Commission structures in a thriving market are a wonderful thing for an agent. Lots of money with very little risk. However, when the market turns south like it has across the globe, it is hard to earn a living if things are not selling.
Real estate agents in Denmark have almost en masse decided that the commission structure is not working out for them and are now asking sellers to pay their fees upfront.
Now to be honest, this bothers me a bit. I do not mind agents charging a fee for their service, but it is annoying when they want it both ways. I would respect these agents in a boom market to have gone away from a commission based system.
But now that the market has turned, why is it the sellers cost? And whats worse, these same agents if they think that the home will sell quickly, it is fair to then sell it on commission.
Part of the real estate commission game is that for a oversized commission the homeowner is going to share the risk with the seller that the home will sell. And the homeowner knows that the pot of gold and the investment in marketing expenses are the motivator to work hard to sell their home.
With thousands of houses on the market and prices in some of the most expensive locations dropping by at least 20 percent last year, real estate agents are having a difficult time shifting the property on their books.
The Danish Association of Chartered Estate Agents confirmed that it sees a changing fee structure being introduced among its members as they are missing out on payments due to properties not selling.
‘Sellers need to get something for their work, even if the property did not sell. Customers must understand that an agent cannot work to sell their property for six months without being paid for it,’ said Niels Carstensen, communications manager with Home, one of the largest national estate agencies.
The ‘sold-or-free’ principle is also being phased out by many working for EDC, another large estate agency. However, EDC said the option is still available to customers if an agent thinks the property will sell quickly. via the Copenhagen Post.
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I hope agents in the U.S. don't start using this method of getting paid as it could lead us down a direction we don't want to go for good!
At the end of the say everyone is trying to make sure they are safe. I really wonder how it took them this long to come up with this, but personally I dont think it will help, giving up the commission will not bring them more sales.
I’m not sure how this is going to work for the clients they have. I don’t think any client would be willing to pay me up front before they are able to complete their transaction. In essence, you get paid and wouldn’t have to work. I do my best to find a way for my client to NOT have to pay my commission. If there’s a way for other parties to pay me, I always look for that first. I don’t agree with the way this is happening at all.
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This issue is current huge debate in Canada where the government has sued the real estate boards to allow open competition and freer access to MLS. There is a Canadian web site devoted to the issue where anyone can post comments. IloveCommission.com
The issues here are about consumer choice. While local boards will say that agents are legally free to offer a wide range of services for various fees and/or commission there have been far too many reported cases of fellow realtors shunning, slamming or seeking to wreck those who cut too low. The open market train is coming down the track. Many realtors are on board but far too many are just standing in the path.
Lawyers used to have fixed fees and strict rules against advertising. Those who commented so far seem unaware of the government actions and law suits against law societies that forced changes. Realtors are not being singled out.
There is a Canadian web site devoted to the issue where anyone can post comments. IloveCommission.com
I don't necessarily disagree with the upfront fee being paid by a seller. Here in the Czech Republic there's no commitment on the part of the seller – even with a signed exclusive. If for whatever reason the seller decides he does not want to sell, he simply says no. Even if a full price offer is brought to him, if he does not want to sell he can say no and is not obligated to the agent for anything, period. That's just wrong in anyone's book. Like in the USA, if I bring you a buyer who is ready, willing and able to buy and makes a full price offer and the seller rejects it, the seller can be held liable for the commission. The unfortunate thing is that there are no licensing requirements here so it's Wild Wild West in terms of how agents operate. There's no oversight board to help collect commissions. Asking a seller for an up front fee, even a small fee, might keep them motivated to sell. They'd have to forgo that fee should they decide not to sell.
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