Real Estate Agents – The Other Side of the Coin

by Mr. Cheap

It’s no secret that Mike and I aren’t big fans of real estate agents. A couple times when we’ve gotten together, it’s been clear that the value of agents is a running debate in the Pillars household, and I was delighted to throw my support behind Mike (at least when his wife was out of earshot).

Our general view is that while agents provide value (advertising and showing the house, providing referrals to mortgage brokers and lawyers, and helping explain some of the relevant laws on the seller side) it’s not worth 5% of the sale price. What we REALLY take exception to, if Mike will let me speak for both of us, is that they get a percentage of the sale price, which gives them an incentive to sell as quickly as possible, rather than to get the highest price.

Larry MacDonald wrote about the agent monopoly, and recently sold his house himself (without an agent).

As with many things though, there is another story. Part of the reason agents get paid so well on the sales that go through is that MANY of them don’t. Much as volatile stocks have a greater return, jobs with uncertainty of compensation (such as commission work), often pay better. An agent can easily have a run of bad luck, not make any sales (and therefore not make any money). Additionally, they have to put a brave face on it and not complain (since who would want to work with an agent who was struggling? We all want the best!).

The buyer’s agreement is another double edges sword. It’s an agreement that you’ll only buy from the agent you sign with (if you buy a property on your own or with another agent, they can sue you for part of the commission). Some agents try to sell this as a benefit to the buyer, which is insulting. HOWEVER, some buyers pull a dirty trick where they get an agent to help them find a house, then buy it themselves (or with a friend who is an agent), and cheat the original agent out of their commission. A rant on a real estate agents blog I found recently details her… passionate… reaction when she saw this happen on HGTV’s “Property Virgins”.

Speaking of which, my ex and I were ALMOST on “Property Virgins”. We wrote them a nice little e-mail (attached a picture) and they called us back. Unfortunately my ex spilled the beans about my rental condo, and they said I wasn’t a virgin (which kind of hurt) and we therefore weren’t eligible. In retrospect it might be a good thing, as the show probably would have been about us breaking up rather than buying a property :-).

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{ 4 comments… read them below or add one }

1 tommyz

Reading all the posts – it’s apparent there is a big discrepancy in peoples experiences – and that folks are lumping all properties together. While true that a realtor might only make 2% in actuality (1% to his broker – 3% to the buyers agent) – this can be quite reasonable on lower end homes – or even negative to the realtor on very cheap homes. At the very HIGH HIGH 10 million plus end – homes can take longer to sell and require more savvy agents – so they should make more. The question is – what is a reasonable cap. As one person mentioned above – selling a 2 million dollar home with 6% in total fee’s accounts for 120,000. Now – in a down market – show me the proof that a realtor can manipulate the market to create new demand – and in a sellers market – what are they doing worth 120k? Just doesn’t make sense. In Amsterdam Holland where I have a home – a buyer pays a flat rate whether they buy or not. This gives them access to listings, showing, negotiation from the realtor. And they survive. Well. The challenge here is that because realtors are generally not as well educated as say – Doctors / or Lawyers – too many saturate the market – meaning as said above – some make nothing and others rape you. Lets face it – the higher end easier to sell homes are the ones that keep realtors afloat – not the lower priced hard to sell units – yet the higher priced easier to sell one’s pay the highest fee’s. It’s bizarre world.

2 tommyz

As said – i have nothing against realtors and have had 1 good and 4 bad experiences with them in the last 5 years. One even landed me in a lawsuit by direct insulting the seller so badly that they refused to close in spite of a contract – then lied about what they did. You have no recourse. But I’d happily use a realtor to sell my home for a flat fee + Marketing expenses. That would be a reasonable arrangement – same way when I hire a contractor – I pay their fee + whatever finishes that I want. Seems reasonable.

3 myhouse385

I have my home listed with a top-selling realtor. I have found I cannot trust her at all. She first tried to tell me 95% financing is great. Now she is telling me to allow the buyer to wait 25 days to put a deposit down because it takes that long to get money out of a 401k. I checked and it takes no more than 10 days max. So I am in an adversarial position with my own agent and I feel definitely she does not have my interests at heart. I would fire her if I could.

4 David

Real Estate agents used to work. Now just a matter of sit with feet up and wait for email

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