Wednesday, November 14, 2007

Another WTF? Moment

Margins are evaporating along with home equity, competition is fierce, free services are reducing the value of your efforts. Why then are commissions rising? WTF?
----
In 1991, the average commission rate was 6.1 percent, ...The rate inched down to 5.4 percent by 2001 and by the end of 2005, it stood at 5.02 percent.

Industry insiders expected further declines with the competition of discount and Web-based brokerages...
But when home sellers found themselves with houses sitting on the market, they became increasingly amenable to paying higher commissions. Real Trends reports the average commission reversed its course and climbed to 5.18 percent in 2006, and it looks like it's going to end 2007 with another rise.

----

Now don't get me wrong. A true professional can save you money or make a deal where no deal previously existed. A whispered word in the right ear at the right time can make a difference of thousands in your favor. There will always be real estate agents just like there will be travel agents. Still the median home in my area is $560,000. What about a routine transaction justifies $30,000 divvied up amongst the salesmen?

7 comments:

Unknown said...

FF&M

Yeah I still lurk...

Let them eat ramen i say.

Funny Circus Bears said...

Why do they get that fee? That's easy: Because they can.

Casey Serin said...

A true professional can save you money or make a deal where no deal previously existed.

I'm not interested in plain old regular deals -- only in sweet deals.

Come visit my new blog, Escape My House -- you can watch me get increasingly delusional as my mind escapes my skull... :-p

Bob said...

2002-2005 you could sell a property by sticking a sign out front -- FSBOs, Foxtons, and everyone and their uncle getting realtor licenses all worked to generate competition to the traditional model. Also, the big national developers used in-house brokers or had the leverage to force lower commissions on outside brokers.

The above factors are no longer in effect. I work with realtors. I can see sellers are worried -- the FSBO and discount routes won't get nervous sellers the exposure they think they need* so it's right back to the full-service broker. As long as the MLS model is in effect, I don't see this changing.

"why do they get that fee? That's easy: Because they can" -- exactly.

*btw, realtors are not shy about telling sellers that if they list with a discount broker, their house will not get shown.

Anonymous said...

$560k median house? That must be a really nice house. Does it have an indoor pool and butler?

Peripheral Visionary said...

I think sellers will be happy to pay a heavy commission if they can get their house sold in this environment. It's buyers who would be insane to pay any kind of big commission for real estate agent services, excepting an out-of-state purchase.

serinitis said...

Fear does interesting things. The seller is the one that negotiates the commission and they are afraid their house won't sell. If I was selling a house right now, I would probably offer 1% to selling agent 4% to buying agent. I would agree that the selling agent doesn't need to do much more than put up a lockbox, add me to MLS, and be a go between if I get an offer.