Saturday, January 10, 2015

WHY, ON AVERAGE, PAYING A HIGH COMMISSION GETS YOU MEDIOCRE SERVICE.

The majority of people complain about the high real estate commissions, yet most home sellers mainly due to ignorance, continue to pay a high 5 or 6% commission. If only they knew! While they pay a hefty commission, most sellers and buyers end up working with an agent that is less experienced and has limited time in business than one would get from Homeowners Concept (our agents sell 3-4 times more homes per year than the average agent, have 19 years in real estate vs 5.5 and the company has maintained an A+ BBB rating for 30 years now!). And to add salt to injury, the vast majority of sellers pay hundreds more dollars in administrative fees at closing in addition to the 6% commission!

The problem with charging high commissions stems from the way the traditional companies operate. There are way too many agents for the amount of sales. The traditional offices count on each agent to bring in some business from their circle. The brokerages will split usually 50-50 the commission with an agent that does just a few sales a year. Once an agent becomes a "big producer" and has many sales a year then the office has to give the agent a higher split, sometimes up to 80%, otherwise the agent will leave for a competing company. So, it is to the company's advantage to keep hiring and maintaining sub-par agents not only for the new business but also because it is much more profitable for the company.

Don’t believe this? Go around and interview to be a potential agent at many of the real estate companies. Many have extremely low bars to entry and simply want an army of low-producing agents to fatten their bottom line. These mediocre agents eke out a modest living via their personal network, and the brokerage takes home fat commission splits. After a few years, the majority of new agents drop out of real estate because they cannot get to a level of having sufficient amount of sales to get to higher splits and make a decent living. Let's face it, a higher number of agents working the metro area does not translate to more sales. You never hear how many sales per agent a company produces but only how many agents they have. That is why the quality of agents remains strikingly low in our industry and is also a primary factor in why commission rates to sell your home remain so high.


Think about it; a more efficient and effective program such as Homeowners Concept makes so much sense for the consumer. Fewer agents who negotiate and close a lot of sales each year, who are extremely proficient in real estate yet charge a low commission but enough to make a living. This way, the consumers (sellers and buyers of properties) win as they get to work with someone who truly is an expert yet pay a reasonable fee.

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