Say Goodbye To Real Estate Commissions Say Hello To Hourly Fees And Retainers

You go, Real Estate Girl! Of course, we need to reign in all that free MLS info that's out there for anyone to gather and keep it to ourselves like the old days. And if we work while on vacation, like I've been doing all week, do we get double-time?

Agreed that change is not likely to happen, any time soon.

If consumers can get free services under the current system, why would they want change?

Fees for services and hourly rates would help put us on the same system as other professionals, but as some have mentioned earlier, there will ALWAYS be those who complain it's too much.

It's not just real estate agents, by the way. I'm married to a retired public school special education teacher, and her former profession was a frequent target. Not that any of the critics were rushing to get certified to teach nine months a year, or get licensed to sell real estate during the summer. In many people's eyes, they're underpaid and everyone else is overpaid, and should work for them for free.

Renee: Great post, and great pix, BTW.

As I was reading it, I was thinking "...and one more thing,..." and then you covered that, too. Well thought out and well written!

Isn't it amazing that someone could look at a HUD-1 and say our commission is too much money but look at their own pay stub and claim it isn't nearly enough!

It's interesting, isn't it, that the strongest complaints come from traditional employees, but very few from business owners or entrepreneurs.

If clients don't hear what they want to hear then they will just move on to another agent. Meaning, if you tell them that their is an upfront fee or retainer- you will probably never hear from them again. I have buyers drive their own cars now, I want them to waste as much gas as I do when searching for properties. 

I once had a seller tell me that if I ask him to lower his price at anytime that I should lower my commission. I started packing my stuff up and said, that is something I will NOT do, I already have alot of upfront fees that I do for marketing your home - are you willing to reimburse me for those fees? He said "well no", then we are clear that I can't go down in commission and you will be paying LESS because your commission is based on the selling price. He understood and we had an agreement upfront!

Recently I had a buyer that finally closed on her first home it took 11 months! Yes almost a year to finally find a home and close on it! Financing issues regarding credit and MHFA program she was using, appraisal issues, etc, not to mention this was a short sale. Of course I thought about the hours and months I spent on this, but she was a referral from a good client and I had to think of all the other referrals I will soon get in the future from me being persistant! I have got to think that good things happen to good people!

Kudos to the consumer!  I fully agree that each party should pay for their specific representation.  I've always disliked the fact that the seller foots the entire commission (and yes, here we could argue who really pays the commission).

The "why" they pay it is more easily explained. 1) In the past, there was no such thing as a buyer's agent.  Every agent worked for the seller.  They were either the listing agent or sub-agent to the seller  2) Lenders won't loan money for the commission.  The only way for the buyer to get the funds is to pay the commission at closing is if it's "hidden" within the seller paid items  Until lenders view an agent fee as a necessary buying expense, the 'all on the seller' agent pay structure won't change.

Renee, I would love to this this fee structure in the future, and MAYBE this will happen, but converting to this system will be a long process. Few agents will start with retainer fees and such, while majority will work on commission, then more will chime in, then it will be about 50-50, and then we'll see... 

Renee, I have always thought the real estate business model is broken without retainer fees and hence why there is so much turnover by agents. It may change, it may not.

Wow, well said!  It is our job to point these things out to our clients.  I find that once the consumer is educated on the "why" for the amount of the commisson, they generally will understand.

There was a book written by Mollie Wasserman a few years ago on the fee for service model.  There were a couple of RE Brokerages that were based on salary vs commission in my area that have now folded.  The fee for service model works with the right clients just as the flat fee brokerage works for some too.

Sellers would go flat broke pronto if the fee was hourly. The hours we invest on doing a great job for our Sellers is surprising .

Great post.  It is hard for anyone not on commission to understand how difficult it can be when you are paid for results only. 

Wouldn't it be great if other professions worked this way too?

I don't mind being paid on commission or contingency and have been paid that way for performance both as an attorney and a Realtor.

It might be nice to get an hourly sometimes though.

Fantastic post.

Renee, excellent post, and there is a reason this was featured! Congrats and keep these posts coming!!!

All sarcasm aside I think there is a viable business model in a combination fee-for-service and lower commission on the back end approach.  We have to be one of the few industry where the seller over-prices what we sell and we agree to sell it for him for free anyway.  It's actually insane.  The trick to the fee for service model is to make it a win all around -- and that may be harder to do, but I'm looking into it.

Intriguing thoughts. 

We don't get paid for hard work or effort. They are a means to an end. We get paid for producing a result. High risk/high reward.

If this became a salaried or hourly industry there would be no incentive to go the extra mile.

Moreover, it would take an industry-wide movement for such a monumental change, and that could not be done without collusion among most or all of the companies. And collusion would create a bigger problem than not getting paid on a deal we failed to get. 

Renee I sometimes feel like I would rather work on an hourly wage and with a retainer. Commission cheques sure are nice but sometimes I feel that I spend way too much time working with people and never getting paid. Great post.

Renee,

Great post. Most people have no clue on the amount of time and effort that is spent on just ONE transaction.

Well put my darlin!