Several years ago, The Greater Baton Rouge Business Report ran a story about real estate commissions. They discussed how commissions (the fees that real estate professionals “earn” for selling a home) came about and what the future will bring. It goes without saying that the way the real estate industry is structured and the way the professionals are paid is a bit of a mystery, especially when you consider what is “the norm” (although commissions are supposedly are “negotiable”), you take it for granted until you are faced with the possibility of selling a home. Perhaps sharing a few thoughts on how we got to where we are today will give you a better appreciation for this side of the business, likewise, shed light on why an agent makes a living that way and where the practice comes from. originated, keeping in mind that this practice is described by many practitioners as a way of making a living from “feast or famine” (and that is not far from the truth for some!).
The “standard” commission, as we know it today, was put into practice in the 1940s, when local real estate boards met to “set” the rates that their members could charge for services leading to the sale of real estate. Some of the practices prior to this “reorganization” were plagued by dishonesty and abuse of all kinds, particularly towards the misinformed consumer, who would sometimes be the victim of deceptive practices, such as “net fee” agreements or paying a hefty “fee. flat “and at worst unsuspecting and unsuspecting consumers would relinquish ownership in a type of arrangement where payment would come after certain events, leading to these machinations. While the practice of a one-sided percentage of the sales price quickly became the norm (the fee is a cost to the seller, usually), there have been attacks against this practice by individuals and companies who literally do not buy this. agreement. For example, people who prefer to do it themselves avoiding a commission, or companies that cater to these types, where they charge some type of consultant fee or minimal intermediation for a minimalist menu of services (a breakdown of some of the typical services a broker full service provided under the “traditional” model).
However, before we get away from the backdrop of why the rate that an agent expects might not seem appropriate to the consumer, let’s first review what any good agent does to earn a living, besides putting up a For Sale sign and waiting for the buyer. to buy your house.
- Marketing: Includes advertising, promotion, traditional and via the internet. This is a critical component in a good agent’s arsenal, he / she has all the tools in place to properly promote the property to the most likely buyer (group) from which to get the best and highest offer your property can get, and you should wait (from the research done beforehand).
- Representation: includes defense of your best interests, knowledge of pricing strategies, ensuring that you are fully informed of the factors that affect valuations; consulting on the financial and tax implications of the transaction; advise on the best financial and tax options given your circumstances; ensure compliance with mandatory ordinances and due diligence obligations, for example, completion of disclosures, inspections and the like; all the way keeping your interest at the forefront.
- Research: includes researching the competition, market trends, and factors influencing selling and attractiveness in relation to the circumstances, for example, sellers sell for a variety of reasons, and a good representative takes these reasons into account; Also, depending on local and regional regulations, recommend strategies to improve the marketability of the property to specific target groups, i.e. staging, videos, etc.
- Negotiations: includes presenting the best case on your behalf for what you are waiting for, especially if the investigation is thorough and confirms your right. Handling the actual buy / sell agreement (s) between you and the buying party, ensures the terms are met, generally works to make sure your end of the deal is honored, to the extent possible with and through other parts, etc.
In addition, with the advent of complex and time-sensitive transactions, for example, short sales, foreclosures and the like, the agent also negotiates with lien holders, achieving an effective transition and ensuring compliance with even more onerous activities and processes. .
- Transactional management: Once a buyer has been secured, in a “typical” sale (as opposed to a short sale), there will be a large number of steps and process coordination, for example, disclosures, signatures, inspections, appraisals, application evaluations. , additional negotiations of everything that is discovered along the way, escrow and title issues, ensuring that all deadlines are met, etc. During this time, there is a delicate balancing act to get things done right and on time. On the contrary, if things are not online, the agent steps in to get things right, with their best interests and (the deal’s) intentions at the forefront, among other things.
These and many other tasks are the responsibility of a good agent and agency. If something is typical of the process, it is that there is nothing so standard that one can group into a sale and an “average sale”. Yes, the standards are there, otherwise there would be no standard, but each transaction has unique qualities that require the expertise of a seasoned professional, if you don’t know how to tackle them. Now that you have a slightly better idea of what an agent does for a living, let’s move on to the topic at hand.
The original intention of real estate agents was to “standardize” rates to avoid abuse and / or disparity in the way professionals would be compensated. However, in 1950, the Supreme Court of the United States declared that this violated antitrust laws, so they adopted “suggested rates”, however, they also received an unfavorable response. The Justice Department filed a lawsuit in the 1970s to reject that as well, requiring real estate agents to make implicit commissions, but local offices or departments (government regulators) mandated that all commissions be negotiable.
This brings us to today’s real estate. There are numerous studies showing that average commission rates across the country remain fairly consistent at around 6%, although market conditions have a slight impact on this rate. Lately, with the arrival of model Internet companies in which they offer great incentives, interesting results have been obtained. While these companies aim to make enough of an impact on buyers and sellers to win them over, they have not yet made a profit or been a viable alternative. Furthermore, these cyber companies offer very little in the way of real person-to-person relationships, relying instead on algorithms and rates, and leaving a lot to be desired for the consumer experience.
There will still be an assessment of the way real estate is sold, however one thing can be for sure, as long as two parties come together on something of such importance, unless there is a unanimity in this event, there will be room for misunderstandings , and those muses. As such, an agent, if only for this reason, serves as a good buffer to allay concerns and ensure compliance. Now the question is, what value does that have to you (in addition to all the other tasks and responsibilities described above)?
And, unlike what some say that an agent is not worth as much as any percentage you can negotiate, one thing is for sure, if you are dealing with a true professional, and not a neophyte, you will soon discover that this person is your best resource. for a variety of things, one of which is installing a for sale sign to sell the house.