CHICAGO DISCOUNT BROKERS DRYING UP! Average Selling Commissions Increase - But Volume, Average Selling Price Tumbles!

Real Estate Agent with Dean's Team - Keller Williams Realty Partners Chicago IL

In Chicago, and in many other areas of the U.S., median home prices have fallen over the last few years.  Units sold have dropped, and many of those single-family homes and condos that have sold have been in distress - in poor condition, often bank-owned, and at a deep discount price.

Dark clouds often offer a bit of a silver lining, however - at least for those practicing Real Estate!

According to RealTrends, a CO-based Real Estate Consulting Firm, and corroborated by Bloomberg News Service, total Real Estate Commissions Earned through November of last year totaled $40.6 Billion.  That figure sound as if it might be describing a typical one-day increase in the National Debt.  But Earned Real Estate Fees,in aggregate, actually fell 6.2% versus the same time in 2008.

However, as reported by Chicago Tribune Real Estate Columnist Mary Umberger in last Sunday's paper, the average percentage real estate fee charged by listing or buyer's brokers actually increased last year - to a 5.29% average in 2009, compared to a 5.26% average at the end of 2008.

Opposing factors are creating this situation for Real Estate Professionals, in the opinion of Steve Murray, President of RealTrends.

First, Average Selling Prices have dropped precipitously in Chicago, and elsewhere across the U.S.  The glut of foreclosures and short sale properties - those homes selling for less than what is owed on the seller's mortgage - has driven down home prices.   Bargain-hunting investors, often with strong credit or cash to purchase, have forced them down even further.

The Fed First Time Homebuyers Tax Credit, in place since late 2008, has lured many younger buyers to the table who have never owned a home before.  These first-timers are looking for inexpensive, smaller homes, offering less total commission to the Real Estate Brokers involved.

Indeed, we at Dean's Team have seen our average 2009 sale here in Chicago fall below $208,000.  During better times - in 2006 - that average was nearly $320,000!  For pros in Real Estate, more homes must be sold in order to take home less income.

On the flip side, however, the need for experienced, most-qualified Real Estate Professionals to sell homes during tough economic times is growing. 

Discount Brokerage Companies - those who charge a flat, up-front, nominal fee to simply place a listed home for sale and do little else - are rarely successful in a down market.  Here in Chicago these days - these listings often expire, unsold.  Several local discounters have disappeared or re-evaluated their business models over the past year or two.

When the market was booming here a couple of years ago, many newer agents and some volume-seeking professionals deeply discounted their full-service fees.  Competition was fierce for listings, and these discounters saw quick sales at virtually any price.  They listed properties for a low fee, and sold their listings, even with little effort, as the marketplace was starving for homes for sale inventory.

Today, average market times have often shot up to over a year in some Chicago Neighborhoods and Suburbs - especially for expensive move-up homes and condos.  Longer times on market requires more labor and more marketing money to keep these listings fresh, and some of the discount real estate practitioners simply don't have the time, money, or inclination to wait things out.  Many have left the business.

At the same time, the best real estate professionals have found they don't have to consider discounting their fees to attract business.  Most serious sellers realize it takes an extra effort to sell these days, and are more willing to pay a higher fee to a strong agent.  Resistance to market-rate real estate commissions, in favor of discounters, has dropped.

Is good news, on average, anyway, for Real Estate Professionals bad news for home sellers? 

Not necessarily - as many of the marginal agents and brokerage companies have left the business, better service, with hard-line negotiating, is evident with the pros who have survived.  Top negotiating skills, and unvarnished client counseling - sorely needed when homes aren't flying off the shelves as they once were . . . yes?

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Dean Moss

Dean's Team Chicago IL Real Estate Team
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