It's the elephant in the room! I don't want to have to defend my value as a full-time real estate agent, but the public is asking us to. Multiple lawsuits filed around the country claim sellers should not have to pay a buyer agent fee. In our area, the commission stands at 5%, which is split between the buyer's and seller's agent.
Perhaps a breakdown of how the process currently works would be helpful.
1. The commission for agents is baked into the selling price of the home. In essence, buyers are already paying the commission, since their funds are sent to the homeowner who, in turn, pays the real estate office selling his/her home.
2. That listing office then splits the payment, giving a portion to the buyer's agent.
3. Both the firm and the agent pay for all their expenses from this distribution.
a. Health insurance
b. Small business tax
A different model that's been suggested would be to have the buyer pay the agent directly, but many first-time homebuyers don't have that type of cash on hand, and they can't wrap it up in their mortgage in this scenario. I also believe this model drives home prices down, and perhaps could overcorrect prices for sellers—not what they want to hear. So the next argument being rolled into this discussion is whether a buyer's agent is really necessary?
87% of real estate agents fail within the first 5 years in the business. It's actually probably a higher percentage of those who don't make it, so the 10% of agents who do survive should be applauded for succeeding and creating strong dynamic businesses when the odds are against them. I am the first to admit that all the top agents work very, very hard and will always give credit to my colleagues at all firms. If you believe in the power of the market, it should be noted the marketplace is responding to a buyer agent model by putting their trust into them and calling on these agents to help. Evidence that clients see value in an agent's expertise. While purchasing what is typically the LARGEST asset of your life I would think you would defer to the experts the same way you seek out the top people with your financial management, legal woes, or your health. The cheapest way to go isn't typically the best.
By assuming a buyer's agent isn't necessary for a successful purchase, any judicial decision is only looking at one transaction in a moment in time. There seems to be no awareness of the agent's time, energy, money, emotional support, negotiating skills, support for people/families relocating, financial guidance, or local expertise that agents put forth. A big part of my business is aiding families moving to our area with children and more specifically special needs kids. Getting set up, having support and guidance through that added complex layer is just as important to parents as the house they buy. At MGS Group our agents have law degrees, MBA's, and come from rich business backgrounds—they are smart and really effective people with incredible experience who took a risk entering a career that doesn't have a base salary or "entry level"; we all start at the bottom earning nothing. The top-tier agents rose through the ranks on their own, demonstrating keen business savvy.
The value you get through your Realtor is the PROCESS that ultimately gets you to where you are supposed to be. I worked for more than a year with a client showing them houses, using a grassroots effort to find them the right property, and in the end, negotiated nearly half a dozen offers they ultimately walked away from. By the end, they were educated on the economics of the market and precisely what they wanted and needed. They had the opportunity to buy directly off-market and did so. The degree they earned on real estate from working with me was free to them—a net loss for me and my family. Time spent with their kids meant time away from mine. Imagine you work for four weeks and your boss says, we decided not to pay you. It's a risk we take, but many are not aware.
There has also been the claim that consumers can easily buy a house themselves with online tools. After all, you can buy stocks or a car through your computer. I argue that 30 shares of Apple stock is a lot less complex and without any of the nuances that come with purchasing a home. As an investor, I could not imagine acquiring my properties without my brokers. Their knowledge has led me to life-changing investments and steered me away from others that could have been financially detrimental to my bottom line.
Finally, your agent takes on incredible liability with each transaction. The devil is in the details in real estate and one wrong move or incorrect statement can lead to damaging and costly lawsuits. If you don't know the questions to ask or the things to look for, it can mean a devastating consequence.
I love my job, and yes it's a lifestyle as well as a career. I wake up thinking about my clients and work weekends and nights so I can be available when they aren't working. What I do isn't a hobby though, it's a full-time job and business to support my family, just like the rest of America and if we aren't compensated, the good ones will be forced to get out and that could be dangerous for the marketplace.