Because everyone is afraid of the FTC case against organized real estate for supposed price fixing of commissions, everyone seems afraid to even talk about it. Well, I am going to take the chance. My issue isn't whether commissions should be 6% or 20%. It is the way it is calculated that doesn't make sense. Does it really make sense that your commission should be based on how much a property sells for rather than the work that it takes to deliver the services. If it were marginal differences, like the bonus a Best Buy person receives for selling a $2000 HDTV instead of the $1500 model, I would understand. But, not when we have houses that sell for $100,000 and others that sell in the millions. I'm in California, so my perspective is a little skewed by our prices but I think I can make the argument to everyone equally.
About 10 years ago, I was managing a real estate office in Saratoga, Califonia. Saragota is an upscale bedroom community in the suburbs of Silicon Valley. One day, my secretary let me know that one of our Sellers wanted to speak to me. I immediately expected to have an irrate homeowner, angry at his listing agent. I was surprised to learn that this wasn't the case. He introduced himself and told me that we had his house listed for just a little over $2 Million. He want further to explain that he had signed a 6% listing and that he was scheduled to pay us in excess of $120,000 to sell his house. He admitted that his agent was doing a good job was was flaggergasted that we could charge that much for our services. He owned his own business and made some analogies of how much furniture $120K was, or that that was 10 weeks of 8 hr per day of his $300 per hour attorney. He had others but you get the picture. He also mentioned that it was a relatively hot market and the house would be expected to sell within 30 days.
I didn't comment as he was ranting but he threw me for a loop when he asked me the next question. He told me that he had a very good friend who also lives in Saratoga about 5 blocks way and that we also had that listing. The difference was that his friends house was listed for about $1 Million instead of $2 Million. Thus, he said, we were only charging that Seller $60,000 for the same service that he was getting. He asked me if he was going to get a diffeernt sign, more open houses, more advertising or anything else for that matter. As you can imagine, I was a little dumb founded. I agreed that it wasn't logical but that was the way the system worked. I assured him that we would do everything possible to get his house sold in a professional manner.
He reached across the desk, shook my hand, said he was glad to meet me, and walked out. We sold the property the following week and collected our $120,000 at closing.
I tell you that story to show you how silly this seems. I have heard agents say ..... I never work for less than 6%. Don't you think the comment should be that I don't work for less than $ ______ per transaction. How is it that an agent will work for $18K on a $300,000 sale but be offended when a Seller wants to discount to 5% on a $600,000, when they would still receive $30,000 for essentially the same work?
Am I missing something?
P.S. One comment below asks the question if we intend to do more for the $2 Million house. Yeh, sure. Brochures always cost more, based on house price. Maybe we should get paid a fee plus any actual cost we incur like advertising