Remember the housing boom that spurred the seller's market that started this whole economic roller coaster ride? Seems like a decade ago even though it was only a few short years!
During those days, many of the discount brokerages rose to fame, touting increasingly lower fees with "full service" representation. FSBOs flourished. Redfin and the like took to the internet to grow their agent-free business model. If you divided all the commission paid by the price of all the houses sold, I would guess that the average commission was lower from 2003-2007 than it had ever been.
Now the tide has turned and houses take longer to sell, requiring more effort, diligence and creativity by agents and more flexibility on the part of sellers.
What I'm wondering though, is whether the average commission has actually gone up?
The problem is that many sellers are short on equity, or don't have any equity at all, so as the economy contracts, I have to think that sellers (many of whom have refinanced at higher values) are probably watching every dollar. This means they are very concerned when they see that the commission is in some cases more than what they are going to walk away with from the sale.
In addition to seller equity influence on commission, agents who are getting fewer transactions in this market probably are willing to accept lower commissions, because "something is better than nothing" as they say. When your next listing appointment might be 2 months away instead of 2 weeks away, you may reconsider turning it down just because the seller didn't agree to the commission you wanted.
So my theory is that average commission levels from the seller's market will continue (despite more effort required by the agent in today's buyer's market), at least until the balance of industry atrition and seller equity position yields an environment more favorable to charging a higher commission.
Also, I think that the importance of us, as agents, demonstrating high value, regardless of what we charge, is now going to be critical. We need to improve our skills, marketing savvy, and service to our sellers so that we can help ignite the market again, and earn what we're paid.
I would love to hear other opinions or theories on the subject. What do YOU think?