{"id":2953,"date":"2017-05-19T07:04:01","date_gmt":"2017-05-19T11:04:01","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=2953"},"modified":"2021-11-23T17:29:41","modified_gmt":"2021-11-23T22:29:41","slug":"changing-real-estate-agent-commissions","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2017\/05\/19\/changing-real-estate-agent-commissions\/","title":{"rendered":"Consumers changing real estate agent commissions"},"content":{"rendered":"

Consumers have most likely complained about real estate agent commissions since the advent of real estate brokerage.\u00a0 However, before the turn of this century, most did not question the real estate agent commissions they paid because they chalked it up to the cost of selling a home<\/a>.\u00a0 Times have changed, such that having a conversation about commissions and compensation is a common topic when agents and consumers first meet.<\/p>\n

Real estate agent compensation is evolving as fast as the industry.\u00a0 The US Bureau of Labor Statistics<\/a> (bls.gov) reports the median annual wage for real estate sales agents was $44,090 in May 2016 (The lowest 10 percent earned less than $22,230, and the highest 10 percent earned more than $112,570). The BLS states:<\/p>\n

“An agent\u2019s income, therefore, often depends on economic conditions, the agent\u2019s individual motivation, and the types of property available. Income usually increases as agents become better and more experienced at sales. Earnings can be irregular, especially for beginners, and agents sometimes go weeks or months without a sale. “<\/p><\/blockquote>\n

Before the turn of this century, there was more conformity in real estate agent commissions because most agents were not negotiable in the compensation they charged.\u00a0 However, modern agents have adjusted their business models and are open to negotiate how much they will be paid<\/a>.<\/p>\n

There are also many real estate broker compensation structures <\/a>from which you can choose.\u00a0 Some brokers offer limited services, and some offer fee-for services, which includes a MLS placement service.\u00a0 Some fee for service brokers offer \u00e0 la carte services, where you can choose specific services for which you want to pay.\u00a0 Most \u201cfull service\u201d agents still charge a percentage, but the percentage can vary from agent to agent.\u00a0 Full service agents can also vary on the extent of the \u201cfull\u201d service they provide; however, many will be open to negotiate their commission rate.\u00a0 Regardless of model, get the agent\u2019s services in writing and hold your agent accountable.<\/p>\n

The increased market pressure on agent compensation is actually good for the consumer.\u00a0 It doesn\u2019t only lower the cost of the real estate transaction, but it also increases the quality of services.\u00a0 This was the finding of an empirical study by Panle Jia Barwick and Parag A. Pathak (The costs of free entry: an empirical study of real estate agents in Greater Boston<\/a>; The RAND Journal of Economics; Vol 46, No. 1, Spring 2015, p.103\u2013145).\u00a0 Their study investigated three scenarios that are chipping away at the traditional real estate agent compensation models: lower commissions, commissions based on break-even costs, and improved information about agents\u2019 past performance.<\/p>\n

Barwick and Pathak found some interesting outcomes from their research.\u00a0 Besides concluding that there are consequences for fixed real estate agent commissions, they also discovered that the easy entry into the industry (i.e., the ease of getting a real estate license) reduces the quality of service.\u00a0 Furthermore, the increased competition among real estate agents caused by easy entry into the industry is not beneficial to a home selling or time on market<\/a>.\u00a0 They also concluded that<\/p>\n

\u201c\u2026lower commissions reduce transaction costs, which might lead to a more liquid housing market, improved asset allocation, and better housing consumption. Flexible commissions also provide a channel for consumers to choose services tailored to their preferences.\u201d<\/p><\/blockquote>\n

Their results suggest<\/p>\n

\u201c\u2026that a 50% cut in commissions would result in 40% fewer agents, social savings that amount to 23% of industry revenue, and 73% more transactions for the average agent.”<\/p><\/blockquote>\n

Realtors should embrace the discussion about compensation and real estate agent commissions with their clients.\u00a0 It offers the agent an opportunity to demonstrate their accountability.\u00a0 It also promotes transparency and the services we Realtors provide, and builds the trust that is lacking <\/a>in the industry.<\/p>\n

Original published at https:\/\/dankrell.com\/blog\/2017\/05\/19\/changing-real-estate-agent-commissions\/<\/p>\n

Copyright\u00a9 Dan Krell
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\nDisclaimer<\/a>. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.<\/p>\n","protected":false},"excerpt":{"rendered":"

Consumers have most likely complained about real estate agent commissions since the advent of real estate brokerage.\u00a0 However, before the turn of this century, most did not question the real estate agent commissions they paid because they chalked it up to the cost of selling a home.\u00a0 Times have changed, such that having a conversation … <\/p>\n

Continue reading “Consumers changing real estate agent commissions”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[382,8,256,13,402,23],"tags":[912,794,633,797,920,803,1105,517],"class_list":["post-2953","post","type-post","status-publish","format-standard","hentry","category-home-seller","category-home-seller-tips","category-home-selling-tips","category-real-estate","category-real-estate-agent","category-realtor","tag-home-seller","tag-home-seller-tips","tag-home-selling","tag-real-estate","tag-real-estate-agent","tag-realtor","tag-realtor-commission","tag-selling-a-home"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-LD","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2953","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=2953"}],"version-history":[{"count":9,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2953\/revisions"}],"predecessor-version":[{"id":6286,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2953\/revisions\/6286"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=2953"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=2953"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=2953"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}