First, realtors deserve to be paid more for their work than the average worker because of the uncertainty of their income and the lack of any benefits. Now with this behind us, when is it fair for a realtor to get paid what most consider an outrageous sum of money to sell a house? The answer, when they deserve it! What is that you may ask?
When a listing agent in Redwood City or San Carlos could just put up a for sale sign and sell the house in a single day with zero contingencies, I don't believe they deserved 3% or even 2%. However, on the other side of that were buyer's agents having to spend months with their clients to make a multitude of offers to hopefully land one that stuck. These agents deserved their 3% or 2.5% commission. Especially when the buyers could walk away from them at anytime, leaving them without a single penny to show for months of hard work.
The real estate market has slowed down considerably and the tables have turned. The listing agent of a plain vanilla house in Redwood City or San Carlos that is on a busy street, may take months to sell it because the owners refuse to lower the price. That agent deserves to be well paid. That agent could spend months trying to sell the home and thousands of dollars out of their own pocket marketing it and when the listing expires, the sellers thanks and goodbye.
Today it's the buyer's agent that can walt into many homes, put in a single offer and get the house, maybe they deserve less today? Not so fast, quite often after much hard work, the buyer's lender will fail to fund the loan and the agent gets left with nothing again.
I believe people should be paid for the work they do and the risk they take, but the system is not set up that way. The well prepared and loyal seller or buyer that does not take up much of the agent's time subsidizes all the other people that become big time sinks without ever producing any results.
Want a fair model. Hire hourly. Charge sellers and buyers a fixed amount per hour or some scaled percentage based on time invested. The house sells in two days because the homeowner had a real jewel - they save lots of money. However, the person with the overpriced wreck could get charged a ton of money on an hourly basis as could the buyer that can never make up their mind. With this model however, the agent gets paid whether or not the house sells or the buyer finds a home.
I don't know how many people would be willing to try that, but it would make it a fair system! I have offered it to clients before and had a few takers. I place a maximum cap equal to a full 2.5% commission on the hourly fees and the clients were pretty satisfied in the end.
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Mark Martinho
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