Six Percent is way too much to earn for home sale transactions. It amounts to thousands and thousands of dollars without putting a lot of effort into the transaction. In these days of the internet, it's time to let the market decide prices, not a cartel protected by state laws.
From what I can see, real estate agents work pretty damn hard. They work seven days a week showing homes, and can work with prospects for months before making the sale (if they do at all). And if they do, they may have to split the commission with the listing broker.
When we were looking for a house, the agent took us to various properties every week from November to the following May, and then had to split the commission.
I think she earned that 6% very fairly.
Ah, it's an elegant dance party.... there may not be enough chairs, if you stop the music and remove some of the chairs. Hello....crash.
We negotiated 5%--in NYC no less, and probably could have done better. I don't need the nanny state to help me, and neither do you.
I hope you make the same contention about accounting, lawyering, and medical practicing, as well.
Actually, realtors are not the monopoly guild I'd go after first with anti-trust laws. After all, they have market competition from homeowners willing to advertise and show their own property.
Still it's a good precedent: but how about all the other state-licensed professions for which 'reasonable and customary fees' are inflated, and there is no effective competion because it is considered 'unethical' to advertise fees so customers/clients/patients can shop for the best deal?
If a profession benefits from state actions which create a monopoly guild by precluding effective competition, the profession's fee structure should be regulated, not by floors as in this obvious case of corrupt legislation, but by ceilings. The old principle that monopolies created by state action for the public good (utilities) should have their fees regulated, because they are not part of the free market in which prices find a level acceptable to both buyer and seller, needs to apply to professions as well.
bump for later
When I worked in real estate, it was common for agents in the Seattle area to not show homes that had a reduced commission unless the buyer really wanted to see it. Agents will tell prospective sellers that a reduced commission will restrict the number of people seeing the home. Agents won't spend as much on flyers and advertising on a reduced commission. And if doing a weekend open house on a listing which if sold will bring the listing agent 3% or do an open house on a 2%...which one will these narcist people hold open? Right.
The commission percentage should be negotiated by the seller and the agent which is a free market principle in practice.
I'm convinced that local officials help in this regard. I sold my house in Reynoldsburg, Ohio a few years ago. I attempted to first "sell by owner". I spent quite a bit of money on some nice signs - simple ones that were not eyesores. I put them out in my neighborhood and they were "stolen" within a couple hours. I found out later that some anal city official doofus confiscated and destroyed them. Wouldn't be suprised if the wimp's wife was a Real Estate agent. By the way, none of the other Columbus suburban neighborhoods have this stupid rule.
Six Percent is not bad when considering that agents have to pay for their own overhead such as advertising.
A year ago I hade a customer who was $700 short of funds needed to close. His realtor called me and asked me to reduce my fee by the $700 so the customer could close. I asked her if she would be cutting her 6% fee also to help out. She said no. So I said, neither am I. I told her to cut the 6% realtor commission or the transaction doesn't happen. She didn't, but the guy found $700 quickly.
In Arizona it is illegal to fix the commission rate. It is negotiable between agency and the seller as it should be.
Good to learn that congress has balanced the budget, secured our borders and now has time to face the peril of realtors.
A good realtor is worth every penny that they earn.
I frankly like the idea of a Fee for Service program. The Realtors Associations should not be allowed to keep Realtors from offering their services on an 'as needed' basis. If I only want a realtor to list my home on MLS, and I'll do everything else, I don't want to have to pay 6% or even 4% for that. I'd like to be able to negotiate a price for the services I think I'll need.
Ridiculous. Realtors do a tremendous amount of work - furthermore, if you FISBO your home or go with a discount broker (who basically does nothing but list it), you're getting away with it only because the other party generally has a realtor, who ends up doing all the legal work (title search, home inspections, warranties, contracts, etc.) for you.
People can also do their own plumbing if they are so inclined; but plumbers still have licensing standards, generally standardized rates for an area, etc. Why isn't the government suing plumbers' associations?
I recently represented the seller on a real estate for the sale of her home. The selling price was $590,000. The house sold in three days. The commission was $35,400, for what amounted to three hours work. My fee was $950 for the transaction, which included negotiating and drafting the contract of sale; drafting the deed; drafting various tax forms and documents; drafting the escrow agreement; dealing with the local building department regarding a problem with the certificate of occupancy; reviewing the title report and taking the necessary steps to clear title; and attending the closing of title. Guess whose fee my client complained about?
Commission rates should not be regulated, lower rates allow small companies (like the one I work for) to compete with the mega brokers, who have many additional operating costs (franchise fees, personnel, IT, signers etc).
As for the worth of a Realtor, many are worth the cost, many are not just like any other service. Why do people hire a financial advisor when they could do it themselves? Much work usually does go into selling a house, or expecially working with buyers (and many do take months to find a home)...not to mention many sellers and buyers are not objective enough to negotiate, cannot spare the time to show, pre-qualify, walk through the steps to closing, save a deal etc. It can be a very harrowing experience, especially since it is a huge investment and when things go wrong it can be difficult to separate emotion out of the deal.
First, Realtors don't pass laws. They can lobby, and they do it well, but it's the state governments elected by the people who pass the laws. Every law restricts something. These state laws usually put up barriers to entry into the real estate field by requiring significant education and license fees to be paid to the state. Most prohibit fixing commission prices, as all are intended to protect the consumer of real estate services. According to the article, in question is NAR's pending bylaw to preclude online brokers, so-called "limited service" brokers from having access to MLS information. This bylaw isn't yet effective, as there is still ongoing negotiation with the Justice Dept. to make sure it's legal first.
Second, I agree w/ cbkaty's reply, and disagree with you that 6% commissions are exhorbitant. Listing commissions depend entirely on the property being listed. I'd list a hot seller (read that as little or no advertising expense other than MLS) for 1-2% on my side and pay 3% to the selling broker, which is usually split with the selling broker's salesperson. Typical sales agent take on a transaction is only 1.5%.
Properties needing a lot of extra work - overpriced for the market, high crime area, large dogs, long drive to town, problem renter-occupied, or other unusually difficult properties should have higher commission rates - some much higher, with extra bonuses, cash drawings, and other incentives paid by the listing broker. Once all the players are compensated and the advertising bills and overhead paid, it's not making anybody rich.
For instance, a typical sale in the Texas market I'm in is cheap - $127k for the median home. A 6% commission on that transaction is $7,620. Almost always it will be split by the listing broker and the selling broker, so $3,810 per side. Out of that the listing broker pays all of the advertising expense and office overhead (rent, utilities, etc.). The selling broker splits the other half with the selling agent and pays office overhead on his side. Selling agent in this theoretical transaction takes home $1,905. Out of that he's got to pay federal income tax, social security, medicare, his MLS dues and state license fees, business property taxes, liability and health insurance, car lease/note, and don't forget the price of gas these days. It costs an agent sometimes hundreds of dollars per prospective buyer. Not all buyers close with that agent, or even close at all. To clear $50k a year, an agent would have to close three to four typical transactions per month. Most don't. Some outstanding agents do more. The best do much more.
Regarding access to the MLS networks (raybbr reply #23) - Realtors built the networks. They pay for the networks. They update the information in the networks daily for listings, sales, property information, showing directions, etc. Nobody else other than Realtors should have access to the MLS. There are many other options available for FSBOs and those using limited service firms, but they should not have access to the Realtors MLS market information. It's proprietary. Bought and paid for. < /soapbox >