Is The 6 Percent Commission The Winning Formula For Real Estate Sales (in a slow market)?
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2 years ago in some of the hot markets across the country, the first step to marketing was putting a sign in front of the home. If that did not work, entry into the local MLS and Realtor.com would typically sell the home.
Consumers are not fools, they knew that real estate agents wanted the listing “no matter what” and would cut a commission to get the deal. If houses were flying off the market in record time, losing a percentage was worth not losing the deal.
Fast forward to the summer of 2007 and the smart agents are demanding 6 percent and refusing to list homes (and owners) that were not ready for sale and priced right. The good to great real estate agents can explain that going with a lower commission makes no sense at all. The discount in the commission means that corners may be cut in the marketing and maybe a point shaved off the buyers agent commission which could hurt opportunities for the home to be shown.
To take an idea that Ken Harvey has in his weekly column, the customer should be running to the full service agents in a slow market. Pay the 6 percent and get the most effective marketing possible. I know some can market the home for a lesser percentage and do a great job, but when push comes to shove, sellers should be very discriminating on the skill sets of their real estate agents.
And agents should be very discriminating on their sellers.
A couple of years ago when I started blogging I really thought the discounters would win the battle. The commission structure was out of whack in my eyes. But all that happened was that the cycle really did not reward the agents who demanded the full commission. A hot market does not need a big marketing budget.
But in the days of a slow market, asking for the 6 percent to get the word out as effectively and powerfully makes a great deal of sense.
During the late ’90s and into the housing boom years, average commissions dropped steadily through the 6 percent level and stabilized about 5 percent.
One key reason for the decline was the relative ease of selling houses at ever-billowing prices. In the hottest markets, buyers lined up and fought bidding wars for houses. Some sellers asked: Why pay 6 percent to a realty agent when houses almost sell themselves – often for more than the asking price?
Now the market is starkly different – sales are down, inventories up, prices anemic – and a different approach to commissions may be gaining ground.
More realty agents are refusing listings that don’t come with full 6 percent commissions. A handful of high-octane agents are even charging 6.5 percent to 7 percent as their standard rates – and they are doing well.via baltimoresun.com
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Comment by Robert Coté on 8 June 2007:
The good to great real estate agents can explain that going with a lower commission makes no sense at all.
Worked with travel agents. Not.
Comment by Kirk on 9 June 2007:
Realtors want you to think it is more difficult to sell now so you should hire them. The reality is the MLS drives the process. You can still sell yourself, just make sure you utilize the MLS (unless you live in a state where the realtors lobbied the state legislators to ensure discount or do-it-yourselfers can’t list). There are just fewer buyers…period. The realtors suffer from the same fate as FSBOs. If there are no buyers, paying a high commission doesn’t create them.
Comment by Fort Lauderdale on 11 June 2007:
Does the old warning come to mind… you get what you pay for???
Comment by Behren Kittrell on 14 June 2007:
I just purchased a Help-U-Sell franchise in Mt. Pleasant, SC, and we operate on a set fee structure. I can assure everyone out there that this is the “wave of the future” what with homes costing more and more.
Buyers and sellers want to take more control in the real estate process because they have realised the internet is a powerful search engine and gives them options that their parents didn’t have.
With our “fee for services” option, consumers can decide how much they want to participate, if at all. No matter what, we are a full service real estate company that bridges the gap for FSBO’s and 6% commission.
Comment by Sean Richards on 19 June 2007:
Who is Ken Harvey?
Comment by Jon Griffith on 19 July 2008:
A smart seller who’s job is not the daily work of buying and selling property is at a huge risk if they do not employ the services of a professional. We earn every cent of our commission. If we don’t provide value, we fade away. By letting the Realtor do his job you allow for a smooth process and you reduce your risk, which is far greater than the commission. We help protect those who don’t “do” real estate from being sued, which costs hours and hours of emotional pain and potentially thousands of dollars.
The seller will still pay 1/2 of the fee to the selling broker whatever the fee may be, and in Arizona, when a Realtor is browsing to show properties, it’s possible that the ones that don’t offer enough won’t be shown.