I cannot begin to tell you how much I agree with you. Detached house prices in my city have gone from an average of $750,000 in 2008 to $1,800,000 in 2018. The real estate fees in that time have gone from $23,250 (7% on first $100,000, 2.5% on balance) to $49,500 - more than twice as much. Are RE agents doing twice the amount of work? No! They actually do far less as most people do their own online research before even going to look at a house. RE agents also have far less expenses (print advertising, fax, etc). There has to be a major change in the way RE agents charge.

Have you tried negotiating the commission? Many will for a higher-valued house.

You may want to look around more. My realtor works for a company that has a flat fee for their services of $2,495 plus an assumed 3% to buyer's agents. A service like that would save you a ton and you still get showings as the buyers agents get their commission still.

Tggrlgh, your formula would result in a RE fee of $56,495 on the average house in my area. How is that better?
The problem is basing the commission on a percentage of the selling price. It is no longer an appropriate way to calculate the value of the service provided. A fee depending on the actual service or package of services provided would be far more fair. A lot of sales in my area happen in less than a week and the agents barely have time to upload the details to whichever website they use.

Its still a lot but would be a lot less than paying 6 or 7% commission which I believe is what the OP is talking about. I am not sure if they have a % up to a certain point in OPs area. They do not in mine but I am in a mid to lower cost area. So that formula may save some but not everyone.

Also you have gained over a million in equity in 10 years. $20k while a lot is a drop in the bucket on your gains.

I don’t believe the OP mentioned any specific percentage. And your point about the gain over 10 years is spurious. It is not “my” gain, simply the change in average price points. If you get a raise, do you pay your hairdresser more to provide the same service?

Not what I was saying at all but while I agree the straight percents are outdated all I was trying to say is there may be cheaper options for OP.

Yes good luck with your quest.

Negotiate for the % you find reasonable for the work involved. Let us know how it works for you. It is important to give a reasonable commission to the buyers agent, in my area that is about 2%.

It seems to me that you have a value question. So why not ask?

So much of this depends on your market and your needs. Ask to see their marketing plan, in full. What are they doing, for their money? Ask for references, on recent sales. Did it all rely on a small print listing, or is there much more to it? I happen to live in a market where real Internet marketing brings sales from places I'd never have access to. And that costs $.

You- and you alone- get to decide the value of what they can do, based on track market amidst your needs. Is this a toe-in-the-water, or do you really need to sell? How fast?

The answers can be quite different, depending on your own situation and your own market. I do ask- don't buy into the idea that you can just do research and BAM. Unless you are in a severely suffering market, that's a bit of a fool's errand.

basing the commission on a percentage of the selling price... is no
longer an appropriate way to calculate the value of the service
provided.

For those who feel that way, alternative arrangements are available in many jurisdictions. From fixed fees, to negotiated agreements, to auctions with and without reserve. Or you can sell privately.

When I was a broker selling restaurants in the '90s, I charged 10%. And the time and effort marketing restaurateur's lies still wasn't worth it!

In our jurisdiction, the government levies a 13% sales tax on top of the broker's commission. Non-negotiable.

Yes, why don't you try the same approach with your doctor? If you have a $400 visit, donate $300 to the church and tell the doctor he needs to take $100.

Whatever percentage you negotiate, please don’t think your realtor gets most of this money. It is split up several ways. I’m lucky to get 1.5% of the purchase price

I guess the fee structure can seem outdated, and I’ll admit that I’ve tried to save a buck a couple times by using a discount fee agency to show me homes and even put in an offer two times through them. I was very unimpressed both times and probably lost out on a home I really wanted one of those times due to using that discount realtor. On the other hand, I’ve been really happy with the standard-fee agent that we’ve used, and think her years of experience and huge number of professional connections (which has translated into a lot of interested buyers for the homes we were selling) have been worth every cent we’ve paid her when she’s sold two of our homes. YMMV

Try FSBO (for sale by owners). Works better in hot/sellers markets and if you have sold/bought several houses over the years and are real estate savvy. It doesn't sound like you have been active in RE ...

You still have to offer 2.5 to 3% to the buyers agent and pay a lawyer to review paperwork.

I think Redfin offers reduced fees.

6% of an unsold house is 0. But so is 0 in your pocket. With no market, and no sale, it makes no difference what you ask, or who you pay. Results matter. A "10 M home" is worth no more unsold than a 100K home. There is exactly the same amount of nonexistent money in the seller's bank

account.

Even if you go the no service just a MLS lister, you have to pay the buyers agent premium. Or you will not get showings, and will not get your home sold. That is a fact. People who won't pay the sales costs missions don't get their homes shown or sold.

Agents spend countless hours showing tons of homes to buyers for free. Also they don't get paid to attend home inspections, open houses, hours at closings, hours working the office. And market analyses for listings that go to someone else. I always wished I could charge for all of that and change the commission fee.

Why? Because it is more work & expense to sell a home as the listing price increases. The $50K tear-down is a completely different sale than a $1.5M turn-key. The "luxury" sellers expect more in advertising in the glossy magazines and want their agent to be on-site for any showings. Showings require pre-approval or proof-of-funds, which is more work.. Drone photos, video 360, unique website, etc. All that is out of the agent's pocket until the home sells.

Flat-fee is okay but you get what you pay for. There's a reason that statistics show that listing with a Realtor will get you more and sell faster than FSBO or flat-fee. Buyers also want that discount when they know you are selling FSBO. They are not stupid, either (for the most part).

Actually c9pilot, statistics don't show that realtors get higher prices than FSBOs. To prove that, you'd need a controlled study, not just a comparison of average selling prices between two different groups.

The fact that buyers want a discount doesn't mean that sellers will give one.

And why would any buyer use a realtor if they thought that realtor-listed homes cost more? I'm afraid the NAR publishes self-serving statistics that don't tell the real story.

And while there can be more work for a $1.5m house than a $50K teardown (but $87K more work???), you're using the extremes. There's not much difference in work needed to sell a $150K house and a $500K house, yet the commissions are $9K vs. $30K. That makes no sense to me.

Of course, you’re right, weedyacres. Statistics can be manipulated in every which way. But also factor in the “GW factor” that most of the people who have been on these forums as long as we have are smarter than the average buyer and seller.

And Real Estate is local. Flat fees may actually work in some places. The FSBO sellers in my market are sitting on the market for months - there’s got to be a reason for that, because it’s a seller’s market right now.

There is a huge difference here between listing a $150K house and a $350K house. Between $350K and $500K, not as much. Higher than that demands more.

All the laws here in Florida, especially covering condos and 55+ and sinkholes and Chinese drywall (etc), and the litigious attitude of today’s society mean that I’m glad to pay a Realtor his due to tackle all of that, as well as all the showings and everything else. Doesn’t help that I work in NJ.

I want to warn you that you get what you pay for. When we last sold a house, Mr. Hammer wanted to negotiate a better deal. After interviewing many realtors, he pushed for the one who gave us a .5% discount off the normal 6%.

It took 6 months to sell that house, when houses were selling in day. I didn't feel like that realtor worked much to sell my house. I don't think the realtor even LIKED that house.

Our realtor’s contract stated that if she sold the house, her commission would be 4% and if another broker brought in a buyer, they would split 5%. Our home sold at full offer on the 2nd day. They each received $15,000. Considering our attorney charged $1500 for representing us, the realtors made out very well. Now I know they don’t get to keep the entire amount, but it sure is a sweet deal.

"Our home sold at full offer on the 2nd day. "

There are lots of houses on the market for forever, and they never get sold, or they failed to close for various reasons.

Who is paying for realtors' effort in marketing, selling, coordinating...etc. related expenses of those houses? I doubt owners of those houses paid for them.

Sylvia Gordon

"Yes, why don't you try the same approach with your doctor? If you have a $400 visit, donate $300 to the church and tell the doctor he needs to take $100."

Doctors have advanced professional degrees and training (and are still overpaid). Realtors take a 6 week course (and can be high school graduates). Not even in the same universe.

And all that said, doctors WILL take somewhat less if you are avoiding the insurance merry-go-round, not that this is relevant to this inappropriate comparison.

It takes much more than a six-week course to get a real estate license. You may wish to look it up for your state, but here in Texas it's equivalent to at least a two-year college degree (I say at least because I haven't looked it up in a while; it may be a four-year degree equivalency now), with a certain number of core real estate classes, just to get permission from the Real Estate Commission to take the test.

You also have to be sponsored by broker, whose educational requirements are much more stringent, for at least 2 years,

and you have to have a lot more credit hours, before you apply for your broker's license.

In addition, we have to take continuing education for the rest of our careers.

But since you think that doctors are not a fair comparison to Realtors, let's talk about plumbers, carpenters, electricians, air conditioner repair people...

In fact let's talk about babysitters! Many years ago there was a letter from a babysitter in one of the old newspaper advice columns, Ann Landers or Dear Abby.

A teenage girl (not even out of high school yet, so the educational bias is neutralized) had agreed to babysit her neighbor's children for a certain fee.

When the neighbor returned home, she told the teenager that she didn't have any money to pay her, & she handed the babysitter a couple of skirts from her own closet and said "these cost a lot more than I was going to pay you, so you are coming out ahead on this."

Babysitter said she had complained to her mother, and her mother said, write to Abby or Ann Landers.

The advice columnist said that

when someone contracts for a service in return for money, and the service is performed, the money is due.

Recipient of the service doesn't get to change the terms of agreement after receiving the service or benefit.

The median income for an agent in the US went up from last year! The median income is now a whopping $38,000. Wooo - hooo!

Somebody want to pay hourly for real estate services? Up front as a retainer, with hourly deducted from it? Avoiding a back end commission? And paying whether or not you sell? Some customers would pay a lot more than they do now!

If a better system could be invented, it would. And it would flourish. Because: Capitalism. Whinging about how much you pay to sell your house comes down to, put up or shut up. You don’t want to use a realtor, don’t. You don’t want to pay 6% , find someone who will work for less.

Don’t be surprised when you aren’t working with the best and brightest, and your house sits. Capitalism says that the market is self regulating. If someone wants to attract harder workers with a more successful sales history, they pay their rates. If someone has those skills, they get to pick their ride. They could sell pharmaceuticals and make more and have a steadier schedule.

But some people actually LIKE selling real estate, and are good enough to last past that 3 year mark by when most newbie agents have crashed and burned. RE eats their young. It isn’t a high paying career but for a few. Sink or swim baby.

Well, actually, there are a number of smart, forward-thinking agents who aren't falling into the trap and who are creating new ways to do this business for an ever more savvy clientele.

I found one and have saved tens of thousands of dollars, and she's been one of the most most highly competent agents with which I have ever dealt (and I have some breadth of experience and the professional credentials sufficient to analyze this).

I've dealt with terrible agents with top firms, and great ones with tiny firms and everything in between. Those with creativity and intelligence, regardless of where they work, make the market work for them, and offer something better than the same old, same old.

Sylvia Gordon: Not in my state. 18 years old, no criminal record, a salesperson's course of a few weeks, and passing the exam are the minimum requirements to obtain a license here. Doable in 6 weeks in the 90's It takes a semester or so now.

I see that Texas does require a few online real estate subjects.

3 hour semester course =45 classroom hours .https://assets.recenter.tamu.edu/documents/articles/1149.pdf

So that would be the equivalent of 4 classes = 180 hours. There are 5 classes required.

Not seeing anything like a 2 year degree requirement.

Trades are a closer comparison.

Not following the point of the baby sitter contractual agreement, which is not at issue. You contract for a simple service, like "Watch my kids for 3 hours and I will pay you $50", then you pay for it upon completion.

But the question here is whether the services rendered are worth the payment when the services rendered bear no relation to the payment. It is illogical that a person selling a 300,000 house does twice the work of one selling a $150,000 house. Yet the first will receive $21,000 (here) for filling out some forms and making some calls or visits, and the second will earn about half that. Both houses could sell in a day. Or a month.

Did the first agent really do twice the work? No way.

This is about value.

Not to say that there could not exist some special circumstances which would require more input and back and forth on a particular transaction. It happens. But this isn't standard.

midcenturymodenlove,

Would you please share how the competent agent does the business for you and have saved you tens of thousands of dollars? Thank you.

I just found a smart, competent realtor last month after tired a few others. He is following the conventional way, yet I am happy to pay him the commission the existing system charges. I am so looking forward to learn your agent's new way of conducting real estate transactions.

What some people here are forgetting is that you are paying for expertise, experience, knowledge and time (and much more if you hired the right agent).

For example, I've hired the best agent to sell an investment condo. What makes him worth his commission is that he's the go-to agent in this complex. He lives there himself which makes showings that much easier. (For a condo, having someone familiar with the complex and amenities is really important especially because ours involves deeded boat slip and lift, detached garage, and other unusual but excellent features that would be hard to explain in the MLS listing.) He knows everything about every single one that is on the market or has sold. He has buyers waiting for the right condo to pop up on the market.

His photographer is amazing - the pix turned out much, much better than I anticipated because of the all the crap our tenant has in there (except for the cringe-worthy postcards and notes stuck all over the fridge) and took them on Easter Sunday to the get the listing up ASAP. He's gotten the drone photos for the complex that enhance the listing. We've had dozens of showings and a couple of low offers (ours is not remodeled because we've had a tenant in there for 7 years and an incurable defect in proximity to traffic). He knows how to maneuver the condo board, documents and approval process.

We have a plan in place for if the current wannabe buyer can't get financing before the tenant moves. We'll make his recommended improvements (currently flooring - 4 different sections right now - yikes) and adjust the price accordingly.

But would I hire him to sell our primary residence? Nope. I've got another agent that will work better for that sale. Someone with the expertise in this type of home. Stuff that you don't learn in Real Estate training. Only learned through experience. Keeping up on the industry and the local trends - knowledge.

I'm not sure of the point of the screen shot. It doesn't say anything but a basic outline. I went into detail online and found exactly what classes are required and how much an hour is in classroom hours in Texas.

I found the best agent I have used in 30 years and sold the last three through her. I've worked with several and some of them are completely useless, and in those cases I conducted every part of the transaction while the agent showed up - or in one case, her boss showed up because she was on a cruise- to collect a check at closing.

I've worked with some others that were all right. This one was the most knowledgeable of all. I don't know that this is necessarily a new idea, but this agent runs a small flat-listing company, but you actually get much more service than I certainly ever need. Even inexperienced sellers to whom I have referred her have been quite happy. A few hundred up front, depending on what you happen to need in addition to the MLS listing. Then pay the buyer agent the normal (ridiculously high here) percentage. Done.

Just a few thoughts...

Education...

One accredited college class is about 40 real classroom hours (colleges often use 50 minutes per hour so the 45 hours are "college hours"), and is targeted at about 80 non-classroom hours (again real hours not college hours). So, while real estate classes do have a "classroom" requirement, they don't really have a non-classroom requirement. Also please understand that a 180 "classroom" hours doesn't really mean you have to set at a desk or in front of your computer for 180 hours. It just means that you have to learn the material that is presented in 180 classroom hours. Most online courses are going to offer a pre-test for each section and develop a study plan based on those results.

Our state requires 100 classroom hours and I recently had three students who wanted to complete the course for independent study credit. They got the 100 classroom hours finished in 12 days and all passed the license exam. None of them spent 8 hours a day in front of a computer.

So comparing the course work required in Texas to a two or four year college degree is simply untrue. Furthermore, it can certainly be done in less than 6 weeks. Realistically, even a relaxed but consistent nights and weekends schedule will get you done in 6 to 8 weeks.

If a better system could be invented, it would. And it would flourish. Because: Capitalism.

Let's start with the easy stuff, a better system has been invented. In fact, many better systems have been invented, but monopoly pressure is monopoly pressure. Which brings us to the second point, the real estate market is objectively one the most established monopolies in the U.S. They are the default case study of a legal monopoly, and they still manage to be found guilty of monopolistic behaviors far more than any other market in the U.S.

-----

In the end, it is a bad system and it is going to go away somewhat soon. Realtors made their hay by limiting access to information, which they can no longer do. Eventually, we should get to a smaller number of realtors making more money by adding demonstrable value to home sales. There is a lot of evidence that the market will move to a flat fee plus small percentage commission at some point in the future in response to consumer pressure. It may stick there or it may move to pay for service model.

Screenshot comes from the Texas Real Estate Commission. 180 hours is not the 45 hours you claimed after your extensive research.

Screenshot comes from the Texas Real Estate Commission. 180 hours is not the 45 hours you claimed after your extensive research.

From SACSCOC (the accrediting agency for Texas two and four year colleges)...

"Federal Definition of the Credit Hour. For purposes of the application of this policy and in accord with federal regulations, a credit hour is an amount of work represented in intended learning outcomes and verified by evidence of student achievement that is an institutionally established equivalency that reasonably approximates

1. Not less than one hour of classroom or direct faculty instruction and a minimum of two hours out of class student work each week for approximately fifteen weeks for one semester or trimester hour of credit, or ten to twelve weeks for one quarter hour of credit, or the equivalent amount of work over a different amount of time, or

2. At least an equivalent amount of work as required outlined in item 1 above for other academic activities as established by the institution including laboratory work, internships, practica, studio work, and other academic work leading to the award of credit hours."

If you look at requirement 1, you will see where the 45 hours comes from. 3 credits (the standard for a college course without a lab) * 1 hour per credit * 15 weeks = 45 classroom hours.

------

In my professional opinion, Midcenturymodernlove overstates the college credit hours that would be given to the real estate courses. As you can see, the requirement for a college class is actually 135 hours per class, because of the requirement that classroom instruction must only account for 1/3 of the total time dedicated to total instruction in a class.

The 180 hours in real estate classes is the total hours needed for the average reader to pass the course and get credit for it. There really is no additional study time demanded outside of the 180 hours. Furthermore, there is a requirement that you click on each reading and answer a multiple choice question at the end of that reading, there is no requirement about how much time you spend reading it.

An Associate's degree requires about 900 classroom instruction hours, and for the average student, will require about 1,800 non-classroom study hours. However, a class hour has some flexibility and is usually 50 minutes, so realistically a student should get about 750 hours of classroom instruction and 1,500 hours of non-classroom study/instruction.

----

To say "here in Texas it's equivalent to at least a two-year college degree (I say at least because I haven't looked it up in a while; it may be a four-year degree equivalency now)" is not only incorrect, it is a gross distortion of the facts.

It really isn't even the equivalent of one full time semester of college. So if you are realtor, I hope you have never actually made that claim to a client, as that would approach fraud.

ETA: Realtor value is a different discussion than realtor pricing, and training can be a completely different discussion than either of the other two.

Sylvania Gordon - Your first comment suggested that someone wants to "stiff" the agent, no one suggested it, your babysitting story is the same. Your posts do not address the posters question about fair payment from the sellers perspective.

Exactly. It isn't even the equivalent of one semester of college, much less anything like even an associate's degree, and certainly not in my state.

As Bry911 states, a real estate course can be completed in a few weeks, so we don't need to pretend it is anything like "a degree". All that is fine...some highly educated people who do actually have degrees in other areas do go into real estate. Some are good. Some are not great in real estate sales, even though they may have been great in their respective fields, for which they did obtain degrees.

The issue is value relative to work required. It is very fair to wonder why an brokerage/agent should receive a percentage of the sale that increases exponentially in a higher priced house, when the work involved does not increase simply because the house is more expensive.

I have not obtained value through the traditional model but once where I was the buyer, and in that case, I found the house myself and brought in an agent only because the Seller's son was the Seller's agent and he was quite emotional about selling his family home. In that particular case, it seemed wise to have someone else in the middle. That's the only reason. She was quite diplomatic, so it all worked out. Not to mention I'm a highly reasonable person, so when the Seller sold some items at a garage sale that were included in the sale, I let it go.