There once was the idea that agents should not be paid so much, and we often do get paid a lot of money. I will not go into what we pay to stay in business here. We are one of the last professions that has not been arbitraged and had our commission's turned into scale. Kind of like travel agents and other industries that have just been decimated by the online revolution. I started in 2004. There was no Zillow, and the internet was not really anything at that point. Because speeds were so slow, not a lot could be done with real estate with all the pictures and information. The internet speed increased and made real estate more viable online and Zillow came in.  2010 is when they came to all the real estate offices and they became more known to the public and realtors. They were selling us on advertising with them, but their initial plan was to get rid of realtors and save buyers and sellers money. AI would eventually take us over. Their intention was to replace realtors, they were going to be the online source. People did not need realtors. Buyers did not realtors.  Sellers did not need realtors.

Commissions are paid by the seller as a cost of their sale. Zillow put out the idea that if the commission was lower the buyer wouldn't pay as much for the property. As prices started going up, it became really apparent that commissions played no part in the price of a home, the price of the home was being set by the market regardless. Very often I would give a seller a net sheet this is the net proceeds from their sale, and it would have all the fees and the commissions which add up to about 6%-7%. The sellers add that to the price and still sell the home just as fine and just as quickly. And over the years it became very apparent the commission had nothing to do with the price of the home. That argument that Zillow had been trying to make to keep their share and to replace realtors with their site was starting to fall away on the seller side. Now on the other side, they had emboldened buyers to tell buyer's agents that they didn't need them, they could do it themselves. They could go to the seller, they could negotiate a lower price. This is part of that DIY idea that has come into the internet space too. The idea of buying a house that you would go tell the seller I'll buy the house, you don't have to pay a buyer's agent. They would tell the seller we can all save some money. Yet this idea never really worked.

There were a few years that I had run across people at open houses and I was told, “No, we want to represent ourselves. We don't need an agent.” Buyers were told that they could buy it themselves, go to the seller and  negotiate directly. In negotiating directly with no commission fees, they could buy the house for less. Well, that did not work. First off, sellers did not want to deal with buyers.  Sellers know they really need an interface between them and someone they do not really know very well. Especially when selling probably the biggest asset of a sellers life. The seller is also dealing with buyers buying the biggest asset of their life and their fears and anxieties. There is a wall that needs to be there. And that is the buyer’s agent and seller’s agent. Now granted, I know, there are plenty of people who did this, and maybe they are fine with it. My experience is running into people who bought from the owners and directly without an agent regretted it. I always hear they were sorry, and they expressed to me that they would never work on their own without an agent. And the numbers of people now hiring an agent is higher than ever. For Sale by Owners with sellers going it alone is even less. Besides the people drama there are disclosures galore and it is just more complicated.

Commissions have really started to be kind of a nonstarter; they just are not really much of the conversation anymore. My experience has been when sellers ask more about my skills, and questions about how I can bring value to the sale have a better experience than sellers who worry about commission. It never fails if I work with a seller who refuses to pay the standard commission their whole experience is tainted by worrying about how much money they are spending versus how much they are getting in value.  

Commissions are always going to be one of those topics that are a little divisive. Yet I think with Zillow exposing how much value agents really do they have led the consumer to turn to us even more.  Zillow made it all about commission and devaluing the real estate agents. Zillow became much like the seller who was too worried about the commission they were paying then the overall value a good local agent can bring to the market.

Posted by Michele Replogle on

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