Why the Low Commission Model Is Right for the Real Estate Industry

9623 Parramatta Pl Highlands-large-001-3-Exterior Front-1500x1000-72dpiFor far too long real estate brokers have been splitting a 6% commission on the transaction of a home (3% to listing agent and 3% to buyers’ agent). It’s been the industry norm for decades. Though I do know some firms in parts of the country pushing that number up to and over a total of 7%.  So, for let’s say at least 40 plus years real estate transactions have cost the seller 6% of a sales price. It’s the “industry norm”. I don’t know about you, but it seems like a lot has changed in the last 40 years.

Everything else in our world has changed, why not commission on the sale of a house? That’s a great question and one I’ve been asking for some time.

Think about it. What do we as real estate brokers have that you don’t? Access to a closed system. A home cannot be listed for sale on the MLS unless it’s listed by a licensed real estate agent. Ok, what else? We have access to tools that make it easier for other real estate agents to view the home, schedule a showing and manage contracts. These are excellent tools and they make the transaction much smoother than it would be if you handled it on your own. These services have improved with technology not only making the process smoother for you, but also easier for real estate brokers. But much of the rest of selling a home has been completely disrupted. Data is democratized. Meaning, as soon as a home is listed on the MLS it’s accessible to most everyone Several sites syndicate the information. Many interested buyers will have the listing show up in their email within seconds of the listing activating. Photos, virtual tours and online scheduling and contracting make listing your home a fairly smooth process.

Don’t get me wrong, we offer a valuable service, but things have changed. Our jobs are a bit easier than they were 40 years ago. Research is at our fingertips. Marketing starts with a click of a button. Buyers can find us with little obstacle. Shouldn’t we change with the times?

I operate on fractional commission as compared to traditional “status quo” brokerages. Buyers working with me have saved up to $20,000+ on the commission structure alone. Other groups like Redfin have also made this change and it’s to the advantage of the consumer and our industry that they have. And there are dozens of discount brokerages that have joined the ranks. You’ll hear real estate brokers throwing a fit and disparaging what they call discount brokerages. They may say “you get what you pay for” and in some cases they’ll be correct. But, just because someone structures the commission on the sale of your home to your greater advantage does not in itself mean you’re getting reduced service.

You need to take the same care in hiring a low commission agent as you would anyone else. Look for someone with expertise in real estate who provides great service. Look for someone who will teach you and equip you to excel in your real estate investment in the future. My goal is to not only have your best interest in mind by representing you, but also by structuring commission in a way that you keep more money in your pocket than you would have otherwise.

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