By NATALIE KEITH
Whether they’ve had to take a cut in their commission percentage rate with the sale of a foreclosed home or saw a decrease in commission dollars per sale due to plummeting prices, many brokers throughout Florida have seen their income drop precipitously with weakened market conditions.
"People are trying to close sales any way they can," said Ellie Trahan, a broker with Golden Rule Real Estate in Ocala. "One of the first things that gets cut is the commission."
With a 25 percent drop in sales activity and an 18 percent drop in the median sales price of single-family homes from 2007 to 2008, Ocala has been one of the hardest-hit areas of the state, according to data released by the Florida Association of Realtors.
To brokers, that means not only a drop in the number of sales they are able to close, but also a drop in the overall volume of commission dollars due to declining home prices. "If you’re not making any sales, then 6 percent of nothing is nothing," lamented Trahan.
Brokers interviewed for this story said they are trying to hold steady to 6 percent commissions for the sale of residential properties and 7 to 8 percent for the sale of land.
But with a large number of foreclosed and REO properties on the market, commission rates are often set by the banks involved in a sale.
Rates can drop several percentage points during the sale of these properties. "Sometimes the banks will offer 2 or 2.5 percent (to the buyer’s broker)," said Thomas Curry, REO and foreclosure specialist with EWM Real Estate in Fort Lauderdale. "I find that, if the commission is under 3 percent, then the property does not get shown much."
In addition to foreclosures and REOs, brokers are also facing a large number of short sales. David Dorman, an agent with Century 21 in the Orlando area, said that with a short sale, he typically receives 2.5 percent as a listing agent.
For bank-owned properties, commissions are usually 3 percent to list the home for sale. "As soon as a bank gets a property, they want to get rid of it, so they’re being aggressive," Dorman said.
In Orlando, sales activity has dropped 3 percent from 2007 to 2008, while the median sales price has dropped 18 percent, according to FAR.
Bradley Arnowitz, president of Arnowitz & Associates in Miami, said he operates within the luxury sales market, which has been less impacted than other segments that have experienced large drops in sales volume and pricing.
Overall, the Miami market experienced a 17 percent drop in sales activity and a 27 percent drop in median sales prices from 2007 to 2008, according to FAR.
Getting deals done in the luxury market is challenging, he noted. To address market conditions, Arnowitz & Associates has agreed to take a smaller commission rate as the listing agent or offered a higher share of commission to the buyer’s agent to get deals done. "We’re working harder and harder to get deals done," he said.
Brokers in areas across the state said it is common for builders and other property owners to offer incentives to agents who secure buyers for their properties.
Linda Hallgren of Smith and Associates Real Estate Inc. in Tampa cited the example of a developer that offered agents their choice of a full-paid Florida college scholarship or a three-year car lease as an incentive to complete the sale of its property. Despite the incentives, the property did not sell.
"It came down to a question of price vs. value," Hallgren said.
Sales activity has jetted up about 48 percent year-over-year in the Fort Myers, Fla., market, though the median sales price fell 38 percent from 2007 to 2008, according to the Florida Association of Realtors.
Ian Anderson, an agent with Century 21 Sunbelt Realty No. 1 in Fort Myers, said the area is experiencing activity levels similar to those found in 2005, although he is quick to point out that the majority of the home sales are in the $200,000 to $300,000 range rather than the $400,000 to $500,000 range experienced a few years ago.
And, although commission rates have not changed much, gross commission dollars have dropped due to the decline. "It’s the old saying: ‘We have to work twice as hard for half as much,’ " said Anderson.
With income trending down, some agents have had to find other work to make ends meet. Trahan said she has three agents who work for her, all of whom have second jobs.
"One of my agents decided to become inactive," she said. "The dues are expensive and she couldn’t afford them."
Natalie Keith is a freelance writer in Florida.
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