We love the 80’s! My ten year old daughter has her alarm ringtone set to Ozzy Ozbourne’s “Crazy Train,” and knows nearly all the words to Bon Jovi’s and Journey’s top hits. My husband dressed up as Axel Rose a for Halloween, and my 11 year old daughter frequently expresses her amazement that I could get my bangs that tall in my junior high pictures. Ahhhhh, the good old days…
While the 80’s brought us all kinds of awesomeness, some things need to stay in the 80’s. My mile-high bangs would be a good example. Mile-high commissions, however, have been like Weird Al Yankovic – annoying, but amazingly still around. It’s truly shocking how those crazy commission rates survived given the tremendous change that’s gone on in the last 30+ years.
Back when Weird Al was singing “Eat it,” real estate agents had it pretty tough. Every month they would get a giant book the size of Manhattan’s phone directory with the current listings. Twenty-four hours after they received it, it was out of date, and they wouldn’t get an updated version for another month. When a buyer called, her or she had little to no idea what was on the market. Listing prices weren’t known to consumers, nor were number of bedrooms/baths, square footage, etc. Consumers relied on the agent to provide all this information to them, which could be quite tedious. After clients selected the homes they were interested in, the agent called each individual listing agent to schedule a showing, then drove around to each listing agent’s office to pick up the keys (lockboxes weren’t the standard back then). Whew! I’m exhausted, and we haven’t even gotten to the part where clients are making an offer! Anyway, the agent would then drive the buyers around and find a suitable house. If they didn’t find the right house in round one, the whole process had to be started over. Electronic signatures, showing services, lockboxes, email, Zillow, and cell phones weren’t part of the landscape yet. It’s hard to imagine how anything got done without lots and lots of work.
Thankfully, bulky listing books and rotary phones have fallen by the way side. According to NAR, 92% of buyers use the internet to assist in their home search, taking a tremendous load off of agents to identify potential properties and share basic information with their clients. Agents can call one number to schedule most of their showings, and every house has either a lockbox or built in code. Easy peasy! Electronic signatures and document sharing keeps everyone from driving around or waiting for the mail man. Agents are easily doing half the work they once did, but still charging clients the same rates they were charging when Jimmy Carter was president.
Now agents will tell you selling houses has gotten more complex in the last 30 years, and that’s why you’re still paying an arm and a leg in commission. Actually, selling a house now isn’t that much different than is was back then. The LENDING process is more complicated, but the real estate agent’s responsibilities are actually much easier with the advent of new technology. Your poor mortgage broker, however, has got some complicated stuff going on. And he only gets paid a fraction of what your agent is raking in per transaction.
Now let’s take this one step further. Think about how much equity sellers could retain if they had more reasonable commission rates. Think how much more they could negotiate on price without taking a hit to their bottom line. Wouldn’t outcomes be better for everyone if they got great service and saved THOUSANDS of dollars? I think yes.
I’ll write more in the future about how exactly the math works on all this, but I wanted you to see that it’s insane to pay out your equity for something that’s pretty darn simple. Keep y0ur cash and call me or another flat rate real estate company. I think we’re the best, but I’m a little biased :)
Good luck out there!