Is the fee worth the service?

By
Real Estate Broker/Owner with Coldwell Banker, Mountain View Real Estate

From time to time we see posts regarding the brokerage fees that are asked to be negotiated down or why the rate should remain at whatever rate for whatever reason.

The business model in real estate is changing or has changed.  Just like in most other types of businesses.  With the advancements in technology (internet) and the cost of print adverstising, which is becoming a thing of the past; why would a seller expect not to negotiate the fee?

It is an agent's choice to work for a firm that has overhead expenses, franchise fees, desk fees, etc resulting in earning less than the amount they would pay if they simply represented themselves. 

There are firms that can market a property with full service at a reduced rate still offering the buyer's agent minimally three percent.  The news reports that the recession has changed the spending habits and lifestyles of many people.  Could a prospective seller not appreciate paying a lower fee with a firm that dosn't have the overhead of the nationally known names?  Really, is it the firm name that sells a property or the name of the individual agent?

Personally I believe that a percent of something is better than a 100% of nothing.  With a property that is priced to sell, sellers that aren't presented a sense of false hope with an unrealistic list price, and effective marketing; can properties not be sold for a lesser brokerage fee?

Wouldn't one rather have a property that is in marketable condition and priced properly sell at a reduced rate than to have a similar listing with unreasonable sellers at an unrealistic price with a six percent fee?

This post is not intended to spark debate but just another view on the brokerage fee blogs.

Comments (53)

Megan Izdebska & Hanna Manoufar Chandler, Scottsdale Real Estate Agent
United Brokers Group - Chandler, AZ
Double Commitment. Double Results.

I think everyone needs to find own comfort of balancing the commission structure between needs, wants and gets. There are advantages of joining larger firms as well as smaller firms. I have been with both and have to admit, that a couple times I was not chosen as a listing agent because the firm I used to work with was not nationally recognized.

Mar 22, 2010 05:58 AM
Joel Jadofsky
Keller Williams - homes for sale - Florida - Gulf - Beach - Panama City Beach, FL
One of the Top Realtors in Panama City Beach Area

From my expierence the only ones that want to haggle over my fees are the ones who's homes they want to list over priced and who need to clean their house before Id take it anyway..Its not true that 50% percent of something is better than 100% of nothing. Sometimes you make much more not taking those listings anyway as they take up most of your time and cost you sales and oppurtunties and money....

Mar 22, 2010 06:34 AM
Sherry Scales
Austin Texas Homes, LLC - Leander, TX
Realtor, for Austin, TX and surrounding areas

I would be happy to cut my commission...What part of my services do you NOT want?

Mar 22, 2010 07:00 AM
Jenna Dixon
Momentum Real Estate Group LLC - Marietta, GA
55 & Over | New Constructions | Horse Farms

It remains an interesting debate.  I don't understand why some agents are so put off by the way I choose to run & sell my business/services.  Obviously, there is plenty to go around, and if you are doing well and I am doing well, what is the problem? 

Why must you assume that because I CAN charge less that I am less educated, less experienced, less motivated, less hardworking, less dedicated, less less less?  We all want what is best for our clients & for the industry as a whole.  I saw a need in my market and I am attempting to fill it.  

I wanted to streamline my business & my life so that I can help more sellers sell...and that is what I am doing! 

Happy listing & selling to everyone!  This will be my last comment on commissions.  To each his own!

Mar 22, 2010 08:21 AM
Jeff Haring
Coldwell Banker Residential Brokerage - Ventura, CA

Jon, the following quote from your blog tells me a lot.."Personally I believe that a percent of something is better than a 100% of nothing."

This tells me that you have little value for what you do.  This is a clear sign of a poor self image and it tells me that you don't really, truly feel you are worth what you charge or that you can be competitive without reducing your fee.  I am not saying that we as an industry should "hold the rate" at any such level.

What I am saying is that you get what you are worth... and there are many of the top agents in this country working for major brokerages that earn every dime of commission they get.  I don't think there are many independent agents that can boast being number 1 in their marketplace.  That should tell you something about affiliating yourself with a top name brand company.  I believe the broker you work for has a lot to do with the business that you do attract.  Yes, the client is hiring YOU but WHO you work for can have a major impact on your earning potential.  

We all offer different services but the larger brokerages (for the most part) have systems in place that can help their agents facilitate the transaction, the marketing and the support that a small brokerage just can't match.  For most agents this model supports them better.  I understand that there are a lot of independent minded agents that want more freedom to conduct their business their way and I support that as well. But if somebody leaves a large brokerage to earn a higher split as an independent and then they boast about now being able to discount their fee on their deals - well I don't see the genius in that move.  Now they earn the same amount (or less) and then they have less clout with a small independent office.  Hmmm...doesn't make sense, does it Jon?

Mar 22, 2010 08:23 AM
Kathy Knight
Intracoastal Realty Corp - Wilmington, NC
BROKER, ABR, CRS, GRI, SFR, SRES

I totally agree with Laura above - you get what you pay for.... totally...

Mar 22, 2010 08:58 AM
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

I'm still trying to get an offer ready for an agent who listed the property then went on vacation an hour later (his words). It's a relo and requires a bunch of disclosures and addenda. He didn't get them ready to issue before he went on vacation. I'm still trying to get the last of them, even though the agent has been back at work since a 'bright and early' 10 am (six hours ago).  My clients had to go to work, so now I'll be running out to meet them at 10:00 tonight.  Did that agent earn his fee? Not in my book. If we end up competing with more offers that come in tomorrow or the next day because of this guy's ineptitude, it's going to be one more strike against the professionalism of real estate agents.

Mar 22, 2010 10:00 AM
Kristie Jensen
Miller & Company Real Estate Services - Salt Lake City, UT

Jon,

Your post is timely for me.  I have contemplated over this same issue.  Not just to get more business, but attempting to be more pragmatic about the future of the real estate business.  After the anti-trust suit filed against the NAR by the Justice Department, which allowed thrid party non-licensed Realtors and the public access to listings on the internet, marketing and lead generation is very competitive.  My number one call and email is from 3rd parties wanting to sell me leads.  I wonder sometimes if the large corporations won't gradually squeeze out the smaller and independant real estate firms and mortgage companies.

I've even wondered if it isn't time for the buyer to pay for their agent out of their pocket and the seller pay for their agent.  Even paying upfront fees.  We are one of the few professions that do not charge for our services unless two parties get what they want.  And I believe anyone on these posts has performed a valuable service to their clients yet never got paid.

Kristie Jensen

Mar 22, 2010 10:13 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

There are a lot of variables and I think it might be possible to discount, market effectively, and still make money.  It depends on the market.

Mar 22, 2010 10:15 AM
Lucien Vaillancourt
Native Sun Realty, Inc. - Jacksonville, FL
Jacksonville Florida Real Estate

It never ceases to amaze me when I hear REALTOR's on AR cheering for discounted brokerage fees.  Jon if you feel that your services are worth less then feel free to work for free if you like.  Just don't try to force your discount on me or try to force me to do your work for you. 

Here's a quote from Trey #4, "We need to RALLY as Real Estate Professionals and help out sellers and buyers and lenders!!" Hey Trey, if you are operating a benevolent charity and feel that lenders need more of a bailout then feel free to cut your rate to zero and pass the savings on to them.  By the way, you are a mortgage professional unless you also hold a real estate license.  As a mortgage professional how many miles did you log travelling to and from homes to to present your loan options?   Most of your customers probably come to your office where all of your business is conducted.  How many weekends do you spend working and meeting customers?  How many days have you spent at open houses?  If you are like most mortgage brokers you are not in your office during the weekend.  I accept the hours I put in as part of the job.  I do want to point out that there is no comparison between the amount of effort and time needed to originate a loan and that of the effort and time required of the real estate professional in the same transaction.  I see what mortgage originators get paid and when the hourly rate is calculated who appears to be overpaid?

Come on people!  Instead of contributing to the false belief that we are not worth whatever we charge for our service lets work to demonstrate that we are.  We are not a commodity.  Our service and consultation goes far beyond placing a sign in the yard and an add in the paper.  A professional REALTOR is worth their weight in gold and can mean the difference between a smooth transaction and one that goes horribly wrong.  To offer this kind of service takes time.  If a REALTOR wants to work for less and think they can make it up in volume then the service they provide will reflect it.  There are only 24 hours in a day.  I'll hire an assistant you may say.  If you pay someone else to do the work what have you saved.

Lets all work to raise the public opinion of our integrity, our service and our value.

Mar 22, 2010 10:44 AM
Jon Brewer
Coldwell Banker, Mountain View Real Estate - Kings Mountain, NC

Thank you to those who have shared their views.   To Jeff Haring - Please know that I do value what I do.  The testimonials I recieve attest to that.  I value  what I do to the extent that I am going to get paid if our sign goes in the yard.

Price fixing?  We are not suppose to say words like, "the prevailing rate, the historic rate, the going rate, etc".  Yet if you ask the VAST majority of sellers that have sold real estate say in the past 20 years, "What was the fee you paid to sell your home with the realty firm?" More than likely the seller would say, "Six percent."  That sounds like a pretty fixed rate to me.

I personally wouldn't pay $12,000.00 to sell a home for $200,000.00. 

Once again, thank you.

Mar 22, 2010 11:05 AM
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Jon:

One of the reasons I own my own brokerage is fees and other controls.

Ty

Mar 22, 2010 12:45 PM
Sean Goerss
14 Moves Real Estate Keller Williams Premier Realty - Saint Paul, MN

Isn't it always about return on investment for the seller?

If you're looking at price, your missing the point of VALUE.

Maybe more agents should focus on bringing more VALUE to their sellers!

p.s. I know many discounters who offer LOWER value than the highest priced ones. They've all gone out of business here in the Twin Cities.

Mar 22, 2010 03:57 PM
Bobbie St John
Brokerocity Real Estate - West Dundee, IL
Bobbie St John & Lisa Savage

I have to agree with Tom Waite, this could be a topic that violates Anti-Trust laws. I do believe we are all in Real Estate for the greater good though, especially in these economic times and our mission should always be to put the client first in all situations..

Mar 22, 2010 11:52 PM
Gary Steuernagel ASSOC. BROKER, ABR, CRB
Keller Williams Southwest - Sugar Land, TX

It's interesting, if I called everyone of the agents who won't negitiate a commission and offered you a legitimate referral and asked for a 20% referral fee everyone of them would probably jump on it and accept it. 

Being honorable and professional, they would all offer the normal outstanding service that they offer to their other clients.  At the end of the closing and settlement they would all take their checks and be happy and say they had made a good business transaction.

Whats the difference therefore of paying me 20% or reducing/rebating 20% to a client if it makes good business sense?

Mar 23, 2010 02:45 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Gary,
I actually would turn down a referral.  The purchase/listing would have to be over a certain amount for me to take it on...or the client would have to kick in an extra 20%.  to compensate us both.  I'm deadly serious about that. Locally,  commissions are simply too low for me to work that way.  Unless its a pretty big transaction - its a problem.  And that 20% fee? I promise you you , you would be shocked at how small that check would be. Been there, done that.  I finally realized I was better off working to cultivate new business rather than trying to make something work for what amounts to  $10/hour. 

Careful what you wish for - you just might get it.

 

Mar 23, 2010 04:48 PM
Matthew Bartlett
Hill Top Real Estate/BRE Lic. #01353034 - Glendora, CA

Commissions are negotiable. When you see a common rate being charged in an area it does not reflect price fixing. It reflects the market. Commission objections have been common for years. Nothing will change that. However, you get what you pay for. If cutting the commission really worked every agent would be taking part. That simply is not the case nor are we trending towards the practice. For the most part, it's my feeling that a seller will only object to the commission when they lack confidence that you can sell their home. Thou sometimes there are exceptions. I will never feel guilty for what I make. I provide a service for my clients and that service has a price.

Mar 25, 2010 05:27 PM
Aaron Silverman
SuccessfulRental.com, Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving Real Estate Experience through Education

I like this point Jon "It is an agent's choice to work for a firm that has overhead expenses, franchise fees, desk fees, etc resulting in earning less than the amount they would pay if they simply represented themselves. " 

A Realtor is essential a business and should conduct business as such and it means adapting to the times.  Less profit is better than no profit. 

Mar 26, 2010 12:29 AM
Debra V. Edwards
edwards builders and realty, inc. - Cashiers, NC
Realtor/Builder, Cashiers, NC., Highlands, NC., Glenville

I earn every dime I get...especially in this economy.  Working in the mountains, is different....you just can't go to a homogenous subdivision and show in a certain price range...a certain price range up here, is around every other mountain.  Yessiree, I earn what commissions I get.

Mar 29, 2010 04:13 AM
Debra V. Edwards
edwards builders and realty, inc. - Cashiers, NC
Realtor/Builder, Cashiers, NC., Highlands, NC., Glenville

I earn every dime I get...especially in this economy.  Working in the mountains, is different....you just can't go to a homogenous subdivision and show in a certain price range...a certain price range up here, is around every other mountain.  Yessiree, I earn what commissions I get.

Mar 29, 2010 04:13 AM