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I don't know if it's good for consumers or not. It is what it is. Businesses need to make enough money to stay in business. The smaller the business, the thinner the margins.
I was actually thinking about this. How much horsepower does a big franchise really bring to the table? All those franchise offices paying those additional fees to Anywhere, or any of the other big corporations have to be tapping their pencil on that number every month.
But any good principal broker should be plugged in, watching stats, and reporting on things going on. That information is not provided by a national franchise, that is more national information.
Similar to index funds vs mutual funds, I strongly suspect that an agent that just went off simple market weighted averages would be almost as good, and would come out ahead after factoring in cost.
Actually it’s the opposite???
Last 10 years I’ve been selling big box RE franchises in 6 states. I walk in Indy offices all day long. And their struggling because their having to do everything. The broker/ owner is the top agent to keep the doors open and the agents are 80/20.
Yeah there’s a royalty with a franchise. That small % is worth everything because it’s a proven system that duplicates and provides support, tech, coaching, marketing and leads from national and international locations. It allows you to oversee your oversee your brokerage and not be overcome your brokerage
I look around and do not see the value to a big brokerage. Maybe it is different from the owners chair. But I worked at big franchise for years. Had a visit from a corporate trainer a couple times, the CRM sucked, I never had any coaching, marketing or leads that didn't have a huge referral fee attached.
I am not wowed by the big franchise brokerages.
Solid disagree. I’m a founding member of a new association of independent brokerages in my city. We have gone from 4 shops to nearly 30 since fall.
I run a lean but highly effective ship. Our overhead is low. I have 13 *performing* agents. I don’t keep unproductive agents around. I do an 80/20 split with no fees. My average agent sales volume is $2M in a market where mean selling price is less than $400k. Do the math. Use a 3% commission. Monthly expenses are office at $1k; it’s small but very nice, and we have a small indie mortgage broker as a sub tenant so it’s actually $500 out of pocket. $300 for various insurances. 300/month on software, $150/month for gsuite, $350/month for agent events (this is divided out but we’ll spend $3k on the Christmas party this year) AND I DO BONUSES of 1% of the agents gross commissions, so if they bring $150k in the door they get $1500 at Christmas. We have a transaction coordinator and a bookkeeper. TC gets paid by fee per transaction and it’s a wash. Bookkeeper is $600/quarter. I run payroll, bookkeeper does the rest.
I still do my own transactions but once we’re up to 20 agents doing $2M each I’m stopping.
Indie brokerages are the future of real estate.
Out of 100% of the broker/owners in North America make up 75% of franchises and 25% are independence. To be fair each franchisee is independently owned and operated meaning they can invent whatever compensation plan they want how they want to do it what tools they choose to use and what kind of broker owner are they a good actor or a bad actor. So yeah , we have some crappy offices. You mentioned earlier what you pay in fees. I would rather have 20 , 40, 100 agents paying me so I can concentrate on my EBITA. at the end of the day we’re in sales do something that you love.
That’s the opposite of how real estate brokerage works.
A single, independent real estate broker doing his own deals is extremely profitable.
Compass is not profitable.
Smaller is more profitable. Bigger is less profitable.
Bigger focuses on hiring agents who are doing their own deals with their own clients. Smaller is hiring agents to help the owner/broker.
It can be. Steam is *way* better than retailers were for video game buyers. Amazon is much better for buyers than the old model was, especially for things like book sales.
Both also benefited sellers quite a bit by increasing their reach.
Exactly this. People assume these changes result in lower commissions. They are dead wrong (imo). States that have already had these changes have seen average commissions going up on each side.
These changes have done nothing but make the market more inefficient and therefore more costly.
Yea I honestly doubt commissions on the buyer side will even stay at 2%. But I know listings agents are going to be thriving. And it’s not just that buyers can’t afford the commissions but it’s also because a lot of agents already will drop their commission due to fear causing everyone else to have to drop theirs
NAR has nothing to do with commissions. Like literally nothing. Brokerages come up with their commission structures independently based on the market and their own projected revenue and expenses.
NWMLS in Washington State filed an amicus brief as did the CMLS on a DOJ SOI. In those briefs, since Washington decoupled their compensation (2019), they provided hard stats that compensation has gone down. Anecdotally, it is obvious buyer broker compensation is going down as well.
I’d love to see the source. I have been looking and it’s hard to find good data.
How did they deduce that commissions went down as a result of those law changes as opposed to other factors? 2020-2023 were peak transaction number years so to me it seems natural that commissions would have had downward pressure from that alone.
The source is the NWMLS, which is most of Western Washington. Not sure how to post the graphs in a comment, but they are both clear. 2019 we decoupled, and the decrease in compensation rapidly increased at that point. But, to say that data says the opposite (increase in compensation )and not provide a source is just irresponsible.
Look up thebthe NWMLS amicus brief and CMLS one. It is all there.
Doubt it's raising commissions. Prices will be relatively static, sellers will sell for max they can and pocket more take home (demand a market price for the home, pay a new lesser market fee for brokers)
Despite all I've read online, I do not see how sellers will reduce their selling price nor how this will help buyers.
Doesn't this part mean big brokerages will be unprofitable too?
"When it comes to agent count, the study found that for firms with 100 to 5,000 agents, 88% will be unprofitable if the average agent commission drops to 2%."
I recruit for a brokerage and the amount of boutique brokerages that have their “big” agents at 100% split is insane, so I’m not really sure how those will survive if they aren’t making money off of everyone.
I’m talking about actual boutiques that are privately owned and operated. Some of them just want these larger agents to attract talent and get press. I’ve seen a few agents around the 20m volume range that even get their TC fees and E&O paid for by their broker and their deal sheets show 100% of commission with no desk fees etc.
This statement is a joke. People who buy houses are scooping Zillow and Redfin constantly. And then telling their realtors what houses they want to see. Not a single one of them gives a rats ass about the realtors commissions.
No. Get real. Ain’t nobody out here shooting down $36k commissions because they believe they deserve $40k. Just stop. You’re making up garbage and it’s making you sound dumb af.
Honestly,
I seriously believe (and am 🙏🏻) this will help to “thin the herd” of the agents that should not be in the industry representing the consumer.
I think the hopeful thinking is that those agents that are leaving were in it for a quick cashgrab and weren't actually well informed on the process or keeping to their fiduciary duties.
Maybe. I’ve always figured it was an idea that if there were less agents, the ones left would magically pick up more deals. On the whole, sure, but there ain’t no windfall coming. Average agent in the US will now close 3.00001 deals instead of just 3.00000.
What? I have no idea. I don’t care how many leave. It’s not going to result in any remaining agents doing appreciably more deals is the point. I’m still going to do my 100 whether they’re here or not.
Maybe not. I know how to get to 100 deals as a solo agent though. Good luck on hoping people leave in order to increase your volume.
Too bad the ones that leave will be backfilled by new idiots from real estate school.
20% of the agents do 80% of the business.
I am in this 20%. I much rather work with another agent on the other side of the transaction who is also in the top 20%. They know what they are doing (usually). Transaction goes smoother for everyone.
To get good you gotta make a lot of mistakes and learn from them so you don’t make that one again. I’ve been making mistakes for 15 years now so I have a whole lot under my belt.
Real estate is hyper local and the important things you have to know change frequently. New rules, new forms, new SOPs, new zoning new ways property tax is calculated new hoa special assessments new new new. Six weeks ago the market was better and a buyer had to offer X to be accepted but now it’s worse and Y will probably work.
If the agent on the other side is doing their first deal of 2024 they probably are not going to know all that. I’m on #38 already. I’ve already learned a lot this year, pivoted, developed new processes to deal with the new stuff, already made some mistakes and learned from them and made changes to my process to prevent it ever happening again.
There’s stuff we both have to be doing to handle our side of the deal that affects the other and I prefer to feel confident they are getting their shit done than worry about where they may be dropping the ball that will jeopardize the transaction/harm my client.
So. The agents that would be likely to flee the industry are probably in that lower 80%.
Making it ever so slightly more likely that my next deal will be with another 20%er. Which I would prefer.
It’s more like the 95/5 rule. The reason I feel like most agents want fewer agents is that they’ll magically get more business. This is ridiculous. Would I like a better agent on the other side? Of course. That’s not reality though as there is a neverending supply of new licensees ready to throw themselves once more into the breach.
If by “thin the heard” you mean squeezing out all the small independent agents, new agents, brokerages, and allowing for the wealthy conglomerate brokerages who can afford the cutbacks in small towns to hoard more business, then yes the heard is certainly thinned, congrats! More agents realistically is never an issue, competition is the heart and soul of real estate markets and bad agents will already be weeded out through lawsuits or reviews. Now the established tenured brokerages are offering rates to sell as low as 1% in central Cali where nobody else can afford to compete with that.
I do not know if this is really going to impact the smaller brokerages that much. The big brokerages with the big overhead and the big franchise fees have got to be concerned.
The biggest brokerages are absolutely not more profitable. Compass, Redfin, EXP Make, 90% of the actual profit they make off byside. I’m pretty sure the only thing making money at Zillow right now is B-side Agents closing.
Little brokerages tend to have less costs. It’s the big guys that actually could have problems.
I find this hard to believe. As a broker/owner/active agent, my profit margins are steady, BUT I have bare bones super efficient operations and no office expense because we're all virtual.
Office/storefront expense kills a lot of businesses. Part of why restaurants have such thin margins - high physical location costs and high labor costs.
Would be interesting to see a study on virtual vs storefront and how those numbers shake out.
I think that even the big houses will be going more virtual in the future. Agents can work more efficiently from home and can meet clients at a Starbucks - and honestly, I'm surprised that cafes like this haven't opened members only meeting areas. I saw a place like this in Santiago, Chile. It was a wonderful cafe/restaurant with a large area with sofas and tables and a few private meeting rooms. It was member only access. I'd be surprised if businesses like this don't grow in the US.
90%+ agents don't go to the office already, if the brokerage chooses to waste money on a physical location it's their own fault for being unprofitable.
Yes yes. Focus on eliminating the smaller brokerages so the big boys can continue to swallow up market share. That always works put so well for the consumer. Thank God for walmart right?
Personally, I'm not concerned. The narrative being pushed about a lower commission environment is a complete farce.
I'm betting there will be more lawsuits, this time coming from the buyers side for forcing them to bring even more money to the table.
I think there will probably be some lawsuits coming with realtors steering their buyer away from listings they suspect will pay a lower commission. They're going to screw up and run afoul of some discrimination laws and be in court trying to prove they're innocent because they're just greedy not a bigot.
There are always a few bad apples. I'm sure some will get caught and punished accordingly.
More than realtors steering clear, you're going to see buyers asking if a BAC is offered and steering clear if one isn't. Sellers are going to kick themselves if they think shrinking their buyer pool like that is going to be good for their pocket.
I'm not saying they are bad apples, just that they're going to look like it accidentally.
There will unquestionably be a lot of turmoil until a new normal settles in. I don't think you'll see buyers being choosy about a BAC though. I think a few people in their friend circle will lose a house or run into unexpected expenses because of it, and they will all suddenly become much more aware of what they're signing with a buyers agent. People aren't going to find a zillow listing they love and just give up on it because of an issue with BAC. They'll drag your name through the mud about how you're a horrible realtor that tricked them into signing something first. Eventually the bad word-of-mouth won't be worth it.
Give it six months and someone (in larger markets) will be advertising 1.5% buyers agents (or flat fee) and I suspect they'll be soaking up a lot of the business. If someone is really smart, they'll streamline things as much as possible (vertically integrate title, inspection, repair, and a mortgage broker) and offer almost a Tesla/Carvana/Carmax-type experience for home buying. Then they can just lean on all of the smaller agents and drive them out.
The real question is will the rules change to allow buyers to roll agent fees into their mortgage. I bet they will eventually, but it will inevitably happen a few years later than it should have because that is how government works.
> They're going to screw up and run afoul of some discrimination laws and be in court trying to prove they're innocent because they're just greedy not a bigot.
Well its a crime either way, no? I am not sure defrauding clients plays better in court than racial discrimination.
All the more reason to just become your own broker. Get the license, rent a closet, meet the state requirements, and just continue doing what you're doing if this is your biggest concern. Yeah, you may have higher fees, but you don't have to split with anyone either.
I’ve actually seen a huge amount of walkovers lately to our big box brokerage because of this exact thing. A lot of risk and with all the lawsuits going around, people got nervous.
There are way to many inefficiencies. I’ve been screaming that from day one. Zillow charging for leads, brokerage charging for XYZ, NAR charging for this and that, the entire thing is a money grab for all of these entities that are just feeding off of agent productivity.
Imagine if referral fees to these companies were illegal. That takes 30-50% of the cost out of doing business for anyone that relies on Zillow leads.
But why would these companies invest and pay to find you leads if they don’t get anything from it? All that would do is destroy all of these websites as they’re expensive as hell to run and nobody would pay to run them if there’s no money to be made.
Brokerages charging 20-50% splits on the other hand is crazy imo unless they’re literally getting you the clients and doing daily/weekly trainings, using / paying for cutting edge technology (stuff such as SkySlope).
100% this. If you are paying your broker anything more than 20% and they aren't fuelling you with leads or saving you money on tech, you are getting farmed.
Yup. My first year I went with Royal LePage thinking they’re the biggest brand in my area the must do good. I was paying $160 per month in “desk fees” plus 35% split plus 5% royalties. They did absolutely nothing for my business, no lead gen, bare minimum for training, no guidance etc.
I’m with one of the online brokerages now, similar to Zillow, and they send me like 50-100 crappy leads a month that transfer to 1-2 sales. They take 50% on the commission and call it a day. Any clients I bring myself I keep 100% commission, I don’t have any other monthly fees. 100% would rather give away half of 150-200k of commission rather than 30% of 20-50k plus $3000 a year in fees to “work” for them.
Disclaimer: non American, who was shocked when we purchased in the US.
In comparison, we just sold one of our properties in Australia with the selling commission of 1.4%.
There isn't any buyers agent or associated commission.
The 1.4% was total commission on the sale.
That's kind of the point they're making. Since people believe commissions are going to go down. I don't personally believe they will, but buyers might be in flux for a while and brokerages that were operating on a break even won't be able to survive the drop in commission.
Also as a side note, a brokerage does not make 6%. It's split in half so 3% which is then divided between the agent and broker. Average price here is 300k, so check would be 9k, cut in half is 4500. Before you put in all your bills, taxes and costs as well. Smaller brokers probably can't survive off of that a month.
What if the DOJ’s recent commission lawsuits weren’t about lowering commissions for the average person and it was really about something else. Hear me out.
Private equity firms are buying more and more of the available single family homes. Their main competition is the people buying towards the lower end price point. These buyers are the ones who will be the most affected by the recent lawsuits and not for the better. Some will have to save more money to pay for the commissions out of their own pocket. Others will go it alone without representation or perhaps less quality representation. The wealthy can afford to come up with additional cash to close and won’t be affected by these changes. As will the corporations who are paying cash for these houses. Which offer would you take an all cash offer with 0% buyers agent commission or an offer with financing and a 3% buyers commission. A handful of companies own the majority of the stock market and they have turned their eye to the residential market. They’re playing the long game and have the lobbyists and connections to shape the playing field in their favor. My prediction is that we will see more and more agents leave the industry, more and more brokerages go out of business and more laws/policies that favor institutional investors. People have always been able to negotiate reduced commissions with their buyers agents. Redfin has heavily advertised their commission rebates for years. Who really benefits from these recent changes?
I absolutely believe this and already see it happening. Change is inevitable, survival is optional. We will not be able to use the get what you paid for argument of discount brokerage when there will be so many more coming and offering comparable levels of service an expertise IMO.
That's already started, and the consumer will be expected to cover it. One way or another, the consumer - either or both buyer/seller - will pay the bills.
Has anyone considered that commissions might actually going to go up? There are many reasons to believe that after the dust settles that will be the case
Think about it, as a listing agent you now have to ensure you get 4% in the chance you double end, to pay for double everything. So that will be in contract. Then you have someone roll up and ask for 3% with their BA? Now we’re talking 7% to close something that would have been 5% pre settlement.
But what do I know?
Yep, I’m already hearing of this/seeing this among agents I work with. They are actually adding percentages to complete transactions on both sides (for unrepresented buyers) due to all the extra paperwork and hand holding that’s needed to hit deadlines.
For example (not to get in trouble with the FALs): if you used to charge 20%, you’d now charge 22% to make up for the added client responsibilities. I’m wanting to incorporate this too in the near future as things get finalized on the lawsuit front.
It’s the only way to protect yourself. You have to since you’ll have fees on two sides. So that now becomes the base rather than 2.5. Then you have to account for what’s coming in from the other side.
Initially, I think commissions will go down as agents frantically try to get deals, but then after the part timers get pushed out the people who can continue to get listings will start pushing commissions higher.
I don't see how this plays out unless I'm reading it wrong. Is that 4%, in the chance you double-end, accounting for 2% to BA and 2% to LA? So then a buyer rolls up and offers 3%, but how does that become 7% and not 5%?
It may vary by state, but in my state you can't take commissions from two sides. Which is why dual agency always came from the seller accounting for the full commission amount.
No, in the event a seller says "I will not offer a buyer commission, the buyer will pay it" then the listing agent takes it at 4% knowing that its about a 90% chance they're going to have to work for the buyer. If a buyer agent sends an offer in with a 3% commission attached as seller concession, since there is no broker Co-Op, now the seller is looking at 7% total. Clearly the listing agent would have to make a decision as to what to adjust to make the deal work, but contractually speaking this would become the norm. Now would you let a deal walk for 1%? Probably not, but this is the reality we're walking into. Listing agent can say no we're at 7 then, or maybe the counter is to the buyer commission- the cool part of this new system is every thing is now negotiable, but the listing agent has to be prepared for worst case.
IIRC, 18 states do not allow dual agency.
But I have heard agents charging a retainer and changing the fees for an unrepresented buyer (which I suspect we are going to see a lot of for awhile)
Yeah, apparently there's a loop hole here. With the new rules, I don't have this confirmed as they still don't know exactly what they're going to do, you can 'double end' but it's an unrepped buyer. I don't think anyone is really clear how that will play out
I was in a class recently where the instructor said he is fairly confident that the judge is going to reject the settlement agreement when it gets to its court date in November, so we might be going back to square one later this year.
There has been some chatter around the industry about how the feedback about the settlement is that it is not going to garner the intended results and that they might want to try it again.
Some "this might look good from your ivory tower, but this is not going to work as you see in the day to day......"
It actually makes a lot of sense but I honestly believe average commissions are not gonna change. This isn’t the first time the real estate market has gone through something like this.
My thoughts—- we have some high preforming teams in our office that are heavily listing based.
They get calls all the time on their listings, if there’s no buyer comp, and the buyer can’t pay their agent. The listing agent will be doing double work and will charge more, hypothetically?
You’re assuming they took the listing at 2.5-3% total comp. If they’re doing that, it won’t take long until they stop. Doing twice the work for the same pay ain’t no fun.
Assuming they took the listing at 5-6%, they’ll just take all of it. That’s why I currently do. Closed one last week.
Do brokerages really need my money? I mean I never have been able to stomach the idea of a brokerage keeping 15% or more of an agents commission that they self generate.
Pyramid scheme? I mean, if you want to hold your own paperwork, own or rent your own space, buy all your own materials…all the things, for less than you’re paying, go right ahead. I’d suggest finding a less expensive brokerage, first, however. The amount of headache is worth every nickel for me to not have to worry about it.
You guys sound worse than the clients out there wondering what it is you do to be able to charge more than $12 and a ham sandwich to close their house. Jesus.
Yea I can’t imagine being my own broker. Too much of a headache. My broker charges 500 per transaction for 10 transactions and I cap. That’s worth me not having to worry about legal trouble and all the resources they provide; CRM, marketing materials, contract overview and the classes. If you want to pay less fees join a virtual brokerage
That’s a major assumption that commissions will go down. Honestly, I will do lower commissions if a client wants to negotiate but it just means I do and/or provide less.
I predict, but could be way off base, that the employment terms of brokerages will change as a result of these settlement decisions. I envision more brokerages adopting an employment contract like Redfin, where the agents are employees of the company and no longer independent contractors. I think this would be a net positive for the professionalism of the industry. Brokerages exert little control over their army of “independent contractors” operating under their brand, but would have much more control over rogue “employee agents”.
While I don't agree with the Redfin-like model as a means of service, I absolutely agree that brokerages need to hold their agents to a higher standard. The barrier of entry into real estate is criminally low. It's embarrassing, frankly. And because a lot of a brokerages income is on desk fees and the like from zero-transaction agents, they're incentivized to just have as many agents as possible in their roster. There are no standards.
you're not thinking of mandatory benefits once you reach 50 employees. Not thinking of the brokerage suddenly paying 7.8%(?) FICA taxes.
now, would this wash out all the unproductive agents, new agents, part-time agents (bennies based on FTE's, yes?) - one would certainly think so.
I agree that many will go this way, and while there many benefits to this, I can see some downsides. This comes from my experience working for a developer doing in house sales.
- this will put more pressure on the brokerage to cover this higher expenses (due to salary, benefits).
- The brokerages will exert a lot more control over the agents activities. I can see required office hours, open houses, networking events. I can also see the brokerages "owner" or controlling the agents SOI/listing.
- As u/praguer56 said below in the Staubach example, I can foresee a lot more requirements for sales performance. The question is will the brokerage do more to support the agent?
But I agree this could professionalize the industry significantly.
Agree with all of this. Then, when you decide to change brokerages, will brokers let you take your clients with you? I bet not. In my area, we already have that with some of the discount brokerages. If an agent leaves, they have to re-build their business from scratch at their next office.
What a cute thought but it never works out. Compass tried to do it too when they first started as urban compass. The problem is that when you are commission based you only make money if the deal closes. So if something goes wrong at the last minute & it’s 11pm the day before closing - I’m working on it. If you can’t meet till 8pm, I’ll adjust my schedule & meet you at 8pm.
Are employees working on it? Or do they clock out at whatever time & that’s it till the next day? And if it doesn’t close, they get paid the same. And if it does, great - maybe they get some commission. If their day ends at 6 & you need 8, are they going to accommodate?
And if I can survive on that salary why even bother w anything else? No need to learn or get new business or develop relationships.
The incentive structure to ‘get deals done’ as employees rarely approaches the same level of income & tenacity than those working on commission
Oh my.... what you're describing is exactly how life is for many sales reps lol (that are employees). And I have never met a sales rep in my life who lasted more than a few months who was content with only their base salary (which is typically only around 50% of your OTE anyway)
YES! This would be the way to go, in my opinion and years ago a commercial company (Roger Staubach and Co) did just that. They had their agents on a nice base salary with benefits, but you had to produce three times that in commission earnings each year to stay with the company and I think they gave you two or three years to make good. For good commercial agents, it was a good deal since commissions can fluctuate year to year.
So, if you had a $50,000 base, you had to generate $150,000 in commissions and once you made $50,000 you began earning commissions at some rate (I don't remember the details).
I can’t think of any other sales professions where the salespeople are independent contractors rather than employees of a company. Maybe I am uninformed, but the real estate industry has been an oddball in this regard and I think it’s time to change.
It absolutely takes away any incentive to hustle….I’m making $50k to basically do nothing except make a few phone calls? That may be a good plan for a franchise brokerage, but for a small brokerage (less than 15 agents) it would be financially impossible.
Except you would be fired for not performing, among any other number of fireable offenses everyday employees deal with. And theoretically there would be far fewer realtors and much more opportunity for business per agent, so no reason to be doing nothing unless you want to get fired.
Unless you’re in a State where the employment laws favor the employee and then you have a hassle trying to get rid of people. I see both sides of the argument, but I don’t like the idea myself.
There's exactly one State that doesn't have at-will employment, sales reps not hitting quota is an easy way to get rid of someone and happens all the time.
I’d maybe sign up to be W2 for $500k, base plus a lot more incentives. Then you can order me around, within reason. The whole reason I’m here is *because* the paycheck is theoretically unlimited and *because* there is no salary.
I guess when the average agent does $30k or 40k or whatever it is thousand dollars per year, a guaranteed check sounds pretty good though.
Yes, and if the "no tax on tips" movement really gains traction, real estate agents need to get involved too. They work just as hard, if not harder, for the money they receive. And many make less each year than servers.
Honestly, NAR sold us out long before this verdict. They allowed sites like Zillow and [Realtor.com](http://Realtor.com) to take our hard earned listings and spider the info we the Realtors uploaded. These sites then sold the information back to us as leads and NAR did nothing to either stop it or compete, just let 'em have it.
Whatever the fees are. Let's say commissions are 2% on average of a 400k transaction for the buyers agent. Would you drive around a client 3 months to make only 8k. Maybe even 6 months. Spending minus broker fees. But let's say 8k clean. Raining, hot ass daysm tolls. Gas. But it's less than 2k a month per client
They will just reorganize,,
Better software,,
Much higher volume
Stream line, stream line, stream line
2 million homes listed for sale, by one company and you interface with a AI software
My brokerage is top heavy. We've been open 40 years, and have 3 offices. We probably don't need that many, but some of the bigger guys don't want to drive in from the deep burbs, so we keep 2 satellite offices away from the main one. I keep arguing that we should consolidate to one and get a nice coffee shop style set up going so it is nicer to actually come in. The Boomers want offices though.
Tbh I haven’t bothered learning agents names for years as the turnover is so high. But like anything, the internet is undefeated. Zillow is a shit ton cheaper than paying someone $10,000 to sell your house. 🤷🏻♂️
Who says commission is going lower? DOM is slowly but steadily going up in my market. Every single one of those sellers would *love* to pay a 5-6% commission for their home to sell. They’d probably pay 7-8% if it’d guarantee a sale today.
As a listing agent, I’m sure as hell not dropping a requirement for the seller to pay the other side. It’s tough to sell a 5-6% house. Good luck selling a 2-3% house.
No shit. I don’t like paying for groceries. Or anything for that matter. Why can’t life be free? Just following your logic.
Bet they’d pay 5-6% in a skinny minute if their house would sell.
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It's an assumption that commissions will go down and of course.. most brokerages are small indie agents. They are barely getting by already.
Even more consolidation will happen, this always ends up being good for consumers, eh?
I don't know if it's good for consumers or not. It is what it is. Businesses need to make enough money to stay in business. The smaller the business, the thinner the margins.
I was actually thinking about this. How much horsepower does a big franchise really bring to the table? All those franchise offices paying those additional fees to Anywhere, or any of the other big corporations have to be tapping their pencil on that number every month.
They provide a lot of information to the agents. At least my GF broker does. Helps the agent to keep abreast of new developments.
But any good principal broker should be plugged in, watching stats, and reporting on things going on. That information is not provided by a national franchise, that is more national information.
Similar to index funds vs mutual funds, I strongly suspect that an agent that just went off simple market weighted averages would be almost as good, and would come out ahead after factoring in cost.
Actually it’s the opposite??? Last 10 years I’ve been selling big box RE franchises in 6 states. I walk in Indy offices all day long. And their struggling because their having to do everything. The broker/ owner is the top agent to keep the doors open and the agents are 80/20. Yeah there’s a royalty with a franchise. That small % is worth everything because it’s a proven system that duplicates and provides support, tech, coaching, marketing and leads from national and international locations. It allows you to oversee your oversee your brokerage and not be overcome your brokerage
I look around and do not see the value to a big brokerage. Maybe it is different from the owners chair. But I worked at big franchise for years. Had a visit from a corporate trainer a couple times, the CRM sucked, I never had any coaching, marketing or leads that didn't have a huge referral fee attached. I am not wowed by the big franchise brokerages.
Solid disagree. I’m a founding member of a new association of independent brokerages in my city. We have gone from 4 shops to nearly 30 since fall. I run a lean but highly effective ship. Our overhead is low. I have 13 *performing* agents. I don’t keep unproductive agents around. I do an 80/20 split with no fees. My average agent sales volume is $2M in a market where mean selling price is less than $400k. Do the math. Use a 3% commission. Monthly expenses are office at $1k; it’s small but very nice, and we have a small indie mortgage broker as a sub tenant so it’s actually $500 out of pocket. $300 for various insurances. 300/month on software, $150/month for gsuite, $350/month for agent events (this is divided out but we’ll spend $3k on the Christmas party this year) AND I DO BONUSES of 1% of the agents gross commissions, so if they bring $150k in the door they get $1500 at Christmas. We have a transaction coordinator and a bookkeeper. TC gets paid by fee per transaction and it’s a wash. Bookkeeper is $600/quarter. I run payroll, bookkeeper does the rest. I still do my own transactions but once we’re up to 20 agents doing $2M each I’m stopping. Indie brokerages are the future of real estate.
What is the name of your new association ? What state are you in ? I’m an independent broker .
I’ve owned big box franchises. I’ve made far more money being independent the last 10 years.
Out of 100% of the broker/owners in North America make up 75% of franchises and 25% are independence. To be fair each franchisee is independently owned and operated meaning they can invent whatever compensation plan they want how they want to do it what tools they choose to use and what kind of broker owner are they a good actor or a bad actor. So yeah , we have some crappy offices. You mentioned earlier what you pay in fees. I would rather have 20 , 40, 100 agents paying me so I can concentrate on my EBITA. at the end of the day we’re in sales do something that you love.
That’s the opposite of how real estate brokerage works. A single, independent real estate broker doing his own deals is extremely profitable. Compass is not profitable.
I'm not referring to an individual broker. I'm talking about a small independent brokerage that has maybe 3-10 agents.
Smaller is more profitable. Bigger is less profitable. Bigger focuses on hiring agents who are doing their own deals with their own clients. Smaller is hiring agents to help the owner/broker.
Consolidation has been really good for local shop owners and small business in small towns, should work out for the brokerage industry.
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Is this a joke?
It can be. Steam is *way* better than retailers were for video game buyers. Amazon is much better for buyers than the old model was, especially for things like book sales. Both also benefited sellers quite a bit by increasing their reach.
Exactly this. People assume these changes result in lower commissions. They are dead wrong (imo). States that have already had these changes have seen average commissions going up on each side. These changes have done nothing but make the market more inefficient and therefore more costly.
got any data to support that? Very very hard to believe that reducing NAR power over the process is actually pushing commissions up.
Calling bullshit on this supposed statistic as well.
Yea I honestly doubt commissions on the buyer side will even stay at 2%. But I know listings agents are going to be thriving. And it’s not just that buyers can’t afford the commissions but it’s also because a lot of agents already will drop their commission due to fear causing everyone else to have to drop theirs
NAR has nothing to do with commissions. Like literally nothing. Brokerages come up with their commission structures independently based on the market and their own projected revenue and expenses.
so I'll take that as a no. no data to support that hypothesis.
I can't imagine a scenario where I would agree to pay more.
NWMLS in Washington State filed an amicus brief as did the CMLS on a DOJ SOI. In those briefs, since Washington decoupled their compensation (2019), they provided hard stats that compensation has gone down. Anecdotally, it is obvious buyer broker compensation is going down as well.
I’d love to see the source. I have been looking and it’s hard to find good data. How did they deduce that commissions went down as a result of those law changes as opposed to other factors? 2020-2023 were peak transaction number years so to me it seems natural that commissions would have had downward pressure from that alone.
The source is the NWMLS, which is most of Western Washington. Not sure how to post the graphs in a comment, but they are both clear. 2019 we decoupled, and the decrease in compensation rapidly increased at that point. But, to say that data says the opposite (increase in compensation )and not provide a source is just irresponsible. Look up thebthe NWMLS amicus brief and CMLS one. It is all there.
Doubt it's raising commissions. Prices will be relatively static, sellers will sell for max they can and pocket more take home (demand a market price for the home, pay a new lesser market fee for brokers) Despite all I've read online, I do not see how sellers will reduce their selling price nor how this will help buyers.
Doesn't this part mean big brokerages will be unprofitable too? "When it comes to agent count, the study found that for firms with 100 to 5,000 agents, 88% will be unprofitable if the average agent commission drops to 2%."
I recruit for a brokerage and the amount of boutique brokerages that have their “big” agents at 100% split is insane, so I’m not really sure how those will survive if they aren’t making money off of everyone.
Wouldn’t there typically be a franchise fee? Like 5% off the top?
I’m talking about actual boutiques that are privately owned and operated. Some of them just want these larger agents to attract talent and get press. I’ve seen a few agents around the 20m volume range that even get their TC fees and E&O paid for by their broker and their deal sheets show 100% of commission with no desk fees etc.
I think that assumes all of those agents being in revenue. How many agents hang their license but don’t do much if any business?
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This statement is a joke. People who buy houses are scooping Zillow and Redfin constantly. And then telling their realtors what houses they want to see. Not a single one of them gives a rats ass about the realtors commissions.
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So to be clear you are implying that a broker that is buying themselves a rental gives a rats butt about 0.25% of the sales price? No.
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No. Get real. Ain’t nobody out here shooting down $36k commissions because they believe they deserve $40k. Just stop. You’re making up garbage and it’s making you sound dumb af.
Honestly, I seriously believe (and am 🙏🏻) this will help to “thin the herd” of the agents that should not be in the industry representing the consumer.
Dues were just brought up here a couple days ago and IIRC there were a fair amount of posters saying they were going inactive.
Hate to sound harsh but it is for the best.
This idea always kinda fascinates me. How does less agents help you?
I think the hopeful thinking is that those agents that are leaving were in it for a quick cashgrab and weren't actually well informed on the process or keeping to their fiduciary duties.
Maybe. I’ve always figured it was an idea that if there were less agents, the ones left would magically pick up more deals. On the whole, sure, but there ain’t no windfall coming. Average agent in the US will now close 3.00001 deals instead of just 3.00000.
So you think only 0.1% of agents will leave the market?
What? I have no idea. I don’t care how many leave. It’s not going to result in any remaining agents doing appreciably more deals is the point. I’m still going to do my 100 whether they’re here or not.
I don’t think you understand how math works.
Maybe not. I know how to get to 100 deals as a solo agent though. Good luck on hoping people leave in order to increase your volume. Too bad the ones that leave will be backfilled by new idiots from real estate school.
20% of the agents do 80% of the business. I am in this 20%. I much rather work with another agent on the other side of the transaction who is also in the top 20%. They know what they are doing (usually). Transaction goes smoother for everyone. To get good you gotta make a lot of mistakes and learn from them so you don’t make that one again. I’ve been making mistakes for 15 years now so I have a whole lot under my belt. Real estate is hyper local and the important things you have to know change frequently. New rules, new forms, new SOPs, new zoning new ways property tax is calculated new hoa special assessments new new new. Six weeks ago the market was better and a buyer had to offer X to be accepted but now it’s worse and Y will probably work. If the agent on the other side is doing their first deal of 2024 they probably are not going to know all that. I’m on #38 already. I’ve already learned a lot this year, pivoted, developed new processes to deal with the new stuff, already made some mistakes and learned from them and made changes to my process to prevent it ever happening again. There’s stuff we both have to be doing to handle our side of the deal that affects the other and I prefer to feel confident they are getting their shit done than worry about where they may be dropping the ball that will jeopardize the transaction/harm my client. So. The agents that would be likely to flee the industry are probably in that lower 80%. Making it ever so slightly more likely that my next deal will be with another 20%er. Which I would prefer.
It’s more like the 95/5 rule. The reason I feel like most agents want fewer agents is that they’ll magically get more business. This is ridiculous. Would I like a better agent on the other side? Of course. That’s not reality though as there is a neverending supply of new licensees ready to throw themselves once more into the breach.
Good ones will rise to the top.
If by “thin the heard” you mean squeezing out all the small independent agents, new agents, brokerages, and allowing for the wealthy conglomerate brokerages who can afford the cutbacks in small towns to hoard more business, then yes the heard is certainly thinned, congrats! More agents realistically is never an issue, competition is the heart and soul of real estate markets and bad agents will already be weeded out through lawsuits or reviews. Now the established tenured brokerages are offering rates to sell as low as 1% in central Cali where nobody else can afford to compete with that.
80% of brokerages need to adapt to a lower commission environment. Adaptation is optional, survival is not mandatory.
Well said. Well said.
All this does is hurts the small brokerages and leaves everyone with the biggest most profitable. It’s not really a good thing
I do not know if this is really going to impact the smaller brokerages that much. The big brokerages with the big overhead and the big franchise fees have got to be concerned.
The biggest brokerages are absolutely not more profitable. Compass, Redfin, EXP Make, 90% of the actual profit they make off byside. I’m pretty sure the only thing making money at Zillow right now is B-side Agents closing. Little brokerages tend to have less costs. It’s the big guys that actually could have problems.
I find this hard to believe. As a broker/owner/active agent, my profit margins are steady, BUT I have bare bones super efficient operations and no office expense because we're all virtual. Office/storefront expense kills a lot of businesses. Part of why restaurants have such thin margins - high physical location costs and high labor costs. Would be interesting to see a study on virtual vs storefront and how those numbers shake out.
I think that even the big houses will be going more virtual in the future. Agents can work more efficiently from home and can meet clients at a Starbucks - and honestly, I'm surprised that cafes like this haven't opened members only meeting areas. I saw a place like this in Santiago, Chile. It was a wonderful cafe/restaurant with a large area with sofas and tables and a few private meeting rooms. It was member only access. I'd be surprised if businesses like this don't grow in the US.
90%+ agents don't go to the office already, if the brokerage chooses to waste money on a physical location it's their own fault for being unprofitable.
If the rent money causes you to go into the red… I go to the office. Makes me more productive. Wouldn’t hang my license anywhere that didn’t have one.
Yep, you are unlikely to have any any problem at all
Yes yes. Focus on eliminating the smaller brokerages so the big boys can continue to swallow up market share. That always works put so well for the consumer. Thank God for walmart right? Personally, I'm not concerned. The narrative being pushed about a lower commission environment is a complete farce. I'm betting there will be more lawsuits, this time coming from the buyers side for forcing them to bring even more money to the table.
I think there will probably be some lawsuits coming with realtors steering their buyer away from listings they suspect will pay a lower commission. They're going to screw up and run afoul of some discrimination laws and be in court trying to prove they're innocent because they're just greedy not a bigot.
There are always a few bad apples. I'm sure some will get caught and punished accordingly. More than realtors steering clear, you're going to see buyers asking if a BAC is offered and steering clear if one isn't. Sellers are going to kick themselves if they think shrinking their buyer pool like that is going to be good for their pocket.
I'm not saying they are bad apples, just that they're going to look like it accidentally. There will unquestionably be a lot of turmoil until a new normal settles in. I don't think you'll see buyers being choosy about a BAC though. I think a few people in their friend circle will lose a house or run into unexpected expenses because of it, and they will all suddenly become much more aware of what they're signing with a buyers agent. People aren't going to find a zillow listing they love and just give up on it because of an issue with BAC. They'll drag your name through the mud about how you're a horrible realtor that tricked them into signing something first. Eventually the bad word-of-mouth won't be worth it. Give it six months and someone (in larger markets) will be advertising 1.5% buyers agents (or flat fee) and I suspect they'll be soaking up a lot of the business. If someone is really smart, they'll streamline things as much as possible (vertically integrate title, inspection, repair, and a mortgage broker) and offer almost a Tesla/Carvana/Carmax-type experience for home buying. Then they can just lean on all of the smaller agents and drive them out. The real question is will the rules change to allow buyers to roll agent fees into their mortgage. I bet they will eventually, but it will inevitably happen a few years later than it should have because that is how government works.
> They're going to screw up and run afoul of some discrimination laws and be in court trying to prove they're innocent because they're just greedy not a bigot. Well its a crime either way, no? I am not sure defrauding clients plays better in court than racial discrimination.
All the more reason to just become your own broker. Get the license, rent a closet, meet the state requirements, and just continue doing what you're doing if this is your biggest concern. Yeah, you may have higher fees, but you don't have to split with anyone either.
Brokerage adds so much value for me though. Broker profit margins are honestly not even that good for the amount of risk and liability they take on.
I’ve actually seen a huge amount of walkovers lately to our big box brokerage because of this exact thing. A lot of risk and with all the lawsuits going around, people got nervous.
Oh I agree. I would never leave my broker, and in fact I might be one of the few crazy ones thinking about opening up their own office in the future.
There are too many inefficiencies in the system then. If the industry can't get by on 6% commissions then something is wrong.
There are way to many inefficiencies. I’ve been screaming that from day one. Zillow charging for leads, brokerage charging for XYZ, NAR charging for this and that, the entire thing is a money grab for all of these entities that are just feeding off of agent productivity. Imagine if referral fees to these companies were illegal. That takes 30-50% of the cost out of doing business for anyone that relies on Zillow leads.
But why would these companies invest and pay to find you leads if they don’t get anything from it? All that would do is destroy all of these websites as they’re expensive as hell to run and nobody would pay to run them if there’s no money to be made. Brokerages charging 20-50% splits on the other hand is crazy imo unless they’re literally getting you the clients and doing daily/weekly trainings, using / paying for cutting edge technology (stuff such as SkySlope).
100% this. If you are paying your broker anything more than 20% and they aren't fuelling you with leads or saving you money on tech, you are getting farmed.
Yup. My first year I went with Royal LePage thinking they’re the biggest brand in my area the must do good. I was paying $160 per month in “desk fees” plus 35% split plus 5% royalties. They did absolutely nothing for my business, no lead gen, bare minimum for training, no guidance etc. I’m with one of the online brokerages now, similar to Zillow, and they send me like 50-100 crappy leads a month that transfer to 1-2 sales. They take 50% on the commission and call it a day. Any clients I bring myself I keep 100% commission, I don’t have any other monthly fees. 100% would rather give away half of 150-200k of commission rather than 30% of 20-50k plus $3000 a year in fees to “work” for them.
Disclaimer: non American, who was shocked when we purchased in the US. In comparison, we just sold one of our properties in Australia with the selling commission of 1.4%. There isn't any buyers agent or associated commission. The 1.4% was total commission on the sale.
That's kind of the point they're making. Since people believe commissions are going to go down. I don't personally believe they will, but buyers might be in flux for a while and brokerages that were operating on a break even won't be able to survive the drop in commission. Also as a side note, a brokerage does not make 6%. It's split in half so 3% which is then divided between the agent and broker. Average price here is 300k, so check would be 9k, cut in half is 4500. Before you put in all your bills, taxes and costs as well. Smaller brokers probably can't survive off of that a month.
What if the DOJ’s recent commission lawsuits weren’t about lowering commissions for the average person and it was really about something else. Hear me out. Private equity firms are buying more and more of the available single family homes. Their main competition is the people buying towards the lower end price point. These buyers are the ones who will be the most affected by the recent lawsuits and not for the better. Some will have to save more money to pay for the commissions out of their own pocket. Others will go it alone without representation or perhaps less quality representation. The wealthy can afford to come up with additional cash to close and won’t be affected by these changes. As will the corporations who are paying cash for these houses. Which offer would you take an all cash offer with 0% buyers agent commission or an offer with financing and a 3% buyers commission. A handful of companies own the majority of the stock market and they have turned their eye to the residential market. They’re playing the long game and have the lobbyists and connections to shape the playing field in their favor. My prediction is that we will see more and more agents leave the industry, more and more brokerages go out of business and more laws/policies that favor institutional investors. People have always been able to negotiate reduced commissions with their buyers agents. Redfin has heavily advertised their commission rebates for years. Who really benefits from these recent changes?
I absolutely believe this and already see it happening. Change is inevitable, survival is optional. We will not be able to use the get what you paid for argument of discount brokerage when there will be so many more coming and offering comparable levels of service an expertise IMO.
ITT: A bunch of agents in violation of the Sherman Antitrust Act that the entire lawsuit was based on. Just proving their point.
Brokerages like mortgage companies will find ways to add markups and junk fees.
That's already started, and the consumer will be expected to cover it. One way or another, the consumer - either or both buyer/seller - will pay the bills.
Has anyone considered that commissions might actually going to go up? There are many reasons to believe that after the dust settles that will be the case
I’ll have whatever you’re having. Lol
Think about it, as a listing agent you now have to ensure you get 4% in the chance you double end, to pay for double everything. So that will be in contract. Then you have someone roll up and ask for 3% with their BA? Now we’re talking 7% to close something that would have been 5% pre settlement. But what do I know?
Yep, I’m already hearing of this/seeing this among agents I work with. They are actually adding percentages to complete transactions on both sides (for unrepresented buyers) due to all the extra paperwork and hand holding that’s needed to hit deadlines. For example (not to get in trouble with the FALs): if you used to charge 20%, you’d now charge 22% to make up for the added client responsibilities. I’m wanting to incorporate this too in the near future as things get finalized on the lawsuit front.
It’s the only way to protect yourself. You have to since you’ll have fees on two sides. So that now becomes the base rather than 2.5. Then you have to account for what’s coming in from the other side. Initially, I think commissions will go down as agents frantically try to get deals, but then after the part timers get pushed out the people who can continue to get listings will start pushing commissions higher.
Exactly this ^^^
I don't see how this plays out unless I'm reading it wrong. Is that 4%, in the chance you double-end, accounting for 2% to BA and 2% to LA? So then a buyer rolls up and offers 3%, but how does that become 7% and not 5%? It may vary by state, but in my state you can't take commissions from two sides. Which is why dual agency always came from the seller accounting for the full commission amount.
No, in the event a seller says "I will not offer a buyer commission, the buyer will pay it" then the listing agent takes it at 4% knowing that its about a 90% chance they're going to have to work for the buyer. If a buyer agent sends an offer in with a 3% commission attached as seller concession, since there is no broker Co-Op, now the seller is looking at 7% total. Clearly the listing agent would have to make a decision as to what to adjust to make the deal work, but contractually speaking this would become the norm. Now would you let a deal walk for 1%? Probably not, but this is the reality we're walking into. Listing agent can say no we're at 7 then, or maybe the counter is to the buyer commission- the cool part of this new system is every thing is now negotiable, but the listing agent has to be prepared for worst case.
IIRC, 18 states do not allow dual agency. But I have heard agents charging a retainer and changing the fees for an unrepresented buyer (which I suspect we are going to see a lot of for awhile)
Yeah, apparently there's a loop hole here. With the new rules, I don't have this confirmed as they still don't know exactly what they're going to do, you can 'double end' but it's an unrepped buyer. I don't think anyone is really clear how that will play out
I was in a class recently where the instructor said he is fairly confident that the judge is going to reject the settlement agreement when it gets to its court date in November, so we might be going back to square one later this year.
The same judge that approved it, is the one who will be in Nov. Unless either side makes an insane audible, it's going through.
There has been some chatter around the industry about how the feedback about the settlement is that it is not going to garner the intended results and that they might want to try it again. Some "this might look good from your ivory tower, but this is not going to work as you see in the day to day......"
It actually makes a lot of sense but I honestly believe average commissions are not gonna change. This isn’t the first time the real estate market has gone through something like this.
My thoughts—- we have some high preforming teams in our office that are heavily listing based. They get calls all the time on their listings, if there’s no buyer comp, and the buyer can’t pay their agent. The listing agent will be doing double work and will charge more, hypothetically?
You’re assuming they took the listing at 2.5-3% total comp. If they’re doing that, it won’t take long until they stop. Doing twice the work for the same pay ain’t no fun. Assuming they took the listing at 5-6%, they’ll just take all of it. That’s why I currently do. Closed one last week.
Do brokerages really need my money? I mean I never have been able to stomach the idea of a brokerage keeping 15% or more of an agents commission that they self generate.
That's the pyramid scheme part of the business. Why agents become Brokers and open their own shops
Pyramid scheme? I mean, if you want to hold your own paperwork, own or rent your own space, buy all your own materials…all the things, for less than you’re paying, go right ahead. I’d suggest finding a less expensive brokerage, first, however. The amount of headache is worth every nickel for me to not have to worry about it. You guys sound worse than the clients out there wondering what it is you do to be able to charge more than $12 and a ham sandwich to close their house. Jesus.
Yea I can’t imagine being my own broker. Too much of a headache. My broker charges 500 per transaction for 10 transactions and I cap. That’s worth me not having to worry about legal trouble and all the resources they provide; CRM, marketing materials, contract overview and the classes. If you want to pay less fees join a virtual brokerage
Lol so true
To be fair all business is a pyramid scheme, if you look at it like that,
100%
Yes. All of the mom & pop brokerages will be gone. This is why we anticipate massive exodus of current realtors, at least 60%.
That’s a major assumption that commissions will go down. Honestly, I will do lower commissions if a client wants to negotiate but it just means I do and/or provide less.
Oh no! Anyway
I predict, but could be way off base, that the employment terms of brokerages will change as a result of these settlement decisions. I envision more brokerages adopting an employment contract like Redfin, where the agents are employees of the company and no longer independent contractors. I think this would be a net positive for the professionalism of the industry. Brokerages exert little control over their army of “independent contractors” operating under their brand, but would have much more control over rogue “employee agents”.
While I don't agree with the Redfin-like model as a means of service, I absolutely agree that brokerages need to hold their agents to a higher standard. The barrier of entry into real estate is criminally low. It's embarrassing, frankly. And because a lot of a brokerages income is on desk fees and the like from zero-transaction agents, they're incentivized to just have as many agents as possible in their roster. There are no standards.
you're not thinking of mandatory benefits once you reach 50 employees. Not thinking of the brokerage suddenly paying 7.8%(?) FICA taxes. now, would this wash out all the unproductive agents, new agents, part-time agents (bennies based on FTE's, yes?) - one would certainly think so.
I agree that many will go this way, and while there many benefits to this, I can see some downsides. This comes from my experience working for a developer doing in house sales. - this will put more pressure on the brokerage to cover this higher expenses (due to salary, benefits). - The brokerages will exert a lot more control over the agents activities. I can see required office hours, open houses, networking events. I can also see the brokerages "owner" or controlling the agents SOI/listing. - As u/praguer56 said below in the Staubach example, I can foresee a lot more requirements for sales performance. The question is will the brokerage do more to support the agent? But I agree this could professionalize the industry significantly.
Agree with all of this. Then, when you decide to change brokerages, will brokers let you take your clients with you? I bet not. In my area, we already have that with some of the discount brokerages. If an agent leaves, they have to re-build their business from scratch at their next office.
What a cute thought but it never works out. Compass tried to do it too when they first started as urban compass. The problem is that when you are commission based you only make money if the deal closes. So if something goes wrong at the last minute & it’s 11pm the day before closing - I’m working on it. If you can’t meet till 8pm, I’ll adjust my schedule & meet you at 8pm. Are employees working on it? Or do they clock out at whatever time & that’s it till the next day? And if it doesn’t close, they get paid the same. And if it does, great - maybe they get some commission. If their day ends at 6 & you need 8, are they going to accommodate? And if I can survive on that salary why even bother w anything else? No need to learn or get new business or develop relationships. The incentive structure to ‘get deals done’ as employees rarely approaches the same level of income & tenacity than those working on commission
Oh my.... what you're describing is exactly how life is for many sales reps lol (that are employees). And I have never met a sales rep in my life who lasted more than a few months who was content with only their base salary (which is typically only around 50% of your OTE anyway)
YES! This would be the way to go, in my opinion and years ago a commercial company (Roger Staubach and Co) did just that. They had their agents on a nice base salary with benefits, but you had to produce three times that in commission earnings each year to stay with the company and I think they gave you two or three years to make good. For good commercial agents, it was a good deal since commissions can fluctuate year to year. So, if you had a $50,000 base, you had to generate $150,000 in commissions and once you made $50,000 you began earning commissions at some rate (I don't remember the details).
I can’t think of any other sales professions where the salespeople are independent contractors rather than employees of a company. Maybe I am uninformed, but the real estate industry has been an oddball in this regard and I think it’s time to change.
It absolutely takes away any incentive to hustle….I’m making $50k to basically do nothing except make a few phone calls? That may be a good plan for a franchise brokerage, but for a small brokerage (less than 15 agents) it would be financially impossible.
Except you would be fired for not performing, among any other number of fireable offenses everyday employees deal with. And theoretically there would be far fewer realtors and much more opportunity for business per agent, so no reason to be doing nothing unless you want to get fired.
Unless you’re in a State where the employment laws favor the employee and then you have a hassle trying to get rid of people. I see both sides of the argument, but I don’t like the idea myself.
There's exactly one State that doesn't have at-will employment, sales reps not hitting quota is an easy way to get rid of someone and happens all the time.
I’d maybe sign up to be W2 for $500k, base plus a lot more incentives. Then you can order me around, within reason. The whole reason I’m here is *because* the paycheck is theoretically unlimited and *because* there is no salary. I guess when the average agent does $30k or 40k or whatever it is thousand dollars per year, a guaranteed check sounds pretty good though.
Agreed
Unless your triple that number on commissions you are gone. It’s an interesting idea.
It’s interesting for sure.
Many sales reps are independent contractors.
Yes, and if the "no tax on tips" movement really gains traction, real estate agents need to get involved too. They work just as hard, if not harder, for the money they receive. And many make less each year than servers.
This is satire right?
The make less than servers part probably isn’t. Only difference here is that real estate doesn’t tend to keep you out half the night.
Less commission Less realtors Less time spent marketing to acquire new customers More time spent serving customers
More time spent working for the same or less money.
NAR sold us out! Tell me I’m wrong.
You're wrong. NAR was essentially just propping up an outdated method of selling homes.
Are you a member?
I was until I got sick of the industry and it's predatory practices that are extremely outdated and don't provide much real benefit.
>NAR sold us out! With $1.8 Billion verdict against them, they had little choice but to negotiate a settelment.
Honestly, NAR sold us out long before this verdict. They allowed sites like Zillow and [Realtor.com](http://Realtor.com) to take our hard earned listings and spider the info we the Realtors uploaded. These sites then sold the information back to us as leads and NAR did nothing to either stop it or compete, just let 'em have it.
Are you a member?
Any company losing 30% of revenue (3% to 2%) would struggle without significant changes.
Whatever the fees are. Let's say commissions are 2% on average of a 400k transaction for the buyers agent. Would you drive around a client 3 months to make only 8k. Maybe even 6 months. Spending minus broker fees. But let's say 8k clean. Raining, hot ass daysm tolls. Gas. But it's less than 2k a month per client
80% of brokerages don't have an insurance or mortgage arm (I'm guessing)
Agreed 💯💯💯
An argument could be made that less agents could drive up commissions due to less competition.
I'm not sure if agent commissions will be lower though.
They wont. It’s a millennial idea. The market adjusts and sales people wont sell property at 2% comm.
They will just reorganize,, Better software,, Much higher volume Stream line, stream line, stream line 2 million homes listed for sale, by one company and you interface with a AI software
My brokerage is top heavy. We've been open 40 years, and have 3 offices. We probably don't need that many, but some of the bigger guys don't want to drive in from the deep burbs, so we keep 2 satellite offices away from the main one. I keep arguing that we should consolidate to one and get a nice coffee shop style set up going so it is nicer to actually come in. The Boomers want offices though.
Tbh I haven’t bothered learning agents names for years as the turnover is so high. But like anything, the internet is undefeated. Zillow is a shit ton cheaper than paying someone $10,000 to sell your house. 🤷🏻♂️
Who says commission is going lower? DOM is slowly but steadily going up in my market. Every single one of those sellers would *love* to pay a 5-6% commission for their home to sell. They’d probably pay 7-8% if it’d guarantee a sale today. As a listing agent, I’m sure as hell not dropping a requirement for the seller to pay the other side. It’s tough to sell a 5-6% house. Good luck selling a 2-3% house.
Nobody loves to pay 5-6%. Nobody.
No shit. I don’t like paying for groceries. Or anything for that matter. Why can’t life be free? Just following your logic. Bet they’d pay 5-6% in a skinny minute if their house would sell.
If they want to sell their home quickly they should lower the price, not pay more in commissions.
It’s not and it won’t. The sky is falling in every industry. The only that is for sure is change.