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Tag: commission (page 1 of 1)

May 8, 2008

I’m in Business to Make Money

by

Real Estate Renaissance Man

Author website

One of the best parts of BHB for me, is taking the ideas and the round tablediscussions that happen here and bringing them to the street.  (I must admit an occasional guilty pleasure taken, when I use the knowledge I glean from BHB to steer and even dominate these discussions.  I am shamelessly looking forward to Unchained, that I might return a 600lb gorilla in gorilla marketing.)  There has been some very interesting debate recently, both here and on other blogs, over the valuation of real estate services.  It is a tough dialogue because large amounts of money are involved and strong feelings abound. 

But asking the agents I work with what they think of the NAR, their sense on the moral obligation of a contract and how they value their services opens up new view points and sheds more light on these issues.  Recently I was talking to a Realtor I know and respect about how to answer the question of commission and agent value.  Now, there may be many right answers to this question; but I have yet to hear one that cannot be debated and diminished.  Not due so much to anyone’s superior skills as a wordsmith but rather the multi-faceted nature of the topic.  This agent and I, however, after deciding that the premise of the question itself was suspect, eventually decided that there is one answer that is inarguable, morally justified and epistemologically sound.  The very simple answer to the question of how one justifies their commission is this:

I am a real estate agent and, by definition, an entrepreneur.  I am in business to make a profit.  I charge what the market will bear.

March 24, 2008

Commission

by

Real Estate Renaissance Man

Author website

There were a number of interesting articles last week regarding the value of a real estate agent.  Essentially asking the agent to justify their commission.  I know it got heated up over on Active Rain and there was some discussion on AgentGenius as well.  Here at BHB we enjoyed two very good posts.  You can read Brian Brady’s post here and Barry Cunningham’s post here.  I disagree with both of them, which is all the more reason to recommend you read them.  That and the fact that they are both very good reads.

Let’s Clarify the Question
First things first: the timing of the whole “justify your commission” question is counter-intuitive.  It is coming up a lot lately, yet one would expect clients to question commissions when home sales are rapid and appreciation high. During those periods it appears simple to sell a home but, probably because of the prices being greater than the seller assumed, we rarely hear this conversation.  Yet times like the current, when homes are not selling and people are most in need of a professional agent, you get the most questions about commissions.  This has a lot to do with the fact that they are making less money than they expected.  So let’s start by clarifying the true nature of the question.  It has little to do with the agents’ value and everything to do with the clients’ profit.

Also, the question of value is directed primarily to the listing agent.  There are some who will question the selling agent about their commission and they will do so regardless of the market.  But for the vast majority of clients the selling agent has very little to do with this conversation.  Why?  Because the selling agent’s commission is already loosely tied to the market and so a function of supply and demand more than intrinsic value.  When homes are moving quickly and inventory is small, the seller and the listing agent discuss what to pay the selling agent and often arrive at 2.5% or even 2% because there is no demand to pay them more (supply of buyers is high).  When the market is slow like it is now, we begin to see the seller and listing Read more

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