Can Web save the 6% commission?
Perspective: From the Future of Real Estate Marketing blog
By Joel Burslem, Wednesday, August 20, 2008.
In its September 2008 issue, alongside its reviews of tub cleaners and organic produce, Consumer Reports turns its critical eye on the real estate industry (see related Inman News article and a related commentary by columnist Ilyce Glink here).
The publication polled a sample of 3753 readers who sold or tried to sell a home, 4029 readers who bought a home and 7368 readers who did both. The results are illuminating to anyone in the industry; especially some of its findings which will surely be controversial.
Let’s look a bit deeper at the numbers.
First, the good news. Only 1 percent of sellers tried to use an online Web site (craigslist, forsalebyowner.com etc.) to sell their home. 80 percent chose to go with an agent. It suggests that any fears that online players may someday disintermediate the Realtors seem overblown. Sellers want to work with a real estate professional.
The bad news is that Consumer Reports concludes that "higher commission didn’t always translate into more service or better results."
Moreover, respondants who "paid commissions of 3 percent or less were just as happy with their brokers performance as those who paid 6 percent or more." In fact, those who paid more were "more likely to say they had regrets about the selling process."
More troubling, is that the article recommends that consumers continue to aggressively negotiate the 6 percent commission downwards.
Seems to me that the real challenge here is that, moving forward, the industry needs do a better job of communicating its value (beyond puff advertising pieces) and, more importantly, delivering that value to consumers.
There are many ways to turn this tide, but I believe one way to slow the downward trend on commissions is if brokers and agents can demonstrate to consumers they have an aggressive multi-modal marketing package in place for each and every listing.
Unfortunately, despite overwhelming evidence that consumers are looking for homes on the Internet (about 80 percent), it seems some Realtors are still choosing to ignore the medium.
According to Consumer Reports, 85 percent of Keller Williams agents advertised homes on the Web -- compared to only 76 percent of RE/MAX agents and 75 percent of Century 21 agents. The numbers, while high, are still unacceptable.
Agents should be syndicating their listings across the Net, taking dozens of high quality photos of the home, creating single property sites, doing video tours, blogging about their listings' key selling features. Any or all of these approaches can add value (either real or perceived) to the bottom line of the transaction.
Brokers aren't off the hook either. They need to be educating their agents on what the 21st Century internet-savvy buyer is looking for and then provide platforms that can deliver those services to their agents.
The Internet is not the be all and end all to getting a home sold. But far from being a threat to the 6 percent commission, it may just end up being its salvation.
Originally posted on the Future of Real Estate Marketing. Joel Burslem is vice president of content at Inman News.
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Submitted by Jayme McLaughlin on August 20, 2008 - 2:45pm.
I am a Keller Williams Realtor in Norman,Oklahoma. My Team posts our listings on over 45 different websites. We have a 97% close ratio and our homes average about 67 days on the market. We feel our service is well worth our 6% commission. We have 2 full time assistants. One does our contract to close and the other assistant does our data entry on the web and 2 different MLS systems. Keller Williams also has the KWLS site which is similar to a national MLS system. You get what you pay for. I suggest the consumer look for the right Realtor.
Submitted by Rich Rector on August 20, 2008 - 3:00pm.
I have written a number of articles on this subject and there are a couple of things that need to be clarified:
1. It is an error to talk about "the 6% commission." Commissions, by law in most places, are negotiable, and in fact get negotiated (and not always downward!) every day based on many factors.
2. The cost of a real estate transaction does NOT decrease just because of listings being on the Internet. The true cost of a transaction could come down significantly if buyers and sellers would take responsibility for their own actions, so E&O coverage and other costs of liability were lowered.
Rich Rector
President
Realty Executives International
Submitted by Doug Osgood on August 20, 2008 - 3:05pm.
What's this discussion about?
"the 6 percent commission"
We are independent contractors setting our own fees based on our value for service to the principals we are hired to represent. As professionals, let's stay out of the commission discussion. Hope the FTC isn't monitoring.
Submitted by Mike Dawson on August 20, 2008 - 3:58pm.
saying "the 6% comission" doesn't necessarliy imply that it is a set rate. i could just as easily mean that when an agent charges 6% it could or should be negotiated down. Perhaps they are ok with 7 and 8% listings.
Submitted by Richard Greenwood on August 20, 2008 - 10:12pm.
The old ways are http://GoneWithTheWeb.com
Submitted by Madeleine Romanello on August 21, 2008 - 4:25am.
I have been a real estate broker for 10 years now. When I started in 1998, I became aware of the "our commissions will be undercut, reduced or eroded completely by the internet" discussion. I was worried back then and researched many different compensation models. Then the real estate boom started and ,yes, we saw more flat fee listings, discounted commissions etc etc as it took no time to sell a home. Now, after the crash, with a 3-4 year inventory on the market, I am seeing no commission discounts in the MLS except from a few unrealistic agents nor are sellers asking me to negotiate my commission ( I do give full internet marketing package, professional photos, video etc etc). In fact, most sellers are grateful to pay a competent agent for sound advice and are very satisfied when the agent helps them meet their objective. Real estate selling and buying is a difficult process plus the 5-7% commissions covers both sellers and buyers' agents time and expertise. What other professional do you know that will work for "free" on their dime, putting up their time and money on behalf of their clients, without a retainer or deposit, until the property sale is closed ? I cannot think of any. I think we need to sometimes point this out to clients when the commission rate comes into the discussion so clients understand we need to be compensated for the risks we take as agents in investing in their property purchase or sale.
Madeleine Romanello
Broker Associate
Douglas Elliman Florida
www.realmiamibeach.com
305-282-2133
Submitted by Catherine Read on August 21, 2008 - 5:42am.
["Brokers aren't off the hook either. They need to be educating their agents on what the 21st Century internet-savvy buyer is looking for and then provide platforms that can deliver those services to their agents."]
That is a very significant insight into the role brokerages play in this discussion about value to the consumer. It's one aspect of branding that many real estate companies don't seem to understand - their company and their "brand promise" is only as good as the agents out there on the street delivering the service to the consumer.
As buyers and sellers demand more services and better services - for whatever commission they are willing to pay - brokerages need to be delivering something of value to their agents to justify what they are keeping as their cut of that commission. Training and technology tools are at the top of that list.
Catherine S. Read
Creative Read, Inc.
Submitted by Alistair Helm on August 21, 2008 - 1:38pm.
I am interested by the statistic on the percentage of sellers using online options to attempt FSBO marketing at just 1%, and conversely 80% choosing an agent.
In New Zealand we have been monitoring this through an annual Nielsen Online survey. The latest statistics from May of this year showed that 41% of sellers would definitely list with an agent compared with 35% last year.
A year ago during a much more active "sellers" market close to half of all respondents said they would "try" and sell without an agent, recognising that eventually they would use an agent. Further details of this analysis can be found at http://www.realestate.co.nz/blog/belief-in-private-sales-falls-as-proper...
Submitted by Larry Wright on October 10, 2008 - 12:35pm.
I agree that "full service" is worth a traditional full fee and discounted/limited service is definately not for every Seller. But you must demonstrate value somewhere besides marketing exposure. I am a "flat fee/limited service" broker and provide more exposure in one day than full service listing agents will create in an entire month's worth of syndication across every available channel.
Larry Wright
www.nwrealty.com
www.nwrealty.net