Real Estate Commissions

The HOME BUYER: THE LITTLE TALKED ABOUT IMPACT OF THE COMMISSION

Elizabeth Weintraub, from About.com , creates a convincing argument that the Buyer, in fact, pays the commission- “Why, because it’s typically part of the sales price. If the Seller did not sign an agreement to pay a commission, the sales price might have been lowered. …..and therein lies the appeal of buying homes through unrepresented Sellers (FSBO) because given the same logic, those prices should reflect a net sales price without a commission.”

Further, the commission stated in the listing agreement is solidified between the Broker and Seller, without the consent of the Buyer. Therefore the Buyer pays a commission to the Seller’s Broker that is determined by the Seller who has the incentive to increase the price of the home- consequently costing the Buyer more money.  That does not seem fair.

Now add insult to injury. If Ms. Weintraub is correct and the Buyer pays the commission on an inflated sales price the Buyer gets hit with a double whammy. Invariable the Broker’s commission will be rolled into the financing and then amortized with interest and that could be 10’s of thousands of dollars the Buyer will pay over the life of the loan. Ouch.

Bottom line the Seller does not make any more money and the Buyer gets gouged using a Broker. There must be a better way!

Donald Van Dyne is THE FSBO ADVOCATE. He is also a licensed real estate agent in the Commonwealth of Massachusetts and the principal at JABIN Software, the developer of the iGOfsbo system. Donald is a seasoned entrepreneur and has over twenty years of experience owning and operating businesses.  For the last twelve years his focus has been in real estate sales, real estate development and property management. Donald can be reached at 978.250.FSBO (3726) or dvdjr@igofsbo.com. To check out the Evolution of Real Estate Sales & Marketing please visit us at iGOfsbo.com.

The Secrets of NAR (National Association of Realtors): It’s all about the Money

“The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful”…. (National Association Realtors-website). Awkwardly, NAR’s mission statement directly conflicts with the needs of the real estate market and the individual Seller and Buyer. For example, recently a well-educated friend tried to convince me it was illegal to sell a home without using a real estate Broker. Of course I know, like you know, my friend is wrong and his thinking is simply not true. However, his thinking reflects the success of the marketing campaigns spewed by the National Association of Realtors. Statistically, an individual will sell a home every 8 to 9 years. So it is understandable how NAR can manipulate the unaware home Seller and even home Buyer.

The only idea more untenable is the unnecessary, excessive, self-advocating commission a Realtor charges the Seller and Buyer. Did you know the mainstay of the Realtor is to market a Seller’s home to other Realtors and not directly to the prospective Buyer? That is the value of the Multiple Listing Service or MLS-a closed broker network. A listing broker posts a Seller’s home to MLS in hopes that a cooperating Broker will accept the commission and pitch the home to a willing and able Buyer.

Adding insult to injury the Realtor charges the Seller a 5% commission (on average).  5% does not sound like much, but what if I told you it was going to cost you $30,000 to sell your home? Now does that sound like a lot of money? Imagine that could be $30,000 in your pocket or purse and not in the Realtor’s pocket for simply posting your home to MLS. To be fair, a Realtor can do more than post your home to MLS. However, a home Seller can do everything a Realtor can do, except post a home to MLS. Again, as I said, MLS is a closed broker network- no For Sale By Owner (FSBO) sellers allowed.

The real problem is not the membership of NAR. The real issue is that NAR promotes and supports the inexcusable traditional commissioned broker model and the MLS system.  The reality is that for over 100 years Realtors have relished a monopoly and it is difficult for the Realtor to let go of the golden goose.

That’s right the Broker’s business of real estate is a MONOPOLY.

A monopoly, as defined by Investopedia, is a “situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, a monopoly is characterized by an absence of competition, which often results in high prices and inferior products.”

However, technology and the dissemination of information are gaining a stronghold and beginning to frustrate NAR’s mission statement. Every day more Buyers and Sellers are feeling empowered and confident. Already 90% of home buyers initiate their search for a home on the internet without the assistance of a Broker.

There is a paradigm shift happening in the real estate industry. Companies like Zillow and others are making a difference. It is time for NAR to cease being a dissenter and get on board. NAR needs to advocate a new real estate business model that is truly consumer friendly and better serves its members.

Donald Van Dyne is THE FSBO ADVOCATE. He is also a licensed real estate agent in the Commonwealth of Massachusetts and the principal at JABIN Software, the developer of the iGOfsbo system. Donald is a seasoned entrepreneur and has over twenty years of experience owning and operating businesses.  For the last twelve years his focus has been in real estate sales, real estate development and property management. Donald can be reached at 978.250.FSBO (3726) or dvdjr@igofsbo.com. To check out the Evolution of Real Estate Sales & Marketing please visit us at iGOfsbo.com.