Why are real estate agents paid such ridiculously high commissions? What real value do they create ???

Question

I think real estate agents are just grossly overpaid for the kind of work they do, and it's an industry where not every agent gets fairly paid. Too much wealth is concentrated on too few agents. It's time for the government to correct the % of commissions to agents given the high value of properties these days, and to regulate the number of properties each agent can buy/ sell in order to give all real estate agents fair opportunities.

I think real estate agents are just grossly overpaid for the kind of work they do (which is not rocket science rally) and it's an industry where not every agent gets fairly paid. Too much wealth is concentrated on too few agents. Some agents may argue that the commission earned goes to cover the overheads, but isn't this the same for most other sales/ business owners?

It's time for the government to correct the % of commissions to agents given the high value of properties these days, and to regulate the number of properties each agent can buy/ sell in order to give all real estate agents fair opportunities.

Answer 1

You'll probably get quite a few answers from realtors, but here's my consumer point of view.

1. I don't have to hire a realtor if I don't want to. If I really want to do a LOT of work and research, I could do it myself. You can buy or sell a house without an agent. There's no law that requires you have one.

2. Commissions aren't set in stone. Everything is negotiable. You can negotiate a flat fee, a different percentage, or however you want to do it. You just need to find an agent who agrees to your terms. If you can't find one, you're probably not offering enough for the deal to be worth their time. It's called capitalism.

3. Good realtors do a lot of work, whether they're acting as a selling agent or a buying agent. If the deal falls thru, they've burned up a lot of resources for nothing. It's in their own best interest to do a good job.

Personally, I'd rather hire someone who knows what they're doing. I think my selling agent will be able to help me make my selling price high enough that his commission will be covered by it AND he'll save me from a lot of headaches. I was cautioned to wait a few months before moving my renters out so the market could stabilize in my area, and sure enough it looks very likely that this waiting time will make me about $5K over what I would have gotten before. I haven't even listed the house yet and he's nearly earned the commission.

Answer 2

This question will never be answered as long as there are Agents and Sellers that need one. Some agents should be banned from the business. Many sellers should have sold by owner. Most Lenders should be imprisoned also. Depending on your most recent real estate transaction you may feel the last 3 statements are all correct. Herein lies the problem, the lender might have had to resolve many issues for their client just so you could close. The agent might have solved many issues before they undermined your deal. Unrepresented seller's are usually in total bewilderment as to how to solve a real issue within ther deal.
The agent negotiates a commission and since there is no way to determine whats fair or unfair its up to the seller to agree with that amount. The variables are too numerous when dealing with the public. One reason sellers can be unhappy is because they werent educated by the agent as to just what did they receive for their money. Thats the agents fault and likely a lost referral will result from such. You as a seller want a good negotiator on your side yet complain because the agent was able to negotiate you. It's all about choices and good agents will get more business. Sadly however some agents arent good yet get a lot more than their share of business. Why ? because people make choices and often those choices are made from an uneducated person being pressured. I have closed hundreds of transactions for my clients and had to do the other agents work for them so my client would close. They didnt deserve a cent yet got half the brokerage, but my priority was getting results for my client. In those deals there was 1 agent underpaid and 1 grossly overpaid. Never was the seller or buyer looking at commission as a measure of competency. My very unpopular idea a little over a decade ago when buyers agency was breaking out was that sellers should only pay their agent. Make buyers agents prove their worth and charge their buyers directly. I have never witness such sloppy and lazy work as what I usually see when its a "buyers agent" that becomes involved. There are great buyers agents also but most are worthless and poor at best as negotiators. Same with listing agents and lenders and it is the public that has handed them their windfall. As a consumer one must qualify their service provider, not be qualified by the provider. There are more tools available for free to sell houses with now than even agents had just a few years ago. There isnt however the right attitude to sell in abundance and many people will always need an agent due to that. As for the value they create it is there if needed but often not required. It takes less time to research mortgage lending and real estate than it does to earn 1/2 of a monthly payment. Why do people place so much at stake in a strangers hands and then want taken care of for the lowest possible fee. If you want your moneys worth it is your responsibility to learn the right questions to ask and how to qualify a service provider. Until the public can understand that, no commission amount will seem low enough and inept morons will still rake in unearned cash.

Answer 3

I think you are missing some information! First of all, the total amount of commission paid on a real estate transaction does not go directly into the salesperson's pocket.

Out of the commission, there are many expenses, office expenses, advertising, and gas to drive to and from to show the properties, cell phone, internet access, just to name a few.

The average realtor in the US makes about $24,000 a year. For a job that often requires you to work evenings and weekends, and more than 8 hours a day, do you really think $24,000 a year is "grossly overpaid"?

As far as limiting the number of properties each agent can handle, why would you want to do this? The reason people choose a sales career is to be able to have their earnings based on their efforts. If you are ambitious, you can make more money because you will sell more properties. Limiting the number of transactions an agent could do would only hurt the consumer, because they would not be able to pick the best agent, and would be stuck with agents that haven't met a quota.

A good agent will make your real estate transaction go smoothly, and bring you the highest and best offer for your property, plus handle all the legalities of selling a property, and leave you free to prepare for your move to your new home.

If this job was so easy, and there wasn't a value there, everyone would be selling their properties themselves. However, the fact that so many For Sale By Owners end up going with a Realtor is proof that there is more to our job than just showing a house and collecting a check.

Answer 4

I agree witht the sentiments of your question! I have dealt with many realtors over the last couple of years (I buy and sell real estate), but have only had ONE that did the job they were hired to do. She was GREAT at her job! However, all of the others were only good until they were hired. I just fired my realtor yesterday (after being "convinced" once again that I needed him to sell my house). I fired him and then later that same day found a qualified buyer for my home on my own!! Yes, I will have to do a little paperwork and have to be up on my reading. But, totally worth saving THOUSANDS of dollars!

Answer 5

I agree with the person who asked the question.

1) In the past, when the value of properties were much lower, the % of commission was given taking into account of the value of the properties so that the agents could earn a reasonable income. Now that the value of properties are much much much higher, the % should be lowered to recognise the value of the properties

2) Please read the question carefully - the asker was referring to those obscenely well-to-do agents who, because of word-of-mouth or "reputation" basically going in for a ride on this bloated industry. I know of a few well-to-do estate agents who basically didn't need to do much but just gets tons of business referred to him and sold because of his "reputation". To add salt to the wound, in his ad, he was posing besides a Ferrari on the front porch of his big mansion !

3) Paying taxes and licences ? What's so unusual about that ? I belong to another consulting profession which requires me to pay my dues as well.

4) Hard work ? I work hard as well, tax my mental faculties to the point of exhaustion, but don't get the commissions as much as agents do. Perhaps it's time to change career.

Answer 6

Ramman has forgotten that we pay our taxes and BOTH sides of Social Security. Have you paid for your own Health Insurance lately? We split the commission with our brokers and our dues and fees we pay are almost $900.00 per year. Then we have to pay for mandatory continuing education to keep up our licenses which also costs us.
The more work you do the more you earn. Work part-time you get paid part-time.
Please do not discuss Distribution of Wealth by the government. People might get the impression you are a Socialist.

Answer 7

I for one am TIRED of people ASSUMING that Real Estate Agents make SO much money..................there is alot of work that we do that we do not get paid for.............and I agree with the above mentioned.............IF YOU DON'T LIKE IT, THEN DON'T USE A REALTOR................and I don't know what your profession is, but why don't we have the goverment start overseeing what everyone in the world makes in wages when there is some arrogant butt hole that doesn't agree with it