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ottawavalleygardener

commission % & housing prices

OttawaGardener
11 years ago

Doesn't it seem odd that the commission rate is basically the same no matter where the house is? If I sell my 2-bedroom, 2-bath bungalow (=ranch in the US) for $340,000, I pay $20,400 in commission, but this same house elsewhere might sell for $120,000, and be much harder to sell (with the commission being $7,200).

It is still a seller's market here, but that commission cost for a house that will sell quickly seems high, and with no relationship to the difficulty of selling. I would never try to sell on my own and recognize that realters work hard, and I also realize that they have to split the commission with the buyer's agent. Just seems like so much money to me!

Here are current Ottawa sale prices:

Standard condos witnessed the largest price increase, climbing to an average of $227,667, but standard two-storey homes also rose 5.9 per cent year-over-year to an average of $345,167. Prices for detached bungalows were also up four per cent, to $339,750.

Comments (20)

  • Billl
    11 years ago
    last modified: 7 years ago

    There isn't an industry where commissions are correlated with how hard it is to sell something. You either sell it or you don't. You can work hard and see a sale fall though at the last minute or you can luck in to a cash buyer who thinks negotiating is too much hassle.

    If it is any consolation, I don't know a lot of super wealthy REA's. Some make a good living, but very few are hitting the jackpot - especially now.

  • terezosa / terriks
    11 years ago
    last modified: 7 years ago

    If it is any consolation, I don't know a lot of super wealthy REA's. Some make a good living, but very few are hitting the jackpot - especially now.

    I work in a RE office, and I can tell you that as the receptionist here (and not even full time) I am making more money than most of the agents. The ones who are making a living a working - a lot!

    I have a RE license and spent a number of years working as an assistant and occasionally selling on my own. It's definitely a lot more work than I had anticipated before I got into the business. And now with the short sales and foreclosures, the paperwork is ridiculous.

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  • OttawaGardener
    Original Author
    11 years ago
    last modified: 7 years ago

    I guess my point is that some agents have to work incredibly hard to earn $60,000/year, and in other areas, the same # of sales will earn $200,000 (due to higher selling prices). In a perfect world, there would be some other more equitable (for the agent) method of determining payment.

    I wonder what the average # of sales per agent per year is?

  • brickeyee
    11 years ago
    last modified: 7 years ago

    At least in the US most every state I have looked at requires an agent to work for a broker, and the brokers gets a cut of every commission for every agent that works for them.

    A 6% fee is split between listing broker and selling broker, then a common split is 2% to the agent from their broker, with the broker keeping 1%.

    There are all sorts of arrangements within larger RE firms about then paying for the use of the name (like ReMax) or local large firms (Northern Virginia has a few, including Long & Foster and others).

    I know a broker who pays 'office rent' to use a big name company.

    Some agents only make a few sales a year, but in a higher end market that may be all they need to have a decent income.

  • blueheron
    11 years ago
    last modified: 7 years ago

    There was a show on HGTV recently called, "Selling New York" and the condos, etc. were enormously expensive. You can imagine the commission on some of the multi-million dollar condos. You would only need to sell one or two a year to live very well in NYC.

  • terezosa / terriks
    11 years ago
    last modified: 7 years ago

    And out of the commissions that agents make they have to pay dues to MLS & Realtor boards, advertising costs, their own office supplies and equipment, self employment taxes, and health insurance. Not to mention referral fees when they work with a relocation company, which can be very hefty.

  • notto
    11 years ago
    last modified: 7 years ago

    I agree that the commission is ridiculously high for selling a house. Plus there are closing costs for the buyer and the seller. That's right. The seller has another 2-3% cost selling a house, so the total in my region is approx 8% when selling a house. That includes 5-6% commission and the rest are STATE and local taxes, transfer fees, atty.
    IMO, that's way too much.

    The RE system is a parasitic business. I know, I worked in it and got out. I couldn't join the "dark side" of cheating, lying, and omitting to tell the buyer/ seller things, all in the sake of "being professional", or not making a commission.
    Nice guys finish last in this business. It's a dog eat dog RE world.
    People see ALL realtors as used car salespeople (no offense). The disrespect is awful. When it comes to money people get very funny- the buyers, sellers, RE agents, and "the RE industry".

    In my area agents work very hard for less than 1%. That's all they get to keep after they split the commission with all the brokers and agents. Couple of top producers in the office get to keep more of the split. The RE INDUSTRY is its own business. Everybody in the industry gets a a fee or a cut. The agent makes nothing. People have no idea how it all works. All a seller sees is that he/she is paying 6%. What they don't know is the rest. The abuse, the disrespect, the paperwork, legalese, and the cost that the lowly agent has to put up with is very stressful and NOT WORTH IT. The RE laws that are lobbied in Washington (for the TOP people in the industry to make money) make it very difficult for the business to be "normal".

    I believe people can sell homes themselves.

  • OttawaGardener
    Original Author
    11 years ago
    last modified: 7 years ago

    I'm really not making this point well ... I feel sorry for those agents who get 6% of $150,000 vs 6% of $350,000 for the same amount of effort, and with basically the same fixed costs. I know, I know, Life is Unfair, but I'm sure when the original concept of a commission percentage was thought up, prices didn't vary so much.

    My agent has already invested time in me (advising what would get me more $ at selling time) and I like her, so when I sell, I'll use her services. The problem is that selling and rebuying costs will = $25,000+, which makes the whole point of selling (to reduce living costs) not very practical. (My hope is to buy a detached home in a small town near Ottawa, but even these are very pricy right now)

  • Billl
    11 years ago
    last modified: 7 years ago

    "The RE system is a parasitic business."

    Well, by that logic, everything except the direct manufacturing of goods is a parasitic business.

    RE is essentially a service industry in transition. Just think about how you bought a house just 15 short years ago. The internet was still a baby. If you wanted to buy a house, you could either spend every waking moment driving around neighborhoods looking for signs, or you could pay a RE agent to compile a list of homes that meet your criteria and then get private, guided tours of them. Then the agent helps negotiate a price and coordinates all aspects of the sale. At that point, 6% seems like a pretty good deal.

    Now, the industry is in transition. The internet has created the belief that information should be available to anyone, at anytime, for little or no money. That is running head on into the reality that someone has a monopoly on that information via the MLS. That isn't a sustainable situation. Eventually, the rules off the business will change and a lot of the costs will be eliminated for the system. That doesn't mean the end of agents. It just means their costs will go down, so the final cost to consumers will go down.

  • brickeyee
    11 years ago
    last modified: 7 years ago

    "but I'm sure when the original concept of a commission percentage was thought up, prices didn't vary so much. "

    This is very doubtful.

    There has always been a significant spread in prices.

    I do bit believe the level of effort is identical either.

    People spending $350,000 tend to look harder and tend to be more thorough from what I have seen over the years.

    Even things like advertising tend to be less expensive in lower cost areas with lower cost housing.

  • notto
    11 years ago
    last modified: 7 years ago

    Posted by billl (My Page) on Mon, Dec 13, 10 at 9:08

    "The RE system is a parasitic business."
    Well, by that logic, everything except the direct manufacturing of goods is a parasitic business.

    RE is essentially a service industry in transition. Just think about how you bought a house just 15 short years ago. The internet was still a baby. If you wanted to buy a house, you could either spend every waking moment driving around neighborhoods looking for signs, or you could pay a RE agent to compile a list of homes that meet your criteria and then get private, guided tours of them. Then the agent helps negotiate a price and coordinates all aspects of the sale. At that point, 6% seems like a pretty good deal.

    Now, the industry is in transition. The internet has created the belief that information should be available to anyone, at anytime, for little or no money. That is running head on into the reality that someone has a monopoly on that information via the MLS. That isn't a sustainable situation. Eventually, the rules off the business will change and a lot of the costs will be eliminated for the system. That doesn't mean the end of agents. It just means their costs will go down, so the final cost to consumers will go down.

    ***********************************************

    I disagree. RE is parasitic in the sense that in that 6%, there is so much beaurocracy and charges attached to that commission that the person doing the actual work is subjected to all these stupid laws,expenses, middlemen to the middlemen, and waiting for a tiny sliver of that commission check, which may never arrive. Most of these entities are NOT warranted.

    I would gladly consult and/or open door for a client. The attorney or title Company can draw up a contract.....DONE! I can be like an Accountant. A person comes to ME and "I" provide as much or as little service as they require for a fee paid at the time of the service!!!!!! But no, the RE industry grew LAWS, feet, legs, heads, all in the name of parasitically sponging off sellers and buyers. THE CONSUMER PAYS. Agents don't don't make that much after everybody is paid off (LOL- Sounds like the MAFIA). All that stuff is NOT necessary. Too many hands in the cookie jar. Streamline the money grubbers.

    I hope the MLS collapses. Someone still can have a central website for listings, and charge people , or their consultants for using it, without all the hoopla the MLS is attached to now....having to belong to all those boards, MLS, the fees, lockboxes. Then you have the games where some websites that allow agents to post listings and charge agents different prices depending if they work for a large comapany or a small one. There should be ONE FEE, and everybody should be allowed to post, agents and private sellers. IT's all fixed and controlled for the RE industry. Poor consumer cannot cut through the thicket. The RE lobbyists in Washington are doing a fabulous job.
    I've bought and sold my own houses without agents. I realize that some people may not know what to do. But if that is the case, they should be able to go to a "consultant" (not a con artist with six middlemen) who can charge them per activity, like an Accountant does. The rest of the industry needs to be dismantled, because the truth is that Buyers or Sellers are really NOT protected. All these stupid Ethics, continuing education, charges, whatever. It's all hogwash.

    Why a broker additionally to an agent? Why all the boards, MLS? The RE industry is piled high and deep. Realtors say or do what's necessary to make a sale. RE laws are made to protect the commission. Wooo, and there are lots of games there, too.
    I had to get this off my chest, because the truth is that if you try to buy or sell yourself, the agents will boycott you. The consumer is held hostage to utilize the services of this parasitic game. Just sayin.

  • ncrealestateguy
    11 years ago
    last modified: 7 years ago

    notto,
    The avg. salary for RE agents is about $34000. And this stat was taken before the meltdown. And most work way more than a 40 hour work week, weekends and holidays.
    If the MLS collapses, where are you going to find properties? Currently, the MLS is out there for all to see, if agent and seller wish it to be. If we have a monopoly on the MLS, it is because the aggregation of data is gathered, maintained and distributed by us, which we agents pay for.

  • C Marlin
    11 years ago
    last modified: 7 years ago

    Commission is negotiable and usually does drop as list price increases. In my area no one would pay more than 5%, usually in the 4% range. in my area, there are a few very good agents that make lots of money annually. One of them would be my first choice if listing tomorrow, they know their job, do it well and work hard at it.

    ovg, I don't feel sorry for the lower paid agents. We all have choices about our career choice and where we live.
    Anyone unhappy with their career or opportunities in their area have choices. One thing about selling in higher priced areas, it is usually more competitive and more difficult to rise to the top. The successful high volume agents in my high priced area work very hard. Also successful agents, can and do negotiate very high commission splits.

    notto, sorry to see you are so bitter. You've already stated you were successful buying and selling on your own, so you've proven the consumer needn't use the services of an agent if they don't want to.

  • brickeyee
    11 years ago
    last modified: 7 years ago

    "Why a broker additionally to an agent?"

    The brokers are supposed to have more training and knowledge than just agents.

    In many states the broker IS the legal entity, and the agents are HIS employees.

    The broker remains on the hook for anything one of his agents might do.

  • chicagoans
    11 years ago
    last modified: 7 years ago

    Some REAs around here did very well a few years ago, as new homes are all going for over $1M (and many are multiple millions.) But as the housing market rose, the number of realtors rose even more (at least it seemed like that), so it got more competitive to land a listing. And, if you're selling real estate in an area with higher prices, you'll need to earn more money to live there. I'm not sure someone in Manhattan could live well just selling a few condos a year, no matter how pricey those condos are, unless that agent happened to inherit a home and had no mortgage of their own.

    As the saying goes, "if it were easy, everyone would do it."

  • sylviatexas1
    11 years ago
    last modified: 7 years ago

    'cheating, lying, and omitting to tell the buyer/ seller things, all in the sake of "being professional", or not making a commission.'

    don't know who you were working for, but a practitioner can lose his/her license for that kind of thing (failure to disclose, violation of fiduciary relationship, etc).

    Maybe it's for the best that you got out of the business.

  • ncrealestateguy
    11 years ago
    last modified: 7 years ago

    Brickeye,
    Just for the record, agents are not employees of the Broker In Charge. We are independent contractors. We file 1099s, not W-2s.

  • earthworm
    11 years ago
    last modified: 7 years ago

    Posted by notto (My Page) on Sun, Dec 12, 10 at 20:06

    I agree that the commission is ridiculously high for selling a house. Plus there are closing costs for the buyer and the seller. That's right. The seller has another 2-3% cost selling a house, so the total in my region is approx 8% when selling a house. That includes 5-6% commission and the rest are STATE and local taxes, transfer fees, atty.
    IMO, that's way too much.
    The RE system is a parasitic business. I know, I worked in it and got out. I couldn't join the "dark side" of cheating, lying, and omitting to tell the buyer/ seller things, all in the sake of "being professional", or not making a commission.
    Nice guys finish last in this business. It's a dog eat dog RE world.
    People see ALL realtors as used car salespeople (no offense). The disrespect is awful. When it comes to money people get very funny- the buyers, sellers, RE agents, and "the RE industry".

    In my area agents work very hard for less than 1%. That's all they get to keep after they split the commission with all the brokers and agents. Couple of top producers in the office get to keep more of the split. The RE INDUSTRY is its own business. Everybody in the industry gets a a fee or a cut. The agent makes nothing. People have no idea how it all works. All a seller sees is that he/she is paying 6%. What they don't know is the rest. The abuse, the disrespect, the paperwork, legalese, and the cost that the lowly agent has to put up with is very stressful and NOT WORTH IT. The RE laws that are lobbied in Washington (for the TOP people in the industry to make money) make it very difficult for the business to be "normal".

    I believe people can sell homes themselves.


    --------------------------------------------------------------------------------
    I agree 100%..RE needs reform as do many other things. In RE dealings, only a deed, a title, and a survey should be the only things necessary.
    No form, no agents, no lawyers, no waste, only trust and honesty....
    The way it used to be.
    Then "something" happened.
    This "something" occurred long before I was born.

  • brickeyee
    11 years ago
    last modified: 7 years ago

    "Brickeye,
    Just for the record, agents are not employees of the Broker In Charge. We are independent contractors. We file 1099s, not W-2s."

    While you may not be a brokers employee for tax purposes, in most states you are his legal sub-agent and the broker is responsible for your actions.

    The IRS definition of 'employee' is NOT the only definition, and is in fact has a VERY specific purpose.

  • Billl
    11 years ago
    last modified: 7 years ago

    "The IRS definition of 'employee' is NOT the only definition, and is in fact has a VERY specific purpose. "

    There is a legal labor law definition of employee - and this is the same as the IRS. The independent contractor status isn't just for tax purposes.