Are 6 percent real estate commissions toast?

Here's a link to a columnist who's clamoring for changes to the 6-percent real estate commission model. He thinks the Justice Department's deal with the National Realtors Association will mean slimmer paychecks for agents:

Kiss your 6 percent commission good-bye, Ms. Agent! Competition is on the way. The only reason — only reason — that Realtors could hold onto their high commission for such little value and work is that they kept information away from the marketplace, making it inefficient.

I'm not convinced the full service real estate agency is kaput. Cheap brokerages seem to flourish during booms, when homes pretty much sell themselves. But the recent collapse Tampa's Home Discovery (home of the 2 percent commission) showed people require more coddling in a down market.

You can list a home as cheaply as you want, but good luck getting an agent to show your house if you're not kicking them a few thousand dollars in commissions. They just won't show your house unless they're paid in the end.

Here's a link to this guy's full column

Comments

[k]

If anything I'm seeing commissions go up with even more bonuses offered. Or, simply shifting more commission to the buyer agent. It's either reduce the price or increase the incentive these days. Lowering the commission should reflect in a lower price for online broker's listings, but do they?

Your paragraph on Home Discovery was spot-on, BTW.

[Tino]

Since almost all of the work is done by the selling agent, there is a very juicy market for discount agents that refund a big chunk of their 3% commission back to the buyer.

Previously, these agents could not get full access to the MLS. Now they can. Why WOULDN'T a buyer go with an agent who gives you a 1% or more rebate?

Letting your agent keep the full 3% (or more) commission is downright foolish. And yes, demanding a cut of the commission at closing is completely legal, despite the lies/ignorance doled out by Realtors.

[k]

"..demanding a cut of the commission at closing.."
Committment escalation?

You'll make GREAT relationships that way, Tino. ;)
Better to arrange any rebates at the time of agency.

"..lies/ignorance doled out by Realtors."
Treading awfully close to libel are we?

[Tino]

Yes, rebates should be discussed at time of agency. However, they should be paid out at the closing. Thank you for clarifying.

It has nothing to do with relationships. It is merely about saving your hard-earned money.

I encourage other readers out there looking to buy a house to ask their Realtor about a rebate. I would love to see what responses they get. I've heard several: "it's illegal", "my broker doesn't allow it", "not in Florida", etc.

Anyone else?

[Frances]

"It has nothing to do with relationships. It is merely about saving your hard-earned money."

No business is all about relationships.

You'd have little leg to lean on by asking for a piece of their commission since it's the Seller and the binding contract that offer it, not the Buyer. Grant it, the Buyer finances it, but I'm not sure the courts will see your logic.

Then there's the illegality of giving commission, (in excess of $50 bucks I think for apt rental referrals - K?), to an unlicensed party. Regulatory laws.

Are you sure your license is for Real Estate?

[Frances]

Finally, if you're "lucky" enough to find an agent willing to prostitute their commission away, I'm sure they'll be marvelous when it comes to negotiating.

Your suggestion is not a bad idea in theory. You could certainly weasle the amatures out of the pack based on their response to your demand.

[Tino]

Frances, you are utterly wrong on all counts.

1. The buyer's agent traditionally receives half of the commission. They can give any amount of it to the buyer. A prudent buyer should negotiate a rebate with their agent, especially in a weak market. A number of real estate companies actually advertise rebates for buyers.

2. Under Florida Rule 61J2-10.028 of the Florida Real Estate Commission (effective 12/30/1997): "The sharing of brokerage compensation by a licensee with a party to the real estate transaction with full disclosure to all interested parties is not considered a violation of Chapter 475, Part I, Florida Statutes."

If you are a licensed agent and spreading this falsehood, then you should be disciplined for negligence. Ever hear of the term "fiduciary duty"?

[Tino]

Any Realtor that intentionally hangs his client out to dry after both parties sign an agency agreement is the reason why Realtors are seen as lying cheats on the level of greasy used car dealers.

It's illegal (fiduciary duty obligations), unethical, and one reason why the government has been trying to break up their mafia-like organization for years. I'm not sure why you would even stoop to make that insinuation.

[k]

Frances, as I understand, it's legal in Florida and many brokers make a practice of rebates to transaction parties. It must be fully disclosed in the contract.

Tino has the correct text.
(See https://www.flrules.org/gateway/RuleNo.asp?ID=61J2-10.028) part b

RE: "referrals". Those can't exceed $50 to a non-licensee. You are correct.

Nice post on rentals, BTW.

[k]

mafia-like?
Is someone going to put a real estate contract out on you? ;)

[Frances]

"The buyer's agent traditionally receives half of the commission. They can give any amount of it to the buyer. A prudent buyer should negotiate a rebate with their agent, especially in a weak market. A number of real estate companies actually advertise rebates for buyers."

I only quoted the Contract binding the commission because you originally trumpeted asking for their commission at the closing table. You used a tone implying that a portion of their commission is somehow owed to you since it's "your" hard earned money.

I stand corrected on the rebate issue. However, while I've owned several homes and investment properties, I am indeed not a licensed agent so I've never been asked to part with a commission.

But I've also have never ask for a portion of someone's commission, nor will I. Assuming someone worked their end of the bargain, found me the prop, negotiated, orchestrated the closing ect., I'd feel it'd be unethical/immoral to take their money, when I essentially agreed to it from the beginning. Bait&Switch.(BTW - it's not 3%, but more like 1.5% after splits with their Brokerage.)

Everyone, even greasy used car dealers, has the right to earn a living.

6%? Most of the Realtors in my office are listing properties at 7% and co-broking 4% to the selling agent. We, as Realtors, are still being paid....not to find a house to buy but to negotiate the contract, ensure it gets from contract to close and out of the courts after the closing. No matter what Tino says (and I think too many Realtors have turned him down for dates and he is hurt by the rejection) we are indeed professionals and do an exceptional job for our clients.

[Rachel Sartain]

For those of you who think Realtors should give rebates or work for less... Have you ever worked as a realtor? Do you know what we really have to do to find a buyer the right house and get it to closing OR Market, show and sell a property in this down market? It sounds so simple but trust me it is a long, time consuming, experience needed, intense process.

No one works for free. I would not ask you to perform your job 24/7/365 with no pay so please don't expect the same out of your Realtor. If you have one that isn't working to your full expectations - Fire that one and find someone that will!

[Brian]

Wow, almost all the posters on this blog are real estate agents. Now we know they have an agenda. When anyone reads one of their posts on a different thread, remember their opinion is extremely biased.

Oh. Get off it Brian. Everyone, Realtors and nonRealtors, has a bias.

Brian -

Were you expecting more mechanics to be blogging on a real estate site?

[Kevin]

Oh. Get off it Brian.

Realtor intimindation at it's best! If they can't get it their way, they intimimidate the blogger on this site to scare them away! Brian, go to for sale by owner, you don't need a realtor to buy these properties.