Boston Real Estate for Sale

I guess I don’t have much to say about it, the survey kind of speaks for itself.

It was a good start to what will hopefully develop into a long, detailed analysis of real estate commissions, over the coming months. Obviously, there’s a lot of discussion, out there, in the real world, about commissions. Some of it is a bunch of junk, so hopefully my blog will cut through all that clutter.

Regarding the survey, I have to say, first off, I was a little disappointed by people’s responses regarding agent salaries. If agents were paid what people think they’re worth, I’d have made $12,000 last year.

It seems as though the majority of people feel agent compensation should move away from a strict commission basis to either a flat fee or variable rate commission structure. This is true for both buyers’ agents and sellers’ agents. I can go along with that. Seems logical.

Of course, people’s desire is to lower the compensation, overall, it’s not like they want the variable rate or flat fee to be MORE than what is paid out, currently.

People’s guess at what the average real estate agent earns, annually, might be about right – or a bit high. My guess is the average agent makes about $40,000 – $50,000, once you take out the top 20 superstar agents (thank you) and those at the bottom, who work part-time in real estate, and do maybe one or two deals, per year.

Suffice it to say, a lot of agents make just barely enough to survive, in a good market or bad. No, I’m not asking for sympathy, I’m just saying that your agent might only be making $30,000, so exactly what kind of person are you expecting to get, for your money?

Regarding flat fee compensation, the majority of people thought a buyer’s agent deserved to be paid about $4,000-$5,000 for each deal. Um, yeah. The average agent does maybe eight to ten deals per year. So, the agent is making from $32,000 to $50,000 per year, if paid this way. The agent is an independent businessman/businesswoman, and has to pay all his/her expenses from this – including paying their company their split, which could run 30-50% of each deal.

So, basically, people think agents should only make a salary in the low $20,000’s, to $35,000, tops. Year after year.

That’s not enough to draw smart and talented people into the real estate business. You’ll end up with a worse situation than you have now.

I guess the real disconnect is between how much effort people think an agent puts into selling or buying a home, and how much the agent should be compensated for doing so.

If people thought an agent worked hard enough, I don’t think they’d feel bad having an agent make a good living off his or her compensation. I guess people think agents don’t have to do a lot to sell a home or help a client buy a home.

Let me just ask you this – how should I be compensated for writing this blog? For doing research on the state of the market? For going out to open houses and spending time with other agents? I know your answer – those are part of the job, so no one should compensate me for that, it should be absorbed into any pay I receive.

Well, first off, is your current job structured like that? Do you only get paid for the hours you produce? No, you get paid for forty hours, no matter what you do during that time.

I’m saying that the agent deserves to be compensated for his or her experience, and that this needs to be included when you think about how much an agent should be paid, not just the amount of time you spend in the back seat of your agent’s car.

Regarding the suggestion that agents be paid based on the number of hours they have to put in, for any one deal, here’s what I think. It’s true, sometimes, more often than not, in the past, at least (nice run-on sentence), it didn’t take a lot ot sell a home, or, really, to find a client a home. So, it might seem fair that compensation be tied somehow to the number of hours an agent puts in. However, as you can probably guess, there’s very little correlation between the price of a property and how much work goes into buying or selling it.

I had a client who bought new construction, in Lynn, and it took HOURS and HOURS of effort before we got to closing. This property was priced at under $250,000. I don’t think my buyer would have wanted to have to pay more than the 2% commission (the seller paid, actually), no matter what, because, if I was paid on an hourly basis, I would have earned $150,000 on that one deal. Also, she wouldn’t have wanted me to collect a flat fee, then go back and ask her for another payment, just because things got messy.

So, what’s the solution to that? Again, like in most things, 20% of the business takes 80% of the time.

I have to say, however, that the survey results have to be taken with a grain of salt; for one, over 40% of respondents are renters, currently, so have never gone through a purchase or sale of a condo or single-family home. Therefore, they are basing their opinions on …. well, their opinions, not on personal experience.

(Regarding the methodology of the study: A respondent could only answer, once, at least, once per computer, so no one filled out the survey, more than once.)

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Updated: January 2018

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