Unless you have been boarded up in a house you have not sold because you refuse to pay real estate commissions, this week the real estate industry has been plastered in headlines across every major news outlet. Bold typeface proclaimed, “NAR ruling ends the standard 6% commission”, “Realtors Agree to Axe 6% Commissions”. Excuse me, what? Extremely inaccurate reporting strategically used as click-bait has unfortunately dominated the news landscape. Although the ruling has not been finalized by the judge and terms can still change, its current iteration states that commissions to buyer’s agents cannot be posted in the MLS and buyers must now have written agreements with their agents. The ruling does not specify in any shape or form that commissions cannot be 6% or any specific percent for that matter. It also states that sellers are no longer “required” to offer the buyers agent a commission.
First off, in California there has never been any such thing as a required “standard” commission. In every listing agreement in bold lettering before the commission amount is inserted, it states “Notice: The amount or rate of real estate commissions is not fixed by law. They are set by each broker individually and may be negotiable between Seller and Broker.” And trust me, I have been licensed since the 90’s and I can assure you that sellers are aware of this clause and want to negotiate it. Instead of calling it a standard commission, 5-6% has “traditionally” been what sellers and brokers have negotiated as fair compensation to be split between the buying and selling side. There are many instances or circumstances in which a seller does not pay that amount and may offer a small flat fee or 1% to a buyer’s agent. That is certainly their choice. But as agents who know the worth of our services, we have suggested sellers pay the selling side 2.5% because many times agents have been working with buyers for months or even years with zero compensation. And on many of those occasions listing agents have taken less of a percentage to place towards the selling side to make sure the commission is attractive. As with any type of commission-based business transaction in a capitalist society, a corporation, an employer, or in this case a home seller, may want to incentivize the opposing side to turn their attention in their direction. Nobody is placing a gun at the seller’s head and saying, “you must pay”. In fact, in most “For Sale By Owner” properties you will routinely see a seller offering a commission to the buyer’s agent to bring someone to their home! Why? Because they recognize that a buyer’s agent has VALUE in a business transaction.
This leads to the question that everyone has been asking, “What is the value of a real estate agent?” This can be broken down into 4 major areas:
1. Expertise and Guidance: Real Estate agents bring market knowledge, negotiation skills, and experience to the table. In what is a person’s largest transaction in their life, their agent’s expertise remains invaluable. From pricing and acquisition strategies to contract negotiations, agents guide clients through extremely complex processes.
2. Navigating Legalities: Real estate transactions involve legal intricacies. Agents help clients understand contracts, disclosures, and local regulations. Their role in ensuring a smooth and legally compliant transaction remains crucial.
3. Market Insights: Agents stay abreast of market trends, property values, active inventory, sold inventory, and neighborhood dynamics. They provide clients with data-driven insights, helping them make informed decisions.
4. Emotional Support: Buying or selling a home can be emotional and psychologically taxing. Clients incur enormous amounts of pressure when buying or selling a home and agents offer support, empathy, and guidance during the process. Without intermediaries keeping peace between the two sides, emotions can kill deals or end in costly lawsuits.
As a real estate professional, it’s been a little disturbing this past week to hear of people flooding social media posts with disparaging comments about real estate agents. I’m not saying there are not some unprofessional agents out there that don’t deserve the bad rap, but there are many of us, like myself, that are true professionals that genuinely care about our clients and assisting people in opening and closing a chapter in their lives. I have had the honor of working with clients that need to buy or sell because babies are on the way, divorces, deaths in the family, job changes, success, bankruptcy, fresh starts and closing doors. I take being the steward of their next chapter seriously and want to make it a seamless process to ease their stress, assure them we have done everything possible to maximize their investment, and make it a positive experience for the largest sale or purchase of their lives. My client’s happiness at the end of a transaction is my job satisfaction. I may not be a doctor, but I know I have helped people in a significant way that affects their well-being and financial situations. I work 7 days a week, sometimes from early morning to late at night, when I’m sick in bed (even once while in the hospital), on vacation (which rarely happens), sometimes in the middle of the night for clients who are international, or any other time a client needs me. And I usually respond in minutes. One does not make a career in the real estate business for decades without being a full-service agent and a valuable commodity to one’s clients.
In the post-NAR world of real estate, there are discussions about agents no longer being offered commissions, working for a small flat fee, or buyers needing to pay their own agents commissions. For decades selling a home worked by the seller paying all the commissions for a deal, in which most cases because they have acquired equity in the home and it’s not an upfront cost directly out of pocket. If a buyer is expected to pay the buyer agent commissions, that will be an added burden on top of their down payment and closing costs they already need to bring to the table. Tell me what exactly is the difference if the seller pays the broker costs on the selling side, and when they go to purchase, they do not have to pay the broker costs? To me that sounds very fair, especially since that seller did not pay the fees when they purchased already. The system worked, that is until a bunch of greedy lawyers saw an opportunity to personally enrich themselves with hundreds of millions of dollars and cast doubt on an entire industry of professionals.
Where do we go from here?
I’m sure there will be discount brokerages popping up offering to write up a contract for the buyer, but there is no way any “professional” will spend the amount of time it takes to navigate a real estate transaction for a small flat fee. They will hand them a list of inspectors and say, “good luck”. This has already been a practice of some discount listing agencies who list your house in the MLS for a small fee of say $500. It is then up to that seller to speak directly with consumers and buying agents to arrange showings, negotiate and sell the house themselves, and hope and pray they have properly disclosed what needs to be disclosed. I can tell you from personal experience of dealing
with a seller who did this, that person left hundreds of thousands of dollars on the table because they did not have their own representation. What seemed like an opportunity to save money cost them more because they had zero experience in negotiation and navigating credits and repairs. If buyers are left to themselves in a transaction, not only would the same thing happen to them, but I can also already envision a myriad of lawsuits forming between both parties for unknown legal issues, or simply no intermediary between them and the listing side. A buyer could also go to the listing agent as dual representation which is still allowable. However the listing agent has a legal fiduciary responsibility to the seller, and an unrepresented buyer is a sitting duck in that scenario. Unless both parties blindly trust an agent to be fair to both sides, which is impossible for a buyer just meeting a listing agent at a showing, there is bound to be an edge to the seller. Lastly, a buyer or seller could use an attorney to draw up contracts. However, attorneys have their own legal practices and are not focused solely on real estate market trends, seeing houses in person, and knowing the intricacies of what a client really needs in a home. Often real estate transactions are built on momentum and fast response times, and the process would greatly slow down with attorneys who have other client priorities other than writing up contracts. Those down times can mean the death of an opportunity to purchase or sell when competing against others.
Going forward agents are going to need to prove their valuation to consumers, and why the current way of handling real estate transactions with the seller paying commissions, is still the correct path forward.
Why are agents valuable and do they really make as much money as you think they do?
Agents can work with clients for weeks, months and even years with zero compensation until a transaction closes. Once they do close a home, half goes to the other person’s agent from the remaining half. They have lots of upfront expenses that must be paid out long before they even get paid:
Broker Splits and Fees
Office rent and utilities
MLS Fees
NAR Fees
Local Association Fees
E&O Business Insurance
Extended Auto Insurance
Self-Employment Tax
State Licensing Fees
Advertising Fees
Showing Service Fees
Website Fees
Assistant’s Salaries
Showing partners
Transaction coordinator
Yard Signs
Photographers
Videographers
Office Supplies
Business Cards
Property Flyers
Electronic Lockboxes
Continued RE Education
Legal Fees
Gas
Income taxes are not taken out, so they must put aside around 33%.
Don’t forget independent health insurance!
Lastly as independent contractors their company does not contribute to any 401k and they must 100% save for their own retirement.
Listing agents just stick a sign in the yard and the home sells, right? Wrong!
Listing agents have numerous tasks during a transaction.
1. Prepare Listing Presentation for Sellers
2. Research Sellers Property Tax Info
3. Research Comparable Sold Properties for Sellers
4. Determine Average Days on Market
5. Gather Info From Sellers About Their Home
6. Meet With Sellers at Their Home
7. Get To Know Their Home
8. Present Listing Presentation
9. Advise on Repairs and/or Upgrades
10. Provide Home Seller To-Do Checklist
11. Explain Current Market Conditions
12. Discuss Seller’s Goals
13. Share Your Value Proposition
14. Explain Benefits of Your Brokerage
15. Present Your Marketing Options
16. Explain Video Marketing Strategies
17. Demonstrate 3D Tour Marketing
18. Explain Buyer & Seller Agency Relationships
19. Describe the Buyer Pre-Screening Process
20. Create Internal File for Transaction
21. Get Listing Agreement & Disclosures Signed
22. Provide Sellers Disclosure Form to Sellers
23. Verify Interior Room Sizes
24. Obtain Current Mortgage Loan Info
25. Confirm Lot Size from County Tax Records
26. Investigate Any Unrecorded Property Easements
27. Establish Showing Instructions for Buyers
28. Agree on Showing Times with Sellers
29. Discuss Different Types of Buyer Financing
30. Explain Appraisal Process and Pitfalls
31. Verify Home Owners Association Fees
32. Obtain a Copy of HOA Bylaws
33. Gather Transferable Warranties
34. Determine Need for Lead-Based Paint Disclosure
35. Verify Security System Ownership
36. Discuss Video Recording Devices & Showings
37. Determine Property Inclusions & Exclusions
38. Agree on Repairs to Made Before Listing
39. Schedule Staging Consultation
40. Schedule House Cleaners
41. Install Electronic Lockbox & Yard Sign
42. Set-Up Photo/Video Shoot
43. Meet Photographer at Property
44. Prepare Home For Photographer
45. Schedule Drone & 3D Tour Shoot
46. Get Seller’s Approval of All Marketing Materials
47. Input Property Listing Into The MLS
48. Create Virtual Tour Page
49. Verify Listing Data on 3rd Party Websites
50. Have Listing Proofread
51. Create Property Flyer
52. Have Extra Keys Made for Lockbox
53. Set-Up Showing Services
54. Help Owners Coordinate Showings
55. Gather Feedback After Each Showing
56. Keep track of Showing Activity
57. Update MLS Listing as Needed
58. Schedule Weekly Update Calls with Seller
59. Prepare “Net Sheet” For All Offers
60. Present All Offers to Seller
61. Obtain Pre-Approval Letter from Buyer’s Agent
62. Examine & Verify Buyer’s Qualifications
63. Examine & Verify Buyer’s Lender
64. Negotiate All Offers
65. Once Under Contract, Send to Title Company
66. Check Buyer’s Agent Has Received Copies
67. Change Property Status in MLS
68. Deliver Copies of Contact/Addendum to Seller
69. Keep Track of Copies for Office File
70. Coordinate Inspections with Sellers
71. Explain Buyer’s Inspection Objections to Sellers
72. Determine Seller’s Inspection Resolution
73. Get All Repair Agreements in Writing
74. Refer Trustworthy Contractors to Sellers
75. Meet Appraiser at the Property
76. Negotiate Any Unsatisfactory Appraisals
77. Confirm Clear-to-Close
78. Coordinate Closing Times & Location
79. Verify Title Company Has All Docs
80. Remind Sellers to Transfer Utilities
81. Make Sure All Parties Are Notified of Closing Time
82. Resolve Any Title Issues Before Closing
83. Receive and Carefully Review Closing Docs
84. Review Closing Figures With Seller
85. Confirm Repairs Have Been Made
86. Resolve Any Last Minute Issues
87. Attend Seller’s Closing
88. Pick Up Sign & Lock Box
89. Change Status in MLS to “Sold.”
90. Close Out Seller’s File With Brokerage
Buyer’s agents only open the door and show the house, right? Wrong!
As a buyer’s agent they also have many tasks.
1. Schedule Time To Meet Buyers
2. Prepare Buyers Guide & Presentation
3. Meet Buyers and Discuss Their Goals
4. Explain Buyer & Seller Agency Relationships
5. Discuss Different Types of Financing Options
6. Help Buyers Find a Mortgage Lender
7. Obtain Pre-Approval Letter from Their Lender
8. Explain What You Do For Buyers As A Realtor
9. Provide Overview of Current Market Conditions
10. Explain Your Company’s Value to Buyers
11. Discuss Earnest Money Deposits
12. Explain Home Inspection Process
13. Educate Buyers About Local Neighborhoods
14. Discuss Foreclosures & Short Sales
15. Gather Needs & Wants Of Their Next Home
16. Explain School Districts Effect on Home Values
17. Explain Recording Devices During Showings
18. Learn All Buyer Goals & Make A Plan
19. Create Internal File for Buyers Records
20. Send Buyers Homes Within Their Criteria
21. Start Showing Buyers Home That They Request
22. Schedule & Organize All Showings
23. Gather Showing Instructions for Each Listing
24. Send Showing Schedule to Buyers
25. Show Up Early and Prepare First Showing
26. Look For Possible Repair Issues While Showing
27. Gather Buyer Feedback After Each Showing
28. Update Buyers When New Homes Hit the Market
29. Share Knowledge & Insight About Homes
30. Guide Buyers Through Their Emotional Journey
31. Listen & Learn From Buyers At Each Showing
32. Keep Records of All Showings
33. Update Listing Agents with Buyer’s Feedback
34. Discuss Home Owner’s Associations
35. Estimate Expected Utility Usage Costs
36. Confirm Water Source and Status
37. Discuss Transferable Warranties
38. Explain Property Appraisal Process
39. Discuss Multiple Offer Situations
40. Create Practice Offer To Help Buyers Prepare
41. Provide Updated Housing Market Data to Buyers
42. Inform Buyers of Their Showing Activity Weekly
43. Update Buyers On Any Price Drops
44. Discuss MLS Data With Buyers At Showings
45. Find the Right Home for Buyers
46. Determine Property Inclusions & Exclusions
47. Prepare Sales Contract When Buyers are Ready
48. Educate Buyer’s On Sales Contract Options
49. Determine Need for Lead-Based Paint Disclosure
50. Explain Home Warranty Options
51. Update Buyer’s Pre-Approval Letter
52. Discuss Loan Objection Deadlines
53. Choose a Closing Date
54. Verify Listing Data Is Correct
55. Review Comps With Buyers To Determine Value
56. Prepare & Submit Buyer’s Offer to Listing Agent
57. Negotiate Buyers Offer With Listing Agent
58. Execute A Sales Contract & Disclosures
59. Once Under Contract, Send to Title Company
60. Coordinate Earnest Money Drop Off
61. Deliver Copies to Mortgage Lender
62. Obtain Copy of Sellers Disclosure for Buyers
63. Deliver Copies of Contract/Addendum to Buyers
64. Obtain A Copy of HOA Bylaws
65. Keep Track of Copies for Office File
66. Coordinate Inspections with Buyers
67. Meet Inspector At The Property
68. Review Home Inspection with Buyers
69. Negotiate Inspection Objections
70. Get All Agreed Upon Repair Items in Writing
71. Verify any Existing Lease Agreements
72. Check In With Lender To Verify Loan Status
73. Check on the Appraisal Date
74. Negotiate Any Unsatisfactory Appraisals
75. Coordinate Closing Times & Location
76. Make Sure All Documents Are Fully Signed
77. Verify Title Company Has Everything Needed
78. Remind Buyers to Schedule Utilities
79. Make Sure All Parties Are Notified of Closing Time
80. Solve Any Title Problems Before Closing
81. Receive and Review Closing Documents
82. Review Closing Figures With Buyers
83. Confirm Repairs Have Been Made By Sellers
84. Perform Final Walk-Through with Buyers
85. Resolve Any Last Minute Issues
86. Get CDA Signed By Brokerage
87. Attend Closing with Buyers
88. Provide Home Warranty Paperwork
89. Give Keys and Accessories to Buyers
90. Close Out Buyer’s File Brokerage
(Thank you to the unknown person on the internet who compiled this above list)
In closing…
I’m sure there will be many agents who have floated by over the years now going out of business because of this ruling. That is actually a win for everyone. Let’s rid the business of unprofessional agents that got a license to sell a family member’s house with no value proposition for anyone else. Let’s get rid of the agents that take days to return a phone call while the seller’s property sits unsold. Let’s get rid of the agents that can’t properly negotiate together and make it a win-win for both parties. This will greatly benefit consumers. But let’s also not pretend that career real estate agents who assist you in buying or selling a home are worthless and hold no value. It’s simply not true. The old adage of “you get what you pay for” certainly applies here. No true real estate professional is going to go through the above list of tasks to complete on every transaction and not be paid what they are worth. Let’s not take the American dream of buying a home and turn it into a nightmare for consumers because they are navigating transactions without proper and professional representation.
I have no doubt that there are quality agents out there and that there is a legitimate need for their services. However, such individuals are clearly the exception, rather than the norm. The real estate industry is populated with far more wannabees and substandard agents than true professionals. For generations, people with little more than dreams of “get rich quick” easy money have flocked to the profession. Hopefully, this renewed scrutiny and increased criticism will manage to finally clean house a bit.
Why are all of you shut the hell up?
None of you can afford a home here in West Hollywood anyways. And another thing this website stole this article from Pamela Rose, a successful real estate agent when she posted all of this on Monday on her Facebook you guys stole this article from her Facebook without giving her credit.
Frank Bruno wrote the article and submitted it to us. We do not know how or where he got his information and posted his piece accordingly. Nobody did anything neferrious and I think both agents are on the same team and agree with each other. Pamela is welcome to contact us directly if there is any issue but you did not introduce yourself as her spokesperson.
Can you please rephrase that first sentence that seems to be written in Klingon?
Sorry to inform you of your misinformed opinion. This is an original article I wrote myself. I clearly state in the article that the list of duties that agents perform came from an anonymous person on the internet that encouraged people to share with others. The list has been posted by numerous people that I have seen dozens of times over the last several YEARS, not last week by your friend. And there is no one person that said it cannot be reprinted. The meat of the article was my personal experience with being a trusted and respected agent in… Read more »
I’m sorry but most realtors earn more than they deserve. Its one of the few jobs that requires very little training and no education to earn a significant amount of money. Most realtors I’ve worked with are part-time actors/models/waiters/porn starts who go through the motions.
Use that earn more then they deserve example on actors making tens or millions per movie or singers making tens of millions of dollars per song, – the average real estate agent makes less than 50k. Just like the average actor or singer cannot be judged by the success of the top few in the industry. If your working with part time actors models porn stars with little experience then you either have a bad choice in agents or are conflating bad agents as high paid realtors. You cant have it both ways.
Sure, Jan.
I just bought our neighbors house and our agent was great. He arranged for all of the inspections, etc. He was paid by the seller. All agents are willing to negotiate.
Good luck. It’s over.
Sorry, you have failed to convince me–the rates are way too high. It’s been hurting everyone except for the realtors feasting off of home buyers and sellers.
Let’s say you put in 100 hours total to do your entire list to sell a home (I have a hunch it’s a lot fewer hours than that). According to Salary.com, the average professional salary is around $86,000 pear year, that’s around $7,000 per month. If you work 100 hours, and say you charge an outrageous $100 per hour, that’s still a generous $10,000 in a commission. If a home in Weho sells for $1,000,000, you think you deserve $60,000, (that’s almost an entire year’s salary to sell one home)? Plus realtors likely deduct everything in taxes. Bottom line: you… Read more »
Actually Queem. You talk out of both sides of your mouth. On one hand you demean professional real estate agents who are working to promote home ownership and on the other side of your mouth you decry renters in so many posts for making poor decisions. In both cases you have nothing nice to add and only demean others. I was a licensed real estate agent for over 14 years till 2022. It is much easier to get up to go to work knowing you have place to go then waiting between sales to see if you can find a… Read more »
You seriously think professional real estate agents are working “to promote home ownership”? They are working to line their pockets with outrageous commissions. I have nothing nice to add, except pointing out the awful truth. Actually, realtors love me, as I have often used only one realtor for both buyer and seller (against advice of others). That way, the realtor makes double commission. I may not be as “fun” as you, but realtors love me. And if demeaning others includes pointing out hypocrisy and facts, then I’m guilty.
the inequities in how work or success is valued extend to almost every profession. from singers to actors to sports salaries and endorsement packages. But the few attain that type of success, and the masses are just trying to get by. This hurts the masses and helps the superstars consolidate. The fiduciary responsibility of the selling agent is to the seller. As Frank says, from qualifying a buyer to multiple offers it is the agent that often makes the difference. If they don’t they don’t get paid. It’s a unique profession that you only get paid for your wins and… Read more »
We agree every business has costs/expenses, and we agree they should make enough money in commissions to cover all of that, and lots more. That being said, I will repeat that a typical $60,000 commission for selling a typical $1,000,000 weho condo, is unreasonable.
looks like you are the decider- perhaps you should have spoken up sooner but appear to just be part of the chorus after the fact. Your are stretching the facts.. a 5% typical commission on a million dollar home is 50k, split between buyers office and agent and sellers office and agent is 25k each. The agent take is 70% or about 10,000 and they need to pay their legal insurance, marketing, travel and their time for a transaction that can drag out to 2-3 months.. The broker on record gets the balance. but again you are the decider of… Read more »
I love how this is supposed to be a discussion of rental commissions, and you’ve decided (since you’re the decider), that I degrade renters and I degrade realtors. Try to stay on topic, since you are the decider. It’s ok to disagree with facts. Would love to have specific example of how I degraded anyone. You’ve degraded yourself.
It’s a unique profession that requires very little education and no training to make a lot of $$ quickly. I know Harvard MBAs that need to work several years before making the same type of $$ RE agents do. With sites like Redfin or Realtor.com, prospective buyers do all of the legwork in terms of locating properties. RE agents just hand off the paperwork to escrow officers and others who do the legwork
Im sorry to disagree with you. Being a real estate agent requires education, being licensed and continuing education. Any broker that employs the agent has multiple classes to avoid a very litigious industry. Classes range from legislative updates to every nuance that can happen in a multiple offer situations, to inspections and the costs of insurance. Anybody can locate a property but with the rule changes you will not be able to see the property unless you have an buyer agent agreement. So, the buyers agent will be paid by the buyer, but perhaps they cannot write if off in… Read more »
You are both bringing unneeded emotion and past spats into this conversation, and really, Larry, you should know better. ,