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I bought a piece of real estate a few years ago. The Seller and I paid ZERO percent commission. It was fast and simple. We met, agreed on a price. I paid a lawyer to write up the contract and do the convenyancing. I wrote the cheque. When the land title was done, the lawyer released the funds to the seller. We saved a lot of money,.. enough to buy a car.. Maybe with a realtor, the seller might have gotten a bit more, but definitely not 7%. But at the time, realtors wouldn't take the listing. The market was that bad. [ Note to self: the time to buy real estate is when realtors decline listings and quit ]. So it is rather suprising that in during the past real estate boom that commissions continues to be about between "5 percent to 7 percent of a property's selling price regardless of local market conditions, housing prices, or the cost or effort required to sell different properties." A government report concludes they have contributed to the bubble. That's right, if your hot San Francisco property is $500000, it a $35000 cut. That money out of your pocket, and cost you have to recover before breaking even. In fact for $35000, you can pay for SEVEN houses along with the posse of realtors:One example is the charming colonial for $7000 shown below. Fannie Mae is dumping despite holding a $59000 mortgage loan. [ Note I'm excluding the $500 house on the list which I'm guessing is below standard. ] Mind you, these houses are in Detroit, but the point is that the fee isn't related to the price, location or market condition.The real estate association holds a virtual monopoly on it's listing service and tries to block new entrants like ERealty as documented in 60 Minutes. 60 Minutes Reporter Lesley Stahl asks: "The price of homes has gone through the roof, pardon the pun, over the last several years. And yet your commission has still stayed at six percent. You're not lowering your commission to give the buyers this advantage. You're just raking in the money?" Deborah Arends, a top RE/MAX agent in Seattle for 18 year replies: "Wish that were true, I think what's happened is a lot of expenses have gone up, everything from postage to gas, which affect real estate agents' profits." Has postage and gas gone up that much to justify $20000 raise? What we need is more public willingness to support alternative means, listing privately or using online with some like Redfin http://www.redfin.com . Ten years ago stocks were bought through full-service brokers which charged an obscene 6%. Today, you can trade stocks online for 0.5 cents / share using discount brokers. Give it a try. You just might save a huge pile of cash. |