some better quality (albeit more expensive) options available - and that's MY choice. Kinda like consumers, when they choose a real estate agent.

Real estate does not have a coener on the "idiot market"...I am sure if you work long enough or are involved enough in any professsion...doctor, lawyer, indian chief...you will find them....Does it cost more to sell a $300,000 house than a $100,000 house...Yes it does....absolutely it does...can't say it is 3X, 2X or 6X....depends on the house. The law of economics...and indeed reality would say that there are more folks that can afford a less expensive house than a more expensive house...that you have to advertise more in more places to attract the right buyer. The more you pay, the more you want it to be more like YOU want it be ...which further narrows the field...SOooooo the more advertising and market exposure is necessary....the more money it takes, the longer it takes...absolutely.

One reason the commission model works is because it's a contingent fee. We do not have to justify our fee. We have the ability to charge that fee that we believe compensates us for the work and risk involved. Fact is, there is about 3 times the risk in a $1,500,000 property listing as there is in a $300,000 property.

No consumer is forced to accept our fee. We're presenting on a listing next week with an astronomical fee. The property has been on the market for 4 years. If the owner wants to negotiate my fee, they won't hire us. Simple as that. Just because the property is a luxury home doesn't reduce the risk and work involved. My fee is my fee.

No one in business has to justify their fee. If they can't remain in business and compete with that fee, they will either go out of business or lower or negotiate their fee.

Wow- I just got my morning cup of coffee and sat down to AR to find this little gem! my opinion is there are good dicounters and lousy ones and in the same respect there are good full-service/commission realtors and lousy ones. I've dealt with both kinds from both sides. I do fear that if we want to survive we will have to adjust our fees just to keep up- Hope not, but at times it looks that way. Very interesting topic and great posts by everyone!

Bob, I can't believe they featured this crap :)

Great conversation you have going here. I love the comment for J.Phillip's. Especially this part:

"If an agent brokers a $1,000,000 transaction he or she is absolutely entitled to a proportionately larger compensation than in a $200,000 deal. More money has changed hands, more commerce has been engaged in, more title insurance has been sold, more homeowners insurance has been brokered, more taxes have been paid, more upkeep will be paid, more mortgage money has been sold, more money has been deposited and subsequently invested, more cars will be parked in the driveway, more amenities like pools, media rooms, & upscale appliances will be consumed, and, in short, everyone going forward will reap more from the million dollar deal than the 200k deal. The agent should not be exempt from this."

He makes an excellent point. I also believe that in most cases the agent that is selling the 1mil plus houses is always selling the 1mil plus houses. It's their niche and the area where they have built their business and reputation. Their commission is normal and expected for what they do.

Now in my case, my average sell right now is about $120,000. My sellers are getting a steal!!!! But it's what's normal for my market and it's what's expected.

Bob - it's unfortunate that so many of the comments on this post are arguing the point of discounting. As you know, I used to own a discount company and we did just fine - financially, ethically, etc. Yes, it is possible to run a profitable business with a discounted model AND provide exceptional customer service. I did it, as do you. But I don't think that was your point (throw in the word "discount" and everyone goes bananas).

Anyway, the conversations yesterday were almost surreal at times. I'm still trying to decide if it was all for entertainment (obviously the whole thing has created quite a buzz around the radio show, which is just dandy) or if Mr. Wilson truly believes he is making an intelligent argument. Anyone who follows my blog knows that I have no hesitation to Realtor-Bash when warranted, but the vast majority of the discussions flying around yesterday WERE well-thought-out and persuasive. Obviously, if everyone actually DOES what they said they do, we have a lot of deserving listing agents out there in AR-Land!

I'm a moderator at AgentsOnline (www.agentsonline.net) and this sort of bickering happens frequently. Someone makes a provocative statement and then all hell breaks loose. It's entertaining, but you just have to shake your head and wonder where these people came from.

Okay, I'm rambling on your blog - great post and congrats on the feature. And, as Ruthmarie brought up on my related post - Keep the Google Juice coming (at least for me- thanks!)

BTW, I agree 100% on the $100,000 vs $300,000 question. In my market, a nice $400,000 home is a much easier sale than a crummy $200,000 home, so getting paid twice as much doesn't really make sense.

When I look at what it costs me in advertising dollars and time spent, the $100,000 home sale @ 6% example is a discount. The question is; should we be charging more for lower priced property than we do? At the higher end, I spend much more on advertising. There is a smaller market of buyers. Has anyone looked at the cost of a magine ad? Over several months a great percentage of my potential commission can be spent.

In a down market many home sellers are willing to offer additional $ incentives in order to receive more showings.

I keep hoping that the market decline will weed out the few bad/lazy agents. Perhaps they will migrate to selling oil futures.

I had an interesting thought on the argument that you don't deserve thousands more in commission on a million dollar home vs a 100,000 home.

If I get a traffic ticket, and want to fight it in court a paralegal could probably do a good job and not cost me much. But if I got charged with murder and I was innocent, I think I'd need a real top dog. And I'd gladly pay whatever was necessary to get the job done. And to get the best, I'd expect to pay alot more!

If I'm selling a 100k house, it really doesn't take THAT much effort, and marketing can be kept to a minimum because there are tons of buyers for a 100k house. But if I have a mansion worth 2.5 million, I think I'd like to have the BEST represent me, do a fabulous marketing campaign, wine and dine potential buyers, and whatever else it takes to get my mansion sold. And I would pay to get the job done. And I don't think there are many 1+ million $ property owners out there who would disagree with that. I just have never met a millionaire with a mansion to sell who would even consider hiring a "discount" broker to save a buck.

Million dollar homeowners know the "the less I do, the more I make" theory. That's why they are millionaires.

Hey bob..we HAVE never turned down the mic on anybody and never would as for being obscure, our nationally prominent guests would say otherwise, as would our rankings in all of the search engines and blog ratings. This obscure show found it's way to Jonathan Washburn's list of top real estate blogs as well. (I did not see yours listed anywhere)

Our show's ratings and website are higher than MANY terrestial based stations and we are in the process of being syndicated nationally.

The issue of commission is one the consumer, not the agent, will ferret out. I know how you guys feel and obviously you know how the guys on the show feel.

Their audience, despite what you may think Bob, is much larger than the comments you seek to obtain here. There are a lot more people tuning in that agree with them, then don't. Far more.

Funny thing, most of the dissenters are agents. Most of those who agree are also agents but many consumers.

You have had 33 comments here, a good number of duplicate posters included. that's not an audience...that's a choir.

Don't you think we know how some agents feel. Don't you realize this subject has been beat to death and it's getting real estate agents no where? hundreds of thousands of agents are leaving the business.

The consumer is becoming more and more informed. We are helping to inform and educate the consumer and will continue to do so.

We're not seeking to alienate the Realtor nation. We're just trying to help usher in the invevitable new bsuiness model that is transparent and empowering to the consumer.

We want the consumer to know what most agents won't tell them.

Like many have said, if a consumer does not want to pay the fees many agents want then they should not have to. Like Lenn and many have said, if they don't like the fees, they don't have to hire you.

I absolutely agree. We just want the consumer to know they have options. We want the consumer to know what questions to ask. We want the consumer to get the best deal possible. And you're absolutely right. If they don't get the answers they expect, then they won't hire you. Case closed.

I am sure, 100% sure, that there will be many established agents who can stand steadfast in defiance of any justification or discounting of their fees.

I am sure many more, possibly hundreds of thousands more real estate agents will leave the business in the coming years.

I am also 100% sure that the consumer will dictate who they want to do business with and it will be the consumer that will determine what they are willing to pay.

So there's no further argument to be had. You charge what you want. Always been you're right and you're business. and we'll keep telling the consumer to question all agents and demand accountability and validation for what they are paying for.

It's called the free enterprise system and being that it's the 4th of July holiday, I think we are going to see how this revolution plays out.

Are we done arguing?

Wow...I've read *most* of the posts and comments relative to this discussion and the first thought that springs to mind at this moment is that if Brett had communicated this eloquently and respectfully from the beginning, there would be a lot less people riled up at him. ;o) I still don't agree with his (or B&B's) contention that listing agents are irrelevant to a real estate transaction, but I have a much higher regard for his/their position when it's stated this way. Thank you for that. :o)

This is one of the very reasons why I enjoy Active Rain. The microphone can't be turned down and it's to our peers to choose which topics and content that are interesting and relevent to the times.

Scott

Fiona...when it comes down to the heart of the matter it's a fairly simple argument. The problem is no one has to convince me or any other agent. The consumer will make the decision as to how the real estate industry will continue to evolve. Those agents that adapt will succeed. Those who don't ..won't. Glad I could make my point more clear.

Oak Valley...as stated, WE NEVER TURN THE MIKE DOWN on anybody. I took offense to Bob's charaterization..especially since he self-admittedly did not listen to the show. In other arena's that's called horrible journalism. But hey..if it make shim happy to feel that way, so be it.

I would have to add Mr. Oak...that you may be missing the larger picture here if you truly think that it is your peers that are shaping relevancy. It most assuredly is the consumer that will write that chapter.

I'm jumping for joy over the attorney (LISA) comment re. double ending. Also wondering how an agent that refuses to show "discounted" listings has any buyers at all, if this is disclosed to the buyer- how is it explained to a buyer? I'd walk REAL FAST. On the other hand, with full disclosure offered in an intelligent manner to buyers, I support the right of ALL agents to maintain their own standard of income, but don't want to hear whining about buyers that aren't loyal. The top echelon don't have this problem, but a new agent will be eaten alive.

Bob, Very interesting post and I am so glad this was featured. I have listened to different discussions here in the Rain about the values of an agent and how some try to justify their commission. I have to say not all agents deliver the same service so all together commissions are very subjective!!

This has turned into a juicy dialogue, which is why I enjoy Activerain. Deleting a comment you don't agree with, would that be akin to turning the mike down?

If there is supposed to be no commission fixing in real estate, how could a discounting agent cut another agent's paycheck? To cut your paycheck would imply there to be a floor or base commission within the industry. Last I checked commissions were negotiable.

I won't discount my fees to obtain a listing nor will I refuse to show a discounted property if it fits my client's needs.

Again, I say if I was the client and was victimized because of an agent's propensity to not show discounted property, we'd be in court to resolve the indifference.

Oops, my mike is on!

I hope he doesn't include me as a person stealing from the public. Perhaps a class action lawsuit for slander and the attack of character might shut him up for a few days. Accusing anyone of a crime, especailly a federal one is very, very foolish.

How would he like it if I said all discount firms are child molesters who can't afford to compete on a larger level?

Still a crime, just sounds a little more unfair?

I don't think so.

What a jackass.

Wow! Was that a Scott Gormley sighting? When did he come out of retirement?

J. Phillip: Thank you for your argument supporting the larger commission for a larger sales price. I will agree that there might be more hand holding and marketing expenses related to the million dollar client than there is with the $200,000, but does it really add up to an extra $19,000 worth? (based upon the listing company's cut)

With my program, a seller who wants additional exposure, say in a magazine or newspaper ad, pays for that ad themselves. I'll put it together and do the footwork to get it published, but they pay the cost of the ad and nothing more. I also provide high quality photos taken with a 10 mega pixal camera with a wide angle lens (the set up cost me over $2500.00). If they want a professional photographer to take the pictures, I will arrange that for them, but they will pay the photographer themselves.

Most of my clients choose to not go that route because even in the higher dollar homes, most of my buyers come from other agents through the MLS. If they do, they pay the additional marketing expenses and nothing more.

As far as the liability issue goes, I don't know if that argument holds water. If I sell $8,000,000 worth of real estate with my average sales price being $200,000 that's 40 transactions. Whereas if I sell $8,000,000 worth of real estate and my average sale were $2,000,000 then my number of transactions is only 4.

I would speculate that my chances of having something screw up and my ending up getting sued would be a lot more likely with 40 transactions than it would be with 4. On a gross dollar amount, the liability would be the same.

I do agree with you on a buyer's agent deserving a larger commission if they have that million dollar buyer. I base this support upon the concept of scarcity. Not every agent has a million dollar buyer because they aren't a dime a dozen. If I, as an agent, control a million dollar buyer and you as a seller want me to bring that buyer to you, then you're going to have to make it worth my while!

It's like owning the parking lot across from a speedway on race day. Is it worth paying $50.00 to park there? It is if you don't want to walk! The parking lot owner can demand more on race day because his commodity (a close in parking spot) is scarce. It's the same thing with million dollar buyers.

Finally, as far as charging what I'm worth...maybe I just took that wrong, but I don't think that is a valid argument. If the average real estate agent makes a gross income of around $30,000 (based upon US Department of Labor statistics) working for a traditional brokerage and one of my people earns $90,000 who's getting what they are worth? True, my person has to work more transactions and also has additional responsibilities in regards to taking loan applications, but over-all they are still only working 45 - 55 hours a week. So, in reality, who's really getting paid what they are worth? The answer, they both are!

Thank you for your comment and a good argument on your side!

Bob Mitchell

ValueList Real Estate Services, Inc.

"Oh....by the way, Bob's hardware is closing its doors soon....and Walgreen's is facing Quizno's fate. Match the offer or go out of business."

I like the Bob's Hardware analogy much better than the normal and polarized argument that some people shop at Nordstrom's, while other's shop at Walmart.

Personally, I think people are willing to pay a little more IF they need advices. They'll go to Bob's Hardware store if Bob is THERE to offer opinions and which product his customer's found most helpful. But if Bob retires and hires people who are simply cashiers...then he'll go out of business. Or if Bob tries to charge too much for the added value...same story.

The day an agent stops giving thoughtful and valued advices, is the day he puts himself out of business.

Neal: Thank you for your comment and I agree that each agent has a right to choose the business model that works best for them. If an agent is successful with a traditional real estate business model, then more power to them! As I've mentioned before, I get beat out on listings all the time by traditional brokers and when they do beat me, they deserve to earn what they get!

Margaret: The most common tactic that agents use when they know that they are going up against me is the "You get what you pay for argument" and as I tell my sellers, there is a certain amount of truth in this statement. However, what that statement doesn't take into account is that it is throughly possible to over-pay for an item or service.

I'll give you an example. One day when I was still working at the mortgage company where I was the VP, my bosses wife came in all excited because she had just purchased a new designer hand bag. I heard her tell her husband that she had gotten it on clearance at Saks or Nieman Marcus or some such store for $500.00!

Having at one point worked at a leather smith when I was a kid, I looked at the purse with a critical eye. The leather was first quality, as was the stitching and the hardware. That said, my old leather smith would have made the same purse for her with HER initials on it instead of some designer for probably about $300.00! Personally, I would have rather had the custom made purse (if I had been in the market for a purse).

To me, my bosses wife had just wasted $200.00. But to her, she was as happy as a bug in a rug. Who was right? I don't know? Which is my point here. Some folks would rather get the purse at Saks with the designer's initials on it and the 200 bucks wouldn't be an issue. For others, they would see my point and go to my old leather smith.

Another example would be buying a branded product vs a non-branded product. My little brother owns a heating and cooling company. One brand that he carries also offers a non-branded version of their product. The units are exactly the same with the exception of the name on the outside of the unit.

He has clients who he points this out to who still want the branded product because they've heard the name. To me, this doesn't make any sense, but I'm not the one buying the HVAC system. Thanks for your comment.

Bob Mitchell

ValueList Real Estate Services, Inc.

Ooooooh, I know it's bad form to link in a comment, but since I'm mentioned in the original blog, can I can I can I? I just wrote a blog about Getting What You Pay For... http://activerain.com/blogsview/577168/-You-GOT-What

(delete me if I was bad)

Sally and David: In my experience the more expensive homes are generally easier to sell (as long as they are priced right) because the buyers are better qualified. Also, as pointed out above, even with our more expensive listings, most of the buyers still come from other agents and the MLS. Also, as I mentioned above, we offer the additional advertising if our clients desire it and simply pass the cost along to them directly without a markup. By doing so, we negate the issue of additional marketing expenses.

Thanks for your comment!

Lenn: I don't know that I agree with your statement that nobody needs to justify their fee. I think that agents have to justify whatever it is that they charge every time they go out on a listing call. Particularly since the advent of alternatives such as my company and even the no-service, MLS only companies.

If I go on a listing call where I'm competing with you for the listing and I do a better job of convincing the client that my program is a better deal, then I get the listing. If you do a better job of convincing them that your program is a better deal, you win. It's that simple. Thank you for your comment!

Shannon: I agree with you 100% regarding there being good and bad in all the various business models (though I'm not crazy about the no-service, MLS only discounters, but that's a subject for another post). The economics of the real estate world are such that most discounters won't be able to make up the amount that they discount by doing volume and that most traditional brokerages are going to have to address their cost structures in order to compete. The issue is far from settled! Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Bryant: Man, you continue to impress me everyday! You say feature it and BOOM it's featured! What's up with that? You got something on these AR boys? ;-) Thanks for flagging my post, btw!

Now, I want you to be honest here....not that you aren't always so....but say you did score one of those million dollar listings and it closed and you made $30,000 on that deal as opposed to $3,600 that you would have made one of your "normal" $120,000 deals, wouldn't you feel like you scored a windfall?

Lets say that you were going to do some special marketing for the property, but hadn't sent the ad or the $800.00 check for the ad yet when the property went under contract and closed. Would you send that $800.00 check to the seller since you didn't spend it? What would TLW say if she knew that you had done that????? ;-)

My point is that while I'm all in favor of agents doing what they are bad enough to do, that the bottom line dollars and cents of the matter doesn't justify the additional costs to the seller. At least to me and to the sellers who list with me! Thanks for your comment too!

Jennifer: Thanks for the support and for your post that got this all started!

Bob: Interesting argument! One that I'm sure is worth considering! I too hope that this market weeds out the folks who shouldn't be in this business. Which in turn will make it easier for us all to make a living! Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

Kimberly: I'll fess up, my highest dollar residential listing to date as only been $795,000 (which in St. Louis is close to being a mansion) and you're right....the more expensive markets have been difficult for us to crack. The conclusion that I've come to is that with the wealthier people that the relationships that they have with their Realtors is more important that the money being saved.

I.E. if you're bosses wife sells real estate and you want that next promotion, it might be worth it to pay more to sell your home and to list with her. It could also be that I'm basically a slob and am too rude, crude and socially unacceptable to appeal to this market. ;-)

Our "niche" seems to be the $200,000 to $400,000 dollar range. Below these figures and we're not that much less expensive than the traditional companies and above this figure....well, you pick which reason that I gave!

Now to your point about wanting the best....To be completely honest with you, I think that I am the best at what I do. If you're looking to sell a home (no matter what price range you're home is in) in the St. Louis market, I don't think that you can do any better than by listing with me and my company. As I told Lynn, if I go up against you and do a better job of showing the value that I bring to the table, then I win. If you do a better job, then you win. Alls fair in love and war! Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services, Inc.

I'm not sure if I like the term discounting. I would tend to want to think of it as different business models. One contrast between low fee vs higher fee brokerages is that the lower fee firms tend to have scaling problems. Redfin has been able to overcome some of the scaling issues, but most limited service brokers (low fee brokers) don't have the revenue coming in to scale to a significant sales force and are typically an extension of the efforts of the owner. That's not to say the owner won't make a good living, however typically the owner has a difficulty leaving the day to day business due to the lack of revenue necessary to hire a staff and a (motivating) manager.

Traditional firms (higher fee firms) tend to have enough revenue from the average transaction to attract sales people who are in fact willing to go out and put it all on the line for a listing or a sale and split that revenue with the owner of the firm. This provides the firm with the ability to scale, by being able to hire and pay the right people, and if done right the business may be able to run on its own without the owner's day to day involvement. That ultimately IMHO is a business worth owning.

Now if you can roll out a spreadsheet and make a value proposition which ultimately yields enough income vs expenses to charge a low fee and grow a business then my hats off to you. The same is true of higher fee firms... Building businesses worth owning is not easy. We have to navigate our marketing, our leadership, our people, and our business models through to the end which is profitability and in this market that can be difficult no matter what your business model.

Statistics show that 90+ percent of all residential real estate in this country is sold by licensed real estate agents. These are people who have every opportunity to bypass paying us a commission and sell it by owner, but they don't, they pay us to do it.

So what is he really saying by making a statement calling us uneducated theives? He is saying that consumers aren't bright enough to do it themselves. So, should we be insulted by his ignorant comments? Sure, but so should the millions of consumers who actually think there is some value in our services. The market has been putting downward pressure on commissions for a long time and will continues to do so. I think homebuyers and sellers are intelligent enough to decide for themselves if there is value in what we do and up till now the answer is a definate yes!

I will post the following in its own blog (on my outside blog probably) in a minute, but thought this would be as good a place as any to toss it in:

Just got off the phone with a potential seller (read about her here). She's currently listed with a MLS-only company and she's not, shall we say, delighted with the outcome.

So, she told me that she called up the Realtor who was her buyer agent when she bought the house and asked if she was interested in listing it. You'll never believe what this agent said:

"Well, if you're listed on the MLS, I don't know what else I could do for you. Maybe take out an ad or hold an open house..."

OMG.

If those in our industry can't come up with how we're worth more than $295, then maybe Brett & the Barries are right.

Thankfully, there are those of us who DO know "what else we can do for you" above and beyond MLS entry...

Sheesh.

The reason agent commission is such a big issue and why consumers want discount agents is because there are simply too many agents. The reality is that at least 80% of the agents aren't worth $5.00/hour much less 2.5-4% of the purchase price. A good agent is worth every penny. The problem is finding that good agent. As long as selling real estate is considered a part time profession and anyone can do it with a few hundred bucks and a few hours of online classes, people are always going to feel agents are overpaid for the service performed. The pressure on commissions is partly due to agents having no respect due to the abysmal low barriers to entry.

Right now, there really isn't a true market for agent commissions. If you really want to see what you are worth, divorce the listing agent commission from the buyers agent commission. If consumers had to write a check for agent services instead of having it indirectly wrapped in their mortgage, agent commissions would go down drastically, particularly on the buyer side.

Brett: First, would it be possible to agree to not be snide and snippy. It's cute when I do it, but when you do it, it's not very becoming! ;-) Just teasing.

In all seriousness, let's keep this friendly, okay?

Great, regarding the popularity of your radio show I hope that things are going well for you. I used the word, "obscure" because I had never heard of it and I spend about 50 hours a week involved with real estate. Now just because I hadn't heard of it doesn't mean that it's not good or worthwhile. I will take a listen when I get a chance. Regarding my blog, it's coming along and it's accomplishing my goals as far as SEO and simply communicating. I enjoy it and am happy with it's performance, especially in regards to the amount of time that I put into it.

I agree with you wholeheartedly that the consumer is going to have the biggest say in determining where the price point equilibrium finally settles. I speculate that for a full-service, traditional Realtor that this price point will be less than it is now and that real estate companies are going to have to adjust to the new market reality. The fact that my company, ValueList Real Estate Services, Inc. is one of the oldest discount real estate companies in the country is something that I'm proud of. I feel like I am doing my part to make the real estate markets more efficient and better efficiency means more for everybody in the long run.

Per our agreement at the top of this comment, I'm not going to address the worthiness of the comments made here. Suffice it to say that I appreciate and value every single one of the comments that are made on my blog and even if only one person had choose to comment, then I would have still appreciated it.

Regarding the subject being beat to death, I don't agree. I still come across people every day who don't realize that they have a choice in the types of real estate companies that they can utilize. How agents are compensated is something that will be talked about for a long time to come.

Moving on to your point about consumers becoming more educated every day, I say that this is a good thing! As a jewelry store ad says, "An Educated Consumer Is Our Best Customer". That said, and I don't mean to be snippy here, after reading your comments on this post and on Jennifer's post, I wonder how important this mission is to you?

I've been doing this for over 24 years now and have credentials out the ying yang and I'm pretty freaking good at what I do, yet I lose out on listings all the time where people...educated people...smart people...who do the math for themselves and choose to go with a traditional company and pay more than I would have charged them. When this happens, I kind of shake my head and wonder...but I can't fault with them for their logic. If to them the traditional company offers a better value, then that is their decision to make.

You're railing against listing agents and the value that they bring to the table, as well as you unwillingness to acknowledge the validity of their argument is part of what makes me doubt your sincerity in regards to wanting to educate the public.

My gut level is that, while the commission rate might move lower than it currently is, that traditional full-service real estate companies will continue to be the "norm" for quite some time. So, while you may be right in the long haul, I don't think that it will be anytime in the near future that a new business model becomes "inevitable".

So, in closing, thank you for this comment being more civil and as I wrote you in my email, I think that we actually agree on more than we disagree on. In the future, at least when dealing with me, if you could refrain from being as belligerent, I would sincerely appreciate it.

Bob Mitchell

ValueList Real Estate Services, Inc.

Fiona: I agree whole heartedly that Brett's comment and the tone that it took is much easier to take. Thank you for your comment!

Oak Valley Mortgage: I have to point out again that as of right now, I've never listened to their radio show and I have to believe Brett when he says that they don't turn the mikes down on their guests. I said this in my post because I do know that this happens in tv and radio interviews, as well as other tricks that the shows can do to make their favored position appear in a better light.

A lot of people don't know that the discussions can be manipulated this way and need to consider that this sort of thing does happen when they watch or listen to one of these types of shows. While I can't say that Mr. Wilson or his cohorts do this on their show, I can say that his response to my original comment on Jennifer's post was a variation on the theme.

By dismissing me curtly with a smug attitude, he was attempting to bolster his position and while this might work on radio, it obviously doesn't work in a forum such as AR. Thank you for your comment!

Brett: Please read my response to Oak Valley's comment. Regarding your position that it's the consumer who will dictate the future of real estate, in the long haul you are right. It's a case of the Golden Rule and the consumer is the one with the gold. That said, markets are made by the interaction of buyers and sellers in a market with the "sellers" in this case being the real estate agents. So, to say that the agents are irrelevant is simply not true. If you don't think that sellers can have an impact on prices, look at what's going on now with the worlds energy markets. As with the Arab Oil Embargo back in 1973, sellers are having a lot to say about that market!

Options! Couldn't agree more! Great comment!

Mana: You're right on target with your comment! Thank you!

Notary: Great analogy....I wouldn't delete a comment (and haven't done so yet since I've been on AR) unless it was complete crap that wasn't relevant in any way to the conversation. That said, even the ones that are complete crap seem to work out to support my arguments by making the commenter look like an idiot! Thank you for you comment and your mike is always on here at RadioBobbyville.

Greg: As I've pointed out above, I've not had the chance to listen to the show, so I don't know if he has slandered anybody or not...at least on the show. Here in his comments, I think that he's been very belligerent and condescending. To me, everyone has a right to their opinion and if his opinion is that listing agents are worthless, then he has a right to express that opinion. The manner that he does so speaks volumes though. Thanks for your comment!

Rich: ???? I don't know who Scott Gormley is? Inside joke?

Ardell: If you couldn't tell, my educational background is in economics and while I don't have a degree in it, I have continued my studies on my own and find the field fascinating. One of the things that I've found is just what you're saying. Smaller businesses can compete against larger, better financed rivals, but they have to add value to what it is that they are selling.

In terms of real estate, the market is becoming more diffuse and competition is forcing commissions down. That said, I am willing to bet that if you come back 20 years from now that there will still be conventional, traditional real estate shops open and thriving. They will do so, by adjusting to the markets and by adding value to the product that they sell. Thanks for your comment.

Jennifer..being that you used to live in Alabama, I'll let you get away with the link...can you say, "War Eagle?" ;-)

Bob Mitchell

ValueList Real Estate Services, Inc.

Glen: Baby, do I hear what you're saying! My company, ValueList over-comes this issue by offering different real estate related services. You're right though, if we didn't, I don't see how we would be able to exist.

I grew my company to where at our biggest we had offices in St. Louis and in St. Petersburg (actually Largo FL) we also were looking to expand into the Nashville market. Unfortunately, that's when my kids hit college and I did something stupid...I bought my largest competitor and expanded into a downward turning market.

Therefore, I downsized big time! I even got to the point where I wasn't taking listings anymore. I was only working with buyers and doing mortgages. As of about 3 months ago, I've decided to ramp things back up and am rewriting the business plan as we speak. Give me about a year and a couple of hundred grand extra to be found somewhere and you can look forward to a ValueList coming to your city soon! ;-) Thanks for your comment!

Terri: First, I think that it was me paraphrasing Brett when I used the term "uneducated thieves" or something to that effect. To the best of my knowledge, he has never said those words...I could be wrong!

Secondly, you're right on the mark with the rest of your comment. What you said is the reason that I wrote this post...that and I didn't like having somebody dismiss me like he attempted to do. Thanks for your comment!

Jennifer: Thats wild! Why would he say that????

Name Not Left: I agree with the first part of what you're saying totally. I don't know that you can divorce the buyer's agents commission from the total, but even if you did....there are people who would be more than willing to pay the agent's commission to help them navigate the road to a real estate purchase. Thanks for your comment!

Yeah!!!! That was a bunch of work addressing all of your comments! Thank you all very much!

Bob Mitchell

ValueList Real Estate Services, Inc.

Bob Mitchell,

OMG!!! I just had an epiphany!!!!!

You know how you said your highest deal was $795,000 (or something like that)...and that the million dollar housing market was slightly tough to crack for a discounter??

It just occured to me that that the solution is sooooooooo easy!!! Instead of charging 1% or whatever it is you charge on the lower priced homes...here's an easy way to capture the higher-end market.

Create a completely separate marketing campaign for higher-end homes. Reference the incredible success your company has experienced in the low to mid range market...and state that (in response to higher-end customers' requests) your company is rolling out its Platinum Program for Luxury Homes (call it whatever you want). The Platinum program offers the high-end home seller all of the "normal, everyday, average-people solutions" <smirk> but in addition, the Luxury Home seller receives the following:

Make up a list and insert it here. It doesn't matter what it contains, as long as you charge more for it.

Your platinum customers simply don't want to feel that they're doing what an "average" person does. Hence, the preference for the brand name HVAC system and branded leather purse examples from above. My daughter's mom is a "Nordstrom's Girl". One day, we went to the Mac cosmetics counter. She bought a lipstick liner and a mascara. The total was $82.00 and I couldn't help thinking to myself "Did Maybelline and Cover Girl go out of business????" LOL!! But in her mind...she felt really good about spending the extra money...and she can often be heard telling complete strangers that she uses Mac cosmetics. ROFL!

Back to your Platinum Program.

All you'd have to do is charge a flat fee of...hmm...let's go with $15,000 for your Platinum Luxury Homes Program. To justify the higher fee, be sure to offer all of the same arguments you're seeing here (cost of living, greater advertising costs, more expensive Diet Cokes, etc.) The fact that they CAN pay more than your normal discounted fee will appeal to them for all the same reasons that paying $2,500 a night for a suite at the Bellagio in Las Vegas makes sense to some.

You'll become the leading real estate office in your area for the Luxury housing market....simply by giving them what they want. A higher fee. The added bonus is that they can still save face by telling their friends that they paid a bunch extra and got the Platinum package versus the "everyday-average-people" one.

Geeze....you know....part of me is being facetious....and part of me wants to help you create the marketing materials just to see if it works!!!!

I love it!

Dave

You wrote: If I go on a listing call where I'm competing with you for the listing and I do a better job of convincing the client that my program is a better deal, then I get the listing. If you do a better job of convincing them that your program is a better deal, you win. It's that simple.

Which is why I don't justify my fee. I don't sell a program. I broker the listing and/or sale of real property by providing representation or consultation to buyers or seller or listing brokers. Each property is unique and each buyer and sellers' needa are unique and there is no one program that is right for all. Each sale involves a plan taylored to meet the needs of the buyer or seller within present market conditions.

A taylor who custom fits a fine suit with quality fabric can charge a lot more than an off the rack at Wal Mart. The taylor doesn't negotiate his fee, nor does he have to justify it. If you want his fine tayloring, you pay his fee. Otherwise, go to Wal Mart.

Bob, I just don't know. My initial thoughts are that if I sold the 1mil property before my advertising even hit then obviously I did something right and the seller would be more than happy to pay me accordingly. Last I checked...selling a property quickly is a good thing for most sellers. I was working with a couple of Drs earlier this year on purchasing a medical center where my part of the commission would have been $95,000. They knew it and didn't think anything of it at all. I say would because the deal didn't happen due to the property being too small. So we are back to looking at properties.

I do want to point out that despite popular beliefs commission rates are actually increasing. They are higher now than they were during the boom because the consumer knows they have to hire experience and they have to be able to offer higher co-brokes to make their properties stand out(the same as a builder offering incentives). Commission are affected much more by market conditions than they are by information availability(Internet).

The bottom line is that the consumer has had choices for a long time now. They can hire who they want and pretty much pay what they want. There is no monopoly. If someone doesn't feel I'm worth what I charge then they don't have to hire me. I never pressure anyone to work with me. They work with me because they want to.

By the way. I left this comment for Brett over on my post but he never came back to comment on it so I'llleave it here as well:

OK Brett, I'm going to approach this from a different angle for ya. First you need to clear your mind of any and all preconceived ideas.

I would never compare what I do to an Attorney or a Doctor. Although there are many Drs and Attorneys that suck at what they do. Just because they may be book smart does not make them good Drs or Attorneys. Nor does it make them a professional. I'm sure you can agree with that.

I also would never justify my commission by how much money I spend or solely on what I do to market a property. Even though the marketing is a part of it. Folk spay me because of what I bring to the transaction. It's a package that includes years of experience, knowledge, reputation etc..

Look at this way: As an advertiser why would I pay money to place an add on your blog site, website or show? Why can't I just go out and build my own website or blog site and place my own ads? Why can't I just advertise on Craigslist or a myriad of other free sites? I certainly have the knowledge to do so. I don't know how much you guys charge but I'm sure the cost to advertise far exceeds any set up costs that you incur. They pay to advertise on your sites and show because you drive traffic. This is an intangible that just happens to be the most important part pf the equation.

If you didn't have any traffic then advertising with you would be a a waste of money because you cannot justify the costs just by the things you do i.e. build a pretty ad and place it on your site. Anyone can do that. And many do. They are paying you because of what you bring to the table. And they know you are bringing things to the table because you can show them results. These results are due to the Barries personality and their knowledge and experience in marketing. There are folks that do exactly what the Barries do BUT if they don't have the personalities, knowledge and experience for it they will fail. The sites and show are NOT successful because of the way the ads are designed.

Here's another example: Let's say you were wholesaling a property. You went out and found a deal and placed it under contract with an assignable contract and then sold off your interest for a tidy profit. Why couldn't the end user have just done the same thing? Why should you be entitled to a tidy profit for just flipping a contract? It's because you had the knowledge and the time to put it together. Even though anyone(in theory) could do it, they don't necessarily have the inclination to do so. This is also an intangible.

There will be some people that will take advantage of today's technology to market and sell their own property. But there will be many more, by far, that won't. Those are the folks I'm looking for. Those are the folks that just want to sell their property and are willing to pay what I charge to get it done. They don't care how I do it.

We will NEVER be able to justify our commissions to you because you don't need or want our services. So trying to do so is an effort in futility. All I know is that in 14 years I have never had a seller that was disappointed in my services or what I charged. Even though I have had many houses that I didn't sell. That's just the nature of the business. I take NO responsibility for market conditions. That's out of my control. It's out of my control that they owe more than the property is worth. My sellers are my friends. They are far more than just a pay check. We do the best we can with what we have to work with.

I care about the folks I work for and they know it. That's how I justify my commission.

I have sellers right now that I have been working with for 2 years. We may never sell their property because they aren't able to price it low enough. They are in their 80s and have health problems. We have no option but to try. The members of AR actually donated money so we could help them pay for a bankruptcy to get rid of bills they could no longer afford. They have nothing except their home that is too big and expensive for them. Earlier this year I worked with them for 3 months to negotiate their 11% adjustable rate mortgage down to a 6.25% fixed rate. Their property is listed with me pro bono to try and get the price closer to market value. I've spent many hours on the phone with them letting them cry on my shoulder when they get depressed. I worry about them daily. That's how I justify my commission which in this case will be nothing. These are intangibles.

I truly hope that the day never comes when you need a REALTOR(R) like me and many others who will help you solve your problems whether we get paid or not. But if you ever do..... give me a call. I'll refer you over to Century 21 :)

It's not what we do, it's how we do it. And you'll either get that or you won't. My guess is you won't. And there's nothing I can do about that.

Bob, I couldn't read all those long comments so I'll make a short one. Looks as if you've become a "golden child" with stars aplenty. LOL

In my personal experience, it always seems that the higher the price of the home, the easier the transaction goes. When it gets down around $100,000 it seems like everything is difficult. Getting financing is difficult, homes are in more disrepair, both sides are trying to squeeze every nickle out of the transaction.

When I sell a million dollar home, people seems to have no problem with the money, the homes usually have been maintained better, and people seem to do what they say. There are fewer surprises.

I just figure that the $100,000 sales are getting my services at a discount. I wish I could charge more but it seems that some how other agents are there willing to do it at a low price.

For the million dollar homes I really don't feel like I need to justify my fees. There are many agents out there and I'm sure that others will do it for less. If someone wants to pay me what I'm asking, why should I somehow feel that I'm charging too much? For some reason, they trust me and feel that I will bring more value to the transaction than someone else. Sometimes they might just not want the hassle of shopping around. People make decisions for all sorts of reasons. I play the game the way it is currently set up and when it changes, I'll make adustments.

The profession is constantly changing (the fact that we are a national discussion on a blog or series of blogs that are open to the public is proof). As mentioned above, customers are more educated. This is a good thing as are choice and competition. Who knows what model, if any, will prevail? My guess is that traditional, discount, tiered, etc will all still be around when we are dead and buried. Agents will fail or succeed in every model not because of the model, but because of the agent.

If I am putting out my money and my time with the hopes that my skills and my knowledge will sell a property, then I charge the rate I feel I am worth.

Brett, if you'd like a discount from that rate, it is REAL easy. Pay me. Up front. Non-refundable. I'll be happy to work in an hourly capacity on those terms.

Look at Doctors. They get paid whether they are right or wrong (I know this one first hand). Attorneys that only get paid if they win charge WAY more than those that work hourly... at least if they win... a lot.

But, it is back to the basic point. If you want me to break out what I do to some sort of hourly rate, you are going to pay me an hourly rate to do the work. If you want to wait to find out if I'm going to be successful, you aren't going to get me on the cheap. And I have offered discount plans, and will offer them again (stay tuned, I'll be wrting about it here on A|R). But, sitting at the table with MOST home owners, the decision sounds like a no-brainer until that whole "writing a check now" thing comes up. They don't want the risk. They want ME to assume the risks.

JUL

2008

RadioBobbyville - With the powers bestowed upon me as a member of the Rain. I declare you credible. There are some who cannot make the declaration you put forth, as they resent debate.

We are the sum total of our experiences and are not expected to see life or an event in the same way. There is a difference in an argument and a debate. No one is compelled to agree with another, but they should respect a dissenting point of view.

As you said, dissentions sometimes enforce your perspective more as the fallacies in the opposing arguments are revealed.

You have received a lot of MPG from this posting! Keep the mike on.

Dave: That was tooooo funny! Thank you for lightening up the conversation. I hate to say it now, but I've actually given a fair amount of consideration to something similar to your idea. I think that it would probably work! Again, thanks!

Lynn: I see what you're saying, but to me, the truth is that we all pretty much have approximately the same tools available to us and like any craftsman, there are tools that we tend to utilize on a more frequent basis. Some tools we utilize just about all of the time.

So, do I have a "program"? Yep! Do I tailor that program to the individual's needs...I honestly don't see how I could do anything different. That said, my "program" that is pretty extensive seems to cover about 99% of what I need to do that is "real" in order to sell someone's home and if a situation happens to arise that isn't covered by my program, I'll break into my tool box and work that out too! Thank you for your comment.

Byrant: Thanks for answering my question. I don't know that there was a "right" answer, I was just curious and was making a point.

Regarding your point about the Doctors not questioning your fee, I wish that I had more clients like that! ;-) The largest transaction that I have ever worked on was a commercial mortgage for a huge apartment development down there in Florida. The loan was going to be for a total of something like a hundred million dollars (over a period of time as the various stages were complete).

My company's fee was going to be .05% of which I was going to get 1/2 of the total commission - so a LOT of money! Two funny things happened on that transaction...one, the borrowers didn't question the .05% commission, but they did question our travel expenses and the cost of the appraisals (which were relatively minimal) and before the deal ever got done one of the borrowers was indicted and fled the country! (so the deal never got done). thanks for your comment.

Bob Mitchell

ValueList Real Estate Services, Inc.

Bob,

Far be it from me to second-guess how you do business. 13 years says you are doing plenty right.

Let me clarify what I meant with regard to liability. Certainly, someone with more transactions is going to have more exposure. My point is that in any one transaction, the more high-maintenance and litigious clientele are the high end buyers and sellers. Again, agents who handle this higher amount of money changing hands with competence and aplomb are rarer. Scarcity justifies a higher compensation in my view.

Let me also clarify what I meant by being paid what we are worth. I said you are paid what you BELIEVE you are worth to the consumer in a given transaction. What I am saying is that you have ample justification to ask for, and deserve, a higher commission rate. Some consumers do not believe any agent is worth 3% on the listing end. Some are willing to pay more. It is a big pool with plenty of room for us all, and I appreciate your thoughts.

JUL

2008

Lane points out somthing really interesting - if the buyer/seller takes the financial risk UP - FRONT it's a no brainer to discount. Part of what we charge has to do with all the lookie lous and sellers wanting free CMAs to get their FSBO pricing. This is a problem for us, but the public pretty much takes it for granted that this is all "free." It's almost written in their DNA...There is DNA CODE in there that says "A Realtor is FREE unless a deal closes."

Lets call it the "theory of abundance." This is free labor abundantly available. No need to conserve or "think" before making use of the resource - because said resource is "free." But NOTHING is free in this world. Freebies are designed to rope you in so you actually WILL pay. The public doesn't give the free help a moment's thought - until its time to pay for it - when the deal closes. It is actually the price for something they have had free use of for a very long time with nary a thought.

JUL

2008

Ruthmarie,

I understand where you're coming from....BUT....isn't it US who have done that to ourselves as an industry??? Aren't we the ones who for years have been promoting "FREE Market Analysis, No Obligation Whatsoever!" on brochures, postcards, etc.??

Don't we do the same thing when it comes to buying a car? Free Test Drive. We go to the dealership, test drive a Chrysler 300....and then walk across the street and BUY the new Honda Civic Coupe (just picking makes and models as an example).

Maybe the Chrysler didn't fit our needs as well. Maybe the salesman turned us off. But whatever the reason....we did exactly the same thing the FSBO customer did to us in garnering a free market analysis.

And I can't help but think we need to reassess what we perhaps did wrong...in not convincing them that we are perhaps a better value for them. I don't blame the consumer at all....we've trained them very well.

Dave

JUL

2008

J. Philip: Thanks for the clarification. As anyone who knows me will tell you, I don't have a problem with what I think that I"m worth! ;-)

Ruthmarie: I think that you and Lane are indeed right regarding the fact that the public doesn't have a problem burning our time and gas and that these considerations need to be taken into account when figuring out what a "fair and just" amount of compensation would be for a real estate agent.

Part of what you refer to as the "theory of abundance" is one of my biggest pet peeves with the real estate industry. That is that there are far too many agents out there! An agent doesn't tell you what you want to hear....find another agent! When it turns out that the second agent was simply telling you what you wanted to hear, get pissed at agents in general because your house hasn't sold! Or something to that effect! ;-) Thanks for your comment Ruthmarie!

David: You are absolutely right in that the real estate industry has done this to ourselves...if for no other reason than the fact that it's been made too easy to get and to keep a real estate license!

Bob Mitchell

ValueList Real Estate Services, Inc.

Whoops! Lost track of where I was over the weekend! Didn't mean to dis anybody!

Barbara: Golden Children...what "Golden Children"! :-) While I do appreciate the folks that flagged this (and other ones of my posts) I hope that AR still "Spreads the Wealth" as far as the features go. Thanks for your comment!

Erik: I agree whole heartedly with you. Thanks for your comment!

Lane: I think that you have hit the nail on the head regarding a "risk premium" that people have to pay. We are in the process of rolling out a new program where the seller does indeed pay part of our fee up front. I'll keep everybody posted on how it works.

Bob Mitchell

ValueList Real Estate Services, Inc.

Ob have: That is wild! I guess that one of the silver linings to the whole mortage mess is that investors are checking up on these things now, whereas they didn't in the past. Thanks for your comment!

Bob Mitchell

ValueList Real Estate Services,Inc.

OCT

2008

I agree with Lenn's comment that you don't have to justify your fee whatever it may be.

Nakia: In a perfect world I would agree with you. But in my world customers question my fees on almost a daily basis. Even though I'm a discounter, I have to compete with the "MLS Only" companies all the time. In that situation I have to "justify" to that customer why I am more expensive. It's not hard to do, but I have to do it. Thanks for you comment.

Bob Mitchell

ValueList Real Estate Services, Inc.

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