The Great Realtor Rip off -- Discuss

good question

why

good question

why

you know, I'm beginning to wonder too

why

exactly

why

exactly, why

why

why

why

What little you must have in your life cunty to do this.

why

?

why

?

why

"I wonder how you guys feel about attorneys taking 33% of any settlement they get you? And yes the average manhattan agent closes 3 deals per year."

Without getting into practicing law versus being a broker.

Legal Fees versus Brokerage Commissions

Contingency fees are common in the industry (doesn't mean I agree with them), I know they are used a lot in PI work and they can be negotiated (depending on your arrangement and who is paying for fees or what the attorney is doing).

The lawsuit is not guaranteed (neither is the sale of property), one can have a claim/case and it can be terrible and not lead to any payment. Even if you win a case, it doesn't guarantee DOLLARS (a defendant could be judgment proof). This uncertainty leads to the high risk high reward of taking cases on contingency claims. In addition, most of the time the attorney is laying out a bunch of money during the filing of the case, motion process and trial etc. This money may all be a lost cause.

Even if a lawyer only spent 2 hours writing a letter to the defendant and then they negotiated a settlement (I assure you this dream doesn’t always happen), the contingency fee could be negotiated in your fee agreement/arrangement. For example the attorney only gets X% if they settle out of court before a trial.

If you don’t like a contingency basis, pay the attorney for all the court costs and their $X per hour fee. I guarantee you those fees would start to add up quickly as litigation comes and begins. Also, if you don’t win…you still owe all that money. Talk about a lose-lose situation. At least if you take a contingency case and you lose, you don’t owe anything.

An apartment is a tangible thing that has value based on a market. Even if you sell your own apartment it still has a value, you may not get as much, but it still has value. Doing your own case pro se…good luck. A claim doesn't always have value; it may not even have a settlement.

I think many more people would have success selling their property than going pro se and doing their own lawsuit. There is a reason why this happens.

Angeloz are you a RE Broker? Just curious.

its soooo annoying every week there is a post about brokers.......

if you don't want to pay do it yourself.....

This was a article in the Economist discussing the inefficiencies of Brokers. THought is was relevant because of all the resent posts. Especially when one study found it to be Social waste quantified to $8bn

@Brooks2, don't apologize. If people don't want to read or post, they don't have too. This is a relevant topic for this place and a brand new article, go ahead and post away.

@MR17_5 most people aren't saying we don't want to pay at all, we're just saying it is TOO HIGH.

I gotta think that fee has been going down slowly and silently - I would think average now is 5% but for higher priced properties must be lower. Any broker willing to pitch in on this?

Jbutton, you are absolutely right, with or without the internet, the boom of agents and all these new companies have forced many companies to be competitive. I have been on several pitches and the seller or owner said very clearly they will end up listing with whoever gives them the best rate. So the Real Estate market has changed a lot, many of these arguments about agents only taking 6% are old and tired. There are hundreds of companies and independent brokers who offer alternative models, like flat fees, discounts, and rebate models that are very competitive. I know some BIG corporate firms who authorized some of their agents to go as low as 2.5% just to be competitive and get listings. So the market ultimately corrects itself whenever there is competition in a free market.

On a side note, inondada, do you really think if an agent cuts their commission down to 3% they will get more listings? I think that is assuming FSBO's are the majority and all agents are fighting for their business...it looks like FSBo's are in the minority here on SE...

I'd think the reasoning is that as the overall commission pie gets smaller, brokers will exit the profession and pursue a different career requiring similar training and effort (and netting them roughly the same as before). The fewer remaining brokers will be a able to close more deals at a similar total work effort until, in equilibrium, they'd be earning the same total amount as before.

Angelo, at my firm, commissions less than 6percent show up in red in our databases are grouped at the bottom when we do a search. Any owner trying to save a point on a commission whobwill narrow his field of potential buyers is a fool.

Jim, i dont like the brokers who take less than 6, but i am pointing out that the free market and brokers who are trying to be competitive are cutting commissions. I know of a few BIG Name brokers who are working for 2-2.5%. However, that being said, arent you doing your buyer a disservice if you are only showing them properties that have a larger commission for you. I dont know any database that sorts by commission structure. lol.....Now in this new information age, i dont know any buyers who know nothing but what the broker tells them. If i tried hiding properties that only paid a 2% commission, then my buyer will eventually find it and want to see it, so then how would i look not showing it to them first?
Polisson- I dont know, the brokers market is almost monopolistic already with only 2 major corporations dominating most listings in manhattan. So i dont see how less brokers will create more competitive pricing and commission structure.

Angelo, don't you specialize in Brooklyn?

Angeloz seems a lot of brokers violating their duties as agents, do you see this a lot (don't answer this)?

If I was a broker, I would prefer to take a lot more volume and show EVERY property (even ones that were 2-2.5%). Eventually a good broker will get more referrals and earn more trust. More word of mouth and more clients and the potential for more transactions. If you're good at what you do, the money will come in due time.

Unethical brokers may cheat a few clients because of the lack of commission at first, but I am sure this will eventually catch up. Not every purchaser is a RUBE, not every purchaser will allow it.

We are talking about the sell side of the transaction, not the buy side. No one is cheating their seller by explaining that his/her property will get it's b at exposure with a full commission. Hello, I've known brokers to ask for and get more.

"Do the job...I dare you. You will wonder why it's only 6%."

LOL. Do you realize that among the users of this board are a good many doctors, lawyers, executives, surgeons, nurses, etc? THESE are the people you "dare" to do a job (realtor) that is done by people, 75% of whom never graduated college (per the NAR's own statistics!). Stupid twit...

BY the way, it's not "social" waste that amounts to 8 billion per year...it's human waste: As human beings, brokers are crap.

What happened to str33teasier?

"On a side note, inondada, do you really think if an agent cuts their commission down to 3% they will get more listings?"

I am saying what polisson said. If the commission norm were 3% (ignoring how we get there), all would be fine except that 10,000 or whatever people would be twice as productive as before (in terms of getting actual work done) and the other 10,000 would be doing something else productive.

You often hear about how the middle class has been getting left behind in terms of sharing in GDP gains of the country. While there are other important factors at play, the harsh reality is that the money wants to flow to the people producing productivity gains. I.e., if you're a factory worker producing the same goods at the same rate at the same factory as your father, capitalism tends to want to pay you the same as your father received 30 years ago (inflation-adjusted), not 64% more as GDP per worker would indicate.

At the end of the day, RE brokering is a middle-class job and home prices go up with inflation. So while gimmicks and bubbles may do something for a decade, the cold harsh reality is that over a person's 40-year working lifetime, the average broker needs to become twice as productive. I.e., sell twice as much as before. Now real home prices do tend to go up over a broker's lifetime simply because people tend to use their increasing incomes to buy nicer homes. The brokerage industry seems to want to hang onto this as their source of productivity gains -- "Look, we're selling more real dollars worth of home!" But at the end of the day, the real value of selling a median home today vs. one 40 years ago has not changed.

Those hanging onto the hope of getting paid double after 40 years (in real terms) for doing the same work with the same efficiency as before are in for a rude awakening. The brokerage community as a whole, and their policy settors, have not come to terms with this. But it happens, at times gradually and at times suddenly.

"Those hanging onto the hope of getting paid double after 40 years (in real terms) for doing the same work with the same efficiency as before are in for a rude awakening. The brokerage community as a whole, and their policy settors, have not come to terms with this. But it happens, at times gradually and at times suddenly."

I agree 100%

How much did it used to cost to book a trip? (travel agents)

How much did it used to cost to buy/sell stock? (stock broker)

How much did life insurance used to cost? (insurance agents)

The middle man has been pushed to the side in many industries DUE TO AVAILABLE INFORMATION and has had to adapt (give/offer more service, for less money).

In my opinion, the first big firm to adapt could make a serious power grab. A step system (flat fee) could really lead to important and over due changes.

This seems like a scare tactic party line Hones is pushing. Reality is there are so many brokers doing 3 deals a year that there is little chance a broker would risk missing a deal for 0.5 or even 1% of his/her commission. Think about it, if Hones did 3 deals a year and another one came up w/ 5% commission, you think he'd say 'no I'll wait for 6%'? I'd think he'd jump on 5% and count his blessings. Only way this could make a difference if your apt is a dime a dozen 1br in Yorkville.

His post above does raise another issue of fiduciary responsibility, and makes it easy to understand why NYC RE brokerage indsutry is not the most respected and liked.

< In my opinion, the first big firm to adapt could make a serious power grab. A step system (flat fee) could really lead to important and over due changes.>

Agree with this. and once it happens the transition will be dramatic and fast.

This jim_hones10 character can't be for reel. He assumes the broker stereotype that people distrust, dislike, and despise far to easily to not be playing a game with everyone here. I doubt he is even a broker as no self-respecting sentient person would consciously do so much to undermine the legitimacy and respect of their own profession.

its early - reel = real.

"His post above does raise another issue of fiduciary responsibility, and makes it easy to understand why NYC RE brokerage indsutry is not the most respected and liked."

I don't think they all respect this fiduciary duty, I also don't think they care too much. I think there are a lot of brokers that just act in their best interest and if that means the client takes a hit WHO CARES.

Jim is a character, and inododo operates in a fantasy land. Which is worse?

Ino does remind me of jimmy mcmillan but instead of 'breakfast, lunch and dinner' it is '10% off rent for everyone' and 'everyone rent $3m apartment for $2k/month'

inonada does a lot of negotiating leases for friends.

One within the past month:
inonada
about 3 hours ago
ignore this person
report abuse I helped a friend recently find & negotiate a place. As it stood on the surface, it was about the best deal he could find. He put in the offer for no-fee, 10% below ask, exclusive right to terminate after year 1. He got the termination option, half the fee, 10% off for the first year but full amount for the second year. Because he's only wants a place in the city for 1 or 2 years, it works out very nicely for him. This was negotiated in the past month.
http://streeteasy.com/nyc/talk/discussion/31015-option-to-renew

one a little over 10 weeks ago:
inonada
about 10 weeks ago
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report abuse I recently helped a friend get a place in Hell's Kitchen. Boutique walkup, great light, nicely renovated w/ Viking stove & whatnot. Originally listed at $4 ppsf, was cut to $3.5 ppsf, he got it for a shade under $3 ppsf. That does not include a very nice little terrace. The place is not high-end.
http://streeteasy.com/nyc/talk/discussion/30045-what-is-a-fair-rent-increase

That's a rather impressive track record? Any others? Maybe one in February, a couple in January, a bunch last Fall?

A big firm won't (and can't) make the switch; "their" compensation depends on this system. Part of adapting for me has meant coming to the conclusion that I do not want or need to hire brokers, it's to costly. As we grow I will engage a multitude of assistants that can handle different stages of each deal and be paid accordingly.

I am doing this right now with one very well qualified associate, we have a very efficient system in place.

It won't just be about discounts, it also has to be about providing a high quality service to a very sophisticated clientele. It also means being able to interact on a very professional/efficient level with listing brokers. If you are going to offer an "alternative model" it can't be stocked with unqualified, poorly compensated individuals.

I will tell you it has been very exciting and rewarding developing this business model and to see it working so well. Managing our rapid growth is my next big challenge.

Keith Burkhardt
The Burkhardt Group

JButton
about 7 hours ago
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This seems like a scare tactic party line Hones is pushing. Reality is there are so many brokers doing 3 deals a year that there is little chance a broker would risk missing a deal for 0.5 or even 1% of his/her commission. Think about it, if Hones did 3 deals a year and another one came up w/ 5% commission, you think he'd say 'no I'll wait for 6%'? I'd think he'd jump on 5% and count his blessings. Only way this could make a difference if your apt is a dime a dozen 1br in Yorkville.

His post above does raise another issue of fiduciary responsibility, and makes it easy to understand why NYC RE brokerage indsutry is not the most respected and liked.

It is not the individual agent who gets to set the commission, but the company they work for.

And I can't speak for what other agents do. I know that when I (rarely) work the buy side (unlike Keith, I know how to work property) I show everything on the market, regardless of the commission structure. But buyers are a pain in the ass.

JButton
about 7 hours ago
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< In my opinion, the first big firm to adapt could make a serious power grab. A step system (flat fee) could really lead to important and over due changes.>

Agree with this. and once it happens the transition will be dramatic and fast.

(yawn) when will this happen? when there are double the amount of fsbo's there are no? when keith has supplanted barbara corcoran on good morning america?

bhh
about 7 hours ago
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This jim_hones10 character can't be for reel. He assumes the broker stereotype that people distrust, dislike, and despise far to easily to not be playing a game with everyone here. I doubt he is even a broker as no self-respecting sentient person would consciously do so much to undermine the legitimacy and respect of their own profession.

you are wrong, and you are also under the delusion that people outside a very small circle read this or care about it.

Keith, I am glad to hear that your having success with the change in commissions. I truly believe a lot more deals will come in if you keep that alternative structure and high quality service.

Congrats!