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Real estate broker’s commission

The new standard What I have noticed on MLS regarding Boston real estate commission’s is 6% that a number of agents have 5% commissions.

Back Bay has 184 condos for sale. The broker’s commission break down is as follows:

1. 3 listings have a 6% commission.
2. 137 listings have a 5% commission.
3. 5 listings have a 4.5% commission.
4. 32 listings have a 4% commission.
5. 1 listing has a 3.5% commission.
6. 6 listings have a 3% commission.

Will commission pay fade away?

23 Responses to Real estate broker’s commission

  • Wow, I did now know there were commissions out there as low as 3%…I have not seen any lower than 4%. I suppose when you get into the 5M+ market, there may be some lower commissions.

  • This is how it works. The big companies decide their the broker rates. If they say 6% people like me charge 5%. I they change the rate from 6% to 5% then I follow suit I change my rate from 5% to 4%. Bottom line, for me to survive I need to be 1% below the big boy’s.

    The untold truth, Real estate brokers are in a race to the bottom.

  • I understand, that makes sense…getting a lower commission rate is better than not getting any commission at all.

    But also keep in mind that some agents, if they have a list of properties to show their clients, will more likely show the 5% commission properties first and not a 3% commission property.

  • I can’t speak for other brokers but I show properties that my client wants to see regardless of its a 5% or 3% fee.

  • Glenn… That’s the classic line to justify high commissions. The reality today is the agent no longer controls what the buyer sees. It’s all on-line including commissions. Agents that do that will be out of business before you can say “the internet is a series of tubes”.

    The internet will force real estate agents/brokers to become more efficient and decrease their commissions while increasing their volume. Some people will get squeezed out of the industry while others will adapt and survive.

    I think agencies will adopt a fee based approach in the future offering choices like discount, standard and luxury packages. Percent of sales price really makes no logical sense.

  • That is why I said “some agents” and not “me” since I’m a small time agent, I will show everything. In these times every sale and rental counts.

  • First let’s be clear there is no set commission! Any talk of any set commission is illegal! The commission is determined between the seller and the listing broker. The fact that market statistic show the number going down may say more about the listing brokers themselves than anything else. The commission is based on how hard the agent is willing to work to get the home sold. The agents job is to get the home sold quickly for top dollar and his or her ability to do that on a consistent basis should be the grounds for an increase in pay. To a degree anyone can get a home sold at some point for some price. But, the agent who gets the home sold quickly deserves more pay. The saying is as old as the hills but it remains true, you get what you pay for!

  • Fellowblogger, I just want to be clear, I never used the phrase “set commission” I used the words “standard commission” as in basis of comparison, or an average.

  • Fellowblogger, I’d say that’s old school thinking. As the market gets more comfortable with the internet, properties will be listed on MLS and that’s about it. It doesn’t take a lot of skill to make a good MLS advertisement although most agents can’t even seem to take a photo in focus, understand that a $200 point and shoot camera isn’t going to get good photos of a property, or realize it’s important to mention things like off-street parking, private yard, balcony, the building has been condemned, etc. in the add. Open houses, adds in newspapers, personal/professional contacts, etc. are yesterdays methods. People will start asking what the agent did that increased the sale value of the property. The answer will be increasingly, not much. Agents that realize this and are up front with perspective clients about the realities of the markets will survive in the long run.

    I’ve never sold anything, but the sales agents that did the best jobs selling when I’ve been buying were the ones that didn’t talk to me.

  • @ fellowblogger – I agree.

    John, you should be careful with what you post – standard and set can be interchangeable and you are putting your license on the line here, the board has strict policies FOR A REASON and you are walking a fine line.

    Also, I doubt you will be making many industry friends with this as most commissions posted by you in this piece are ridiculous.

  • Oh!, I forgot the code of secrecy.

  • fellow agent

    I don’t know about you, but most buyers would appreciate and reward the frankness and information, rather then secrecy and conspiracy.

    Those are the acts of a fraud and amateur, not a good business man who wishes to build a reputation.

  • Fellow agent, you can stick your head in a hole in the ground but it won’t change the reality of the situation. You can try to scapegoat John Ford, but he is just the messenger. You and all your “friends” can burn an effigy of him in The Commons but it won’t increase your income.

    Yesterday buyers and sellers just took the commissions as non-negotiable, but that was yesterday. You can adapt or go extinct. Threatening to call the licensing board on him for this post is shameful.

    Exactly what is ridiculous about the commissions posted in this post? Have you browsed MLS lately? It seems more or less accurate to me.

  • @CambridgeLandlord
    I will tell you that I agree, many agents don’t do all that they can and those are the type of agents who are being forced out right now. The change that you speak of will come as a result of technology but it will be different than what you’re saying. MLS is a great tool, they provide some incredible information and have put much more power in the consumers hands. However, MLS is not the be all and end all since some brokers still use Link. I think there are other tools out there that will separate the great agents. Great agents at times like these are in fact great marketers. As for claiming that buyers and sellers took the commission as non-negotiable, that is not what I or what @fellowagent said. We both seem to be saying that nothing is standard and until the terms are agreed upon it is up to the individual seller and broker to make a decision. Don’t confuse this with ignorance to changing market conditions.

  • @Fellowblogger – “I think there are other tools out there that will separate the great agents.” As consumers become more empowered through the internet they will believe less and less in the magic Mojo that warrants high commissions. Higher commissions will soon become to Real Estate as what “rust proofing” is to auto sales, i.e. just a gimmick that people use to fall for.

    It’s an interesting topic and I by no means know how it will play out exactly. I am sure that your average real estate agent will cling on to the old model until the bitter end.

  • I think everyone is missing the point of what fellowblogger stated in the beginning. What John said in the article is that there is standar commission rate which Boston agents charge. By assuming that there is a standard someone could also assume that brokers must have got together and agreed upon that average. This can then be considered “Price Fixing” by someone who is sue happy and could easily sue John for stating that resulting in loss of income and possibly his license.

    I am a real estate broker and charge a certain percentage to market our listings which I feel is justified by our marketing and efforts plus profit. If someone feels they can do the same job that we do for less money then good for them. If another broker wants to switch to an hourly rate, retainer or flat fee model then good for them. If it works for them maybe we will switch to something similar but there has yet to be another profitable model of brokerage.

    But the point again is that there is still no standard commission rate in Boston or anywhere else. This means there is no price fixing which actually means more consumer choice.

  • @Nick-Fellowblogger, if 90% of people charge the same rate what do you call that rate? “Standard” is a pretty accurate word. “Standard” implies that there are other rates out there higher “the premium rate” and lower “the discount rate”, but most people charge the “standard” rate. It does not imply price fixing nor does it imply a “set” rate.

    You guys can justify the rate you charge all you want, but in the future it’s going to be less then it is today. Your insistence that John is promoting price fixing by bringing up this subject just makes you look like the old school price-fixers.

  • Thanks for the response CambridgeLandlord. However, you have again missed the point by a mile.

    I’m as surprised as anyone that it can be considered price fixing if a broker uses the terms “standard” or “average” commission. I just learned about this law in a recent class and that there have been many lawsuits against brokers brought on by clients when a broker mentioned a standard or average commission for the area. Their basis for these suits is that if there is a standard commission then multiple companies must have got together to “fix a price”. I know it sounds dumb but brokers have been sued for hundreds of thousands over this.

    I didn’t invent the law and I personally think it’s stupid but its there and has precedent for courts to go by. I was just trying to inform John that if I was him, I would be careful because the public could take his statement in the wrong way and if someone is sue happy it could be a lot of headaches for him.

    Again, so you can understand it clearly, I am not supporting any particular type of commission structure over another. If a broker can find a better way to do things then I encourage it. More choice for the consumer is a better thing and usually results in better service. Do you understand my point this time?

  • I changed the wording, but the spirit of the blog post is the same. Thank you, Cambridgelandlord for your support.

  • Nick you hit the nail on the head or whatever the expression is. It comes down to jerks that will sue for anything and everything. I guess it is the American way.

    Somehow I don’t think this would have got the same response if it wasn’t such a hyper-sensitive issue now in the real estate business. And I think “fellow agents” post really shows the fear that is enveloping agents. I also find “fellow agents” post about losing friends over mentioning the current state of commissions to be nasty, mean spirited, and frankly sounding like someone that lives in yesteryear before the invention of the information superhighway. Any idiot browsing the MLS will notice that the large majority of commissions are in the 5% range with some lower and some higher. Yet, “fellow agent” still thinks that this is secret information only available to people with special access.

    But yes you are right about lawsuits. I know I can get sued for expressing my opinion about one of my properties or the neighborhood it is in to a perspective tenant. I try to get quiet tenants but I’d never put in an add that said a property was in a quiet building as I could get sued by the Heavy Metal Hard Rockers Anti-Discrimination Alliance. This is an editorial blog and it’s John’s opinions and insights that make it interesting that and a post about foreclosures in chicken coops.

  • “Yes, the day of the standardization of 6 percent commission is dead. How long will it take for the industry to realize this? That is the new question.” – Inman News 2/16/09

    Looks like in addition to every agent and broker in Boston suing you for price-fixing and losing your license, you clearly plagiarized the word “standard” from Inman news and will be getting sued from them as well.

    Even consider blogging about something less controversial like puppies?

  • CambridgeLandlord, I don’t want to upset the Animal Rights Activist.

  • Maybe the PETA people are in the market for a home…