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Commissions Still High

This article was written by in Real Estate and Home. 4 comments.

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In general across a broad variety of services, competition has been driving commissions down. The internet has certainly helped in decreasing these costs to the consumer. For instance, you can trade stocks for $7 instead of $35 or more. Even management fees for index funds have been going down.

As home prices have gone up, so have the number of people with stars in their eyes, wanting and willing to become brokers. More brokers have to compete for business.

For some reason, we still have to pay (in general) a 6 percent commission to sell a house. New technology has not done much to reduce that amount. Here’s why, according to CNN. Traditional brokers act in certain ways that will ensure that individuals selling homes will not receive good service from a discount or online brokerage. Here are some of their tactics:

* Traditional agents, when serving a buying customer, do not show properties represented by a discount broker. Some traditional brokers won’t even help a customer if he or she was brought in my a discounter.

* According to the article, at least one discount realtor has been harassed by traditional agents who tell their clients that the discounter is out of business.

* Traditional brokers try to use leverage with politicians to seek legislative actions to restrain trade. The result of this has been “minimal-service” requirement laws. In some states, brokers are not allowed to perform just one service, such as listing on the MLS. The customer would be charged a full commission and would not even have the option of going to a discount broker.

MM over at PFBlog has recently finished selling his home without a broker. He is posting a series of tips for those who wish to do the same. It may be worth the effort — although tradiional brokers will surely try to convince you that it’s not.

First, I’ll need to worry about buying a house. That’s another issue altogether.

Updated June 23, 2016 and originally published October 26, 2005.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

avatar 1 Anonymous

As an aside, check out Brown Co., the commissions on a market order is only $5.

avatar 2 Anonymous

I have several friends who have recently become real estate agents. How can I tell them that I think their entire industry is a sham? There is a value to the service they provide, but it’s not completely necessary. Like MM, it feels like with enough research I could do well enough on my own, or at least well enough to not warrant the use of a broker. It would be like hiring a financial advisor for a single transaction.

avatar 3 Anonymous

I don’t recall the name of the movie (maybe Robocop) but there is a scene where
someone walks into a home for sale – instantly televisions turn on and a guy comes
on to tell you the “features” of the home and how great it is. It occurred to me
that with modern telecommunications, that person could easily sit in India and give
you the speech.

The paperwork could be emailed offsite to India as well. We’re only a decade away
from reality.

Oh yeah, you’d need a rent-a-cop to make sure no one breaks or steals anything….

avatar 4 Anonymous

DOWN TO 2%??? Are you kidding me??? 2% on an $800,000 home in the Bay Area comes out to $16,000 commission…..all this for what??? Seriously, somebody please enlighten me as to what these Agents do to earn “my” $16,000. I will start and if any of you “agents” out there have anything to add, please…..let me know:
1. MLS listing? Can do this for $500 on my own
2. Color brochures? Kinkos for less than $50
3. Open house? Can do this myself and I also know the house, neighborhood and local schools alot better than the agent who lives miles away. I can tell you what it’s like at night, day, during the weekends, how the traffic is leaving in the morning and coming back at night. I can tell which neighbors are nice and friendly……practical things that are important unlike the generic answers you get from the agents.
4. Market on Craigslist? Can do this myself
5. Market in newspapers?
6. Let everybody else know about my home…..See #1 above
7. Help with escrow/title process? Hire an attorney for a ton cheaper…..also, the attorney can answer legal questions for you whereas the agent can not.
Seriously, somebody please enlighten me!