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Posted by: Dean Foust on March 07, 2006
This article, published by Inman News, is further evidence that it’s a matter of time before real estate commissions come down. It tells the story of an agent named Barbara (no last name given) who is rebating a portion of her commission back to the seller, but doing so without the knowledge of her employer, the real estate brokerage.
You just knew this had to start happening. Hundreds of thousands (millions?) of people jumped into the real estate business, be they agents or mortgage brokers, and they’re now scratching for business. I’ve always felt it was just a matter of time before the real estate cartel cracked and agents began competing on price.
I’ve always felt agents were overpaid. I remember…
during my years living in Washington DC when the big real estate brokerage, Long & Foster, announced it was raising commissions from 6% to 7%. The president of the company rationalized it by saying that it had been years -- DECADES, even! -- since agents had last "gotten a raise." And he said this at a time when housing prices were on the rise. Wasn't the commission from selling a $500,000 more than the commission when that house was selling for just $300,000 three years earlier?!?!?!?!
I've also had fantasies about the next time I sell a house. I'd love to sit down with an agent looking for my listing and make him or her a deal: Since it would be relatively easy for me to establish what the fair market value of my house was, I'd offer them a full point BELOW the prevailing commission rate for selling at that price (since it should take little work to sell at that price). And THEN I'd offer them them an extra half-point if they got me, say, five percent above that baseline, a full point if they got me 10% above, and so on. My feeling is they should be compensated for bringing in foot traffic and then striking a hard bargain at the negotiating table. But then again, this is just a fantasy because I know that most agents would simply walk out rather than accept that bargain. I'd love to hear from agents here...
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.