Is the 6 Percent Commission Already a Myth?
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Real Estate agents treat the 6 percent commission as doctrine when talking to clients, you can not change it no matter what. But in reality, new studies are showing that average commission paid has dropped to 5.1 percent and looks to go down near 4 percent in the next 5 years.
This trend is being fought desperately by the old line agencies, but newer firms are already implementing some of the changes and are doing very well. With internet tools being used more often and now being more effective then ever before, the exclusivity that real estate agents possessed is quickly eroding.
Real Trends, a real estate research and publishing company, has reported that the average commission rate among the nation’s top brokerage dropped to about 5.4 percent in 2001 and now averages 5.1 percent. That will fall to about 4 percent in the next five years, said Dave Linder, chairman of national real estate brokerage Re/Max.
For brokers, that means the end of the era of nearly guaranteed sales margins, and the start of a new line of price competition. For consumers, it means an increasing array of price and service options in home selling and shopping.
Some new brokers advertise full service at reduced rates — generally 3.9 percent to 4.5 percent. via blackenterprise.com
This transition will change the industry, and it may be for the better. Presently there is a glut of agents as people get into real estate thinking it is easy money. When the fees shrink, it will chase away many of the pretenders, and provide more room for the true professionals to operate.
So in a way, lower commissions will clear the way for the true professionals and develop a better and more efficient marketplace.
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Comment by Bill R on 9 March 2006:
There is a Real Estate Trends 2006 report that talks about real estate commissions a little bit. It mostly agrees with this post.
You can get the Real Estate Trends report at the Real Estate Bookstore web site (www.realestatebooks.org)
If you use the Promo Code SEOBONUS13 at checkout, you can get a free Search Engine Optimization (SEO) report specifically written for real estate agents.
You can find more information on the Trends Report at http://www.realestatetrendsreport.com
Comment by Trevor Smith on 26 April 2006:
I totally agree with the 4 percent commission. I have built my entire Real Estate business around it. With the housing prices skyrocketing the last few years (at least in Seattle and Tacoma where I’m at), I think 6% commission is just too much. I believe Realtors who demand 6% are not truly looking out for their clients best interest. Check out my philosophy at http://www.4percentrealestate.net (Seattle - Tacoma WA Real Estate)
Comment by Janet Hesting on 18 September 2007:
In markets like mine - Tulsa, Oklahoma - we have not experienced the skyrocketing home prices that have taken place in other areas in the US. If a realtor is doing his job well, he or she earns every penny of that commission, after the hours and hours spent showing homes, countless dollars advertising clients’ listings, miles and miles driven on behalf of the client, and just acting as the point man in making the deal happen and serving as a liaison between all parties involved. You may view your services as less valuable, but I certainly don’t view mine that way.