Enjoy competition? Becoming a REALTOR is for you!

[gwasser]

I hear a lot of moaning and groaning about realtor commissions and the MLS monopoly, so I would like to point out some facts – as I see them in this three part posting series.

The Competition Bureau claims the MLS system has to open up further and the emotional claims about a realtor monopoly and unrealistic commissions are heard everywhere. So I want first to address the MLS system.

The MLS system started about 54 years ago and was brought onto the internet some 10 years ago and is in part available to the public. The creation of the MLS software and database did cost millions that were paid for by the membership of CREA (Canadian Real Estate Association) of which close to a hundred thousand realtors are members. Not all realtors are members but most who sell residential real estate are. The success of MLS as a marketing tool is undeniable and consequently a large percentage of people think that they should have access to it as well. It is their right they claim. Really??

You can market your properties outside MLS, there is Craig`s list, Kijiji and just plain personal websites. Many REIN members sell without realtors or they only use realtors part of the time. Tony Peters finds renters-to-own via an extensive marketing campaign. Mark Loefler uses the find-tenant-first strategy; only once he qualifies his tenants he contacts a realtor (to save time and money) to help the tenant select the RTO property. But when he sells to his tenant there is no realtor.

Anybody heard of Ron Le Grand? Yellow letters? Excuse me, that is buying and selling without a realtor. And guess what? How many learned the hard way that yellow notes cost a lot of money and sweat and even... police calls. How many REIN members placed classifieds or send around newsletters to sell their properties? Is that for free?

 

[gwasser]

I hear a lot of moaning and groaning about realtor commissions and the MLS monopoly, so I would like to point out some facts – as I see them in this three part posting series.
About those darn realtor commissions:

The complaints are that realtors are not competitive; do charge too much; and they by-pass houses listed for lower commissions and FSBO! Excuse me!

You do not have to sell through a realtor as shown above. But a realtor makes it a lot more easier. The realtor sets up a custom made searches on his fabulous database. By the way, did you ever ask the Bay how much underwear they sell and for how much and what the manufacturer got paid for it? So you can go to Superstore and see if you get it cheaper? Of course not. But that is what many of you want from MLS who only tracks sales made through their realtors. In fact realtors are happy to share this data with you so you can make a buy or sell decision. But... you have to pay for it and obey the rules.

You can buy just MLS data or list without other services from some realtors – though many that sell only access to MLS go broke and can`t make a living. MLS access is only a small part of the services offered. How many hours does the realtor spend making appointments to enter listed homes; to show the homes; to check out the data of the properties that you would want to make an offer for? They are even liable if they do not help you sell or buy according to the laws of the land and province or according to the interpretation of those laws by the Real Estate Council of Alberta(RECA). RECA`s sole purpose is to protect the public against erroneous, omitted and misleading behaviour by realtors. It is funded by mandatory payments (outlined in law) by realtors. They also provide errors and omission insurance to compensate the public for damages suffered. MLS means that the data on properties meet certain standards to ensure accuracy and disclosure. If it is not in MLS, it is the realtor`s job to find and disclose issues important to their buyer or seller clients as much as is possible. While at the same time there is a commitment to confidentiality between client and realtor even after their contract has ended.

So you, inexperienced first-time buyer or seller goes up against a sophisticated investor or an experienced home owner without a realtor. You can, be my guest. Oh, by the way, who needs a lawyer, or a home inspector or a mortgage broker or a condo doc reviewer? After all, all those people charge too much commission and you can do this by yourself. Yeah... right. You need a realtor who does this all for you and he should do this for free or only for want you think he/she should be paid! Yeah... right!

In fact, you actually can determine how much you pay in commissions. But guess what... you get what you pay for, or better what the seller pays for. The commissions are part of fair market value! So whether you buy with realtor or ala Ron Le Grand, you pay market value (unless you a have special situation). It is really the seller who pays the commission.

alibri-->So now you go to the For-Sale-By Owner (FSBO). This person is not there to sell you below market value; he/she just does not want to pay for the commission. In fact, FSBO`s often overestimate the value of their property, often do not disclose issues even if they have to by-law (with which they are often not familiar) and they do not adhere to RECA rules and standards and they do not adhere to MLS standards and you have no errors-or-omissions insurance or tribunals to resort to (other than a court-of-law) and now you buy unprotected.

Guess what, realtors can and do help you with FSBO deals. But, they won`t do it for free. Of course you are less protected even with a realtor when buying from an FSBO. The realtor does not have ESP. But with a realtor there is a lot of knowledge about real estate at your side and he/she can help ensure the transaction is done properly.

Realtors in Alberta work these days with a Buyer-Brokerage agreement (or a Seller-Brokerage agreement). This agreement spells out what the buyer and the realtor (representing the brokerage) expect from each other, including fully negotiable commissions.

Under commissions, the agreement states that the commission is so-and-so and that with MLS listed properties this is paid for by the seller. However, the commission is paid for by the buyer, when dealing with a FSBO or a developer (or builder) who normally pays little or no commissions when you decide to buy new.

Usually this commission paid by the buyer will be reduced by any contribution that can be negotiated from the FSBO or developer. This way you are covered and the realtor has absolutely no incentive to avoid showing you other properties than those listed in the MLS.

 

[gwasser]

I hear a lot of moaning and groaning about realtor commissions and the MLS monopoly, so I would like to point out some facts – as I see them in this three part posting series.
Finally, how competitive is it to be a realtor? Extremely

Do not feel bad about this, I don’t. But be aware.

In Alberta, to become a realtor you have to follow an education program that is approximately 3 to 4 months long on a full time basis plus you need a high school diploma. The program tuition and exam fees amount to roughly $7000. You have to do 3 or 4 major exams. Once qualified, you have to do annual mandatory professional development (typically a 3 days to a week or so of education every year). This can often be done in classroom or on-line.

You have to be licensed by RECA and accepted (in particular when doing residential) by the local real estate board. You also need some gadgets to access MLS and to be able to enter properties for showing. This amounts to $2000 in the first year and $1200 to $1500 in subsequent years. You must be associated with a brokerage firm such as Royal LePage Pinnacle or Royal LePage Solutions. This costs you about $1000 per month.

You need to advertise, have open house signs, pay gas to drive your clients around (and fuel the clients with coffee) as well as an accountant and numerous other standard business expenses. You have no fixed working hours and may work until deep into the night. Clients do not come running into your arms – you have to do extensive marketing for yourself. Typically you should not count on any income during the 3 to 4 months of education nor during the first 6 months or so when starting up. That means, you may need to live close to a year without income to become a realtor.

80% of the properties are sold by 20% of the realtors. In Calgary there are right now 4000 active listings and over 5000 realtors with negotiable commissions. The average house sells in Calgary for $330,000 or so and it takes currently about 2 months to sell a place. Many realtors want a commission of 7% on the first $100,000 and 3.5% on the remainder of the sales price. So total commission per house sold is around $14,000 to be divided (often equally or somewhat equally) between buyer and seller realtor. Assuming a 50/50 split this would amount to $7000 per realtor, from which he/she has first to deduct all expenses. So say the realtor’s take-home is $4000.00 per house sold.

So per month right now, 2000 properties are sold in Calgary. 80% or 1600 properties are sold by 20% or 1000 realtors. The other 4000 realtors sell 400 houses per month. That is 1/10 of $4000 or $400 dollars per month if you are one of the lucky 80%. Wow, that is some monthly salary! No wonder that a large proportion of realtors quit in the first year and many more won’t make the five year line. I can’t think of a more competitive profession.

bri">Don’t get me wrong. I love being a realtor, especially since it is my second or semi-retirement career. I love investing and I love helping other people on their way toward achieving their personal Belize (life vision). I see myself doing this another 30 or 40 years from now. I visualize myself at 92 in a wheel chair racing out in front my clients in a show home. Squealing enthusiastically and pointing out that the kitchen has a top-of-the-line dishwasher. But above all, I love the excitement of the deal and helping others on the way towards fulfilling their dreams. After all, as Don Campbell pointed out this Monday night at the Red and White Club in Calgary, it is not about retirement and sitting at home or being bored on the golf course. It is about having the financial strength to do what you want to do. Eh, even Tiger Woods gets distracted playing golf 24/7 as we have recently learned.

 

[fumbrunner]

Ok, I`ll bite...

QUOTE (gwasser @ Feb 10 2010, 07:36 PM) I hear a lot of moaning and groaning about realtor commissions and the MLS monopoly, so I would like to point out some facts – as I see them in this three part posting series.

The Competition Bureau claims the MLS system has to open up further and the emotional claims about a realtor monopoly and unrealistic commissions are heard everywhere. So I want first to address the MLS system.

The MLS system started about 54 years ago and was brought onto the internet some 10 years ago and is in part available to the public. The creation of the MLS software and database did cost millions that were paid for by the membership of CREA (Canadian Real Estate Association) of which close to a hundred thousand realtors are members.

Millions?  Really?  I know a couple of programmers that could set it up for alot less.

Not all realtors are members but most who sell residential real estate are. The success of MLS as a marketing tool is undeniable and consequently a large percentage of people think that they should have access to it as well. It is their right they claim. Really?? 


I don`t think people are asking for unfettered access.  I would gladly pay a fee to access the data, similar to how realtors pay to be "members"




You can market your properties outside MLS, there is Craig`s list, Kijiji and just plain personal websites. Many REIN members sell without realtors or they only use realtors part of the time. Tony Peters finds renters-to-own via an extensive marketing campaign. Mark Loefler uses the find-tenant-first strategy; only once he qualifies his tenants he contacts a realtor (to save time and money) to help the tenant select the RTO property. But when he sells to his tenant there is no realtor.




Sure, but as you well know, MLS is by far the most used tool



Anybody heard of Ron Le Grand? Yellow letters? Excuse me, that is buying and selling without a realtor. And guess what? How many learned the hard way that yellow notes cost a lot of money and sweat and even... police calls. How many REIN members placed classifieds or send around newsletters to sell their properties? Is that for free?

 

[fumbrunner]

QUOTE (gwasser @ Feb 10 2010, 08:22 PM) I hear a lot of moaning and groaning about realtor commissions and the MLS monopoly, so I would like to point out some facts – as I see them in this three part posting series.About those darn realtor commissions:

The complaints are that realtors are not competitive; do charge too much; and they by-pass houses listed for lower commissions and FSBO! Excuse me!

You do not have to sell through a realtor as shown above. But a realtor makes it a lot more easier. The realtor sets up a custom made searches on his fabulous database. By the way, did you ever ask the Bay how much underwear they sell and for how much and what the manufacturer got paid for it? So you can go to Superstore and see if you get it cheaper? Of course not. But that is what many of you want from MLS who only tracks sales made through their realtors. In fact realtors are happy to share this data with you so you can make a buy or sell decision. But... you have to pay for it and obey the rules.



Realtors seem to tire of people asking for data.  Especially if you follow Don`s advice about making potentially dozens of offers in a year.




You can buy just MLS data or list without other services from some realtors – though many that sell only access to MLS go broke and can`t make a living. MLS access is only a small part of the services offered. How many hours does the realtor spend making appointments to enter listed homes; to show the homes; to check out the data of the properties that you would want to make an offer for? They are even liable if they do not help you sell or buy according to the laws of the land and province or according to the interpretation of those laws by the Real Estate Council of Alberta(RECA). RECA`s sole purpose is to protect the public against erroneous, omitted and misleading behaviour by realtors. It is funded by mandatory payments (outlined in law) by realtors. They also provide errors and omission insurance to compensate the public for damages suffered. MLS means that the data on properties meet certain standards to ensure accuracy and disclosure. If it is not in MLS, it is the realtor`s job to find and disclose issues important to their buyer or seller clients as much as is possible. While at the same time there is a commitment to confidentiality between client and realtor even after their contract has ended.

Tell me, is this service worth upwards for 20-30K for a transaction?  I dont think so



So you, inexperienced first-time buyer or seller goes up against a sophisticated investor or an experienced home owner without a realtor. You can, be my guest. Oh, by the way, who needs a lawyer, or a home inspector or a mortgage broker or a condo doc reviewer? After all, all those people charge too much commission and you can do this by yourself. Yeah... right. You need a realtor who does this all for you and he should do this for free or only for want you think he/she should be paid! Yeah... right!



This is the only time I feel a realtor makes sense - first timers



In fact, you actually can determine how much you pay in commissions. But guess what... you get what you pay for, or better what the seller pays for. The commissions are part of fair market value! So whether you buy with realtor or ala Ron Le Grand, you pay market value (unless you a have special situation). It is really the seller who pays the commission.

So now you go to the For-Sale-By Owner (FSBO). This person is not there to sell you below market value; he/she just does not want to pay for the commission. In fact, FSBO`s often overestimate the value of their property, often do not disclose issues even if they have to by-law (with which they are often not familiar) and they do not adhere to RECA rules and standards and they do not adhere to MLS standards and you have no errors-or-omissions insurance or tribunals to resort to (other than a court-of-law) and now you buy unprotected.

Guess what, realtors can and do help you with FSBO deals. But, they won`t do it for free. Of course you are less protected even with a realtor when buying from an FSBO. The realtor does not have ESP. But with a realtor there is a lot of knowledge about real estate at your side and he/she can help ensure the transaction is done properly.

Realtors in Alberta work these days with a Buyer-Brokerage agreement (or a Seller-Brokerage agreement). This agreement spells out what the buyer and the realtor (representing the brokerage) expect from each other, including fully negotiable commissions.

Under commissions, the agreement states that the commission is so-and-so and that with MLS listed properties this is paid for by the seller. However, the commission is paid for by the buyer, when dealing with a FSBO or a developer (or builder) who normally pays little or no commissions when you decide to buy new.

Usually this commission paid by the buyer will be reduced by any contribution that can be negotiated from the FSBO or developer. This way you are covered and the realtor has absolutely no incentive to avoid showing you other properties than those listed in the MLS.

 

[gwasser]

QUOTE (fumbrunner @ Feb 10 2010, 09:03 PM) Ok, I`ll bite...Millions? Really? I know a couple of programmers that could set it up for alot less. My response, outside the quote tags.

Wow, you should tell CREA that they paid too much. Does that include data entry? Site advertising? Realtor software that you never saw unless you looked over a realtor`s shoulder, document management such as those virtual photo tours? Integration with municipal tax departments, links to maps, links to historical listings, automated e-mailing, client tracking and so on and so on?

Didn`t think so.

I don`t think people are asking for unfettered access. I would gladly pay a fee to access the data, similar to how realtors pay to be "members"

So why don`t you? Isn`t that what discount real estate brokerages offer?

Or you can become a broker yourself – annual fee $1500 or so. Lot cheaper than commissions. Even if you have to pay $1000 monthly brokerage fees it is still below what you spend on commissions. As you pointed out it is so easy!

Oh, I get it. You want to pay but not that much? As I said, you get what you pay for.

By the way, why don`t you ask a realtor to put you on his e-mail list. He probably custom searches the database for you and e-mails you the results (including instantaneous updates) and all for free! You probably won`t have to sign anything until you ask for advise or want to see the property inside. So where is that monopoly?

Sure, but as you well know, MLS is by far the most used tool.

Why is that? Craig list is a lot cheaper!

Must be all that `cheap` data and `cheap` programming he?

Realtors seem to tire of people asking for data. Especially if you follow Don`s advice about making potentially dozens of offers in a year.

So how is it that you need to make so many offers? One would think any reasonable offer would be happily accepted by those `stupid` sellers?

To be honest, I don`t mind making a low offer for my clients. I do it for myself as well. But I do check out whether the conditions warrant a low offer. If there is no chance of acceptance why bother?

Your realtor can tell you by market segment what the typical list prices are and how they compare with the sold prices for a particular time or market. He/she knows whether low bids have chance or not.

I don`t care as a buyer`s realtor whether the seller is `insulted` but I don`t want to waste my time making offers over and over just for the sake of making offers. Often, I can just give the seller`s realtor a call asking him/her whether such an offer has a chance or whether it will be outright wiped off the table.

You want data, just ask. But don`t expect that I run my b..ind off for you for months and then you make an offer behind my back, because you feel I don`t deserve your commissions. This is a two-way street buddy.

This is the only time I feel a realtor makes sense - first timers

And who lets you into the place to check it out? You think you can just walk into any place you feel like? There are renters and other occupants to be considered. People have to take off time from work just so you can have a look at a place on which you attempt to do a stink bid nobody in their right mind accepts.

I have bought a number of properties overtime, and I am usually with a realtor who helps to point out things I miss. Two opinions are better than one. Now I am on the other side, and I hope that I can do as good a job as my erstwhile realtors did. You truly get what you pay for. The times I bought without a realtor (yeah I did too) often ended up with some pretty big problems.

But by now I have learned, I got trained, and have a much more experienced broker looking over my shoulder. BTW I buy also a lot of stocks and bonds in the stock market. Some I buy by myself, but major purchase, even after 25 years successful investing, I do still through a full service stock broker. Guess why?

Yeah, I hear you... Godfried is a slow learner!

Thanks for `biting`. I liked the `challenge`. In spite of a bit of sarcasm on my side, or was it attempt of poor humour? I did appreciate the chance to discuss your perceptions. In the end, that is what it is all about how you see things from your corner and I from mine.

 

[housingrental]

I think the problem is its a private system

Lets nationalize land sales data and make it public

Because you want to pay more tax`s and prefer a single government administered source, right?

Do you still want to complain about the current mls system?

 

[wealthyboomer]

QUOTE (gwasser @ Feb 10 2010, 07:22 PM) But with a realtor there is a lot of knowledge about real estate at your side and he/she can help ensure the transaction is done properly. [/font]
Ya, 4 weeks worth of knowledge to get their license. That is a lot!

 

[wealthyboomer]

QUOTE (gwasser @ Feb 10 2010, 07:22 PM) In fact, you actually can determine how much you pay in commissions. But guess what... you get what you pay for, or better what the seller pays for. The commissions are part of fair market value! So whether you buy with realtor or ala Ron Le Grand, you pay market value (unless you a have special situation). It is really the seller who pays the commission.

You get what you pay for? Payment isn`t made until the sale is complete.
-----------------------------


Most people feel that it is the `seller` who pays all of the commission to both the seller’s agent and the buyer’s agent in a real estate transaction. Although the seller is the party who is actually writing the cheque for the commissions, the buyer should also feel that they are contributing to paying the commission indirectly through the purchase price.

Most sellers consider the amount of commission that they must pay both when setting their listing price and when doing their calculations while considering accepting any offer. Sellers will net out the commission to determine how much they are actually left with. Interestingly, most buyers do not think of the commission when purchasing a home.

Buyers do not typically negotiate commission with their agent because of the idea that the seller pays the commission. However, without the buyer, the buyer’s agent would not be receiving any commission. On the purchase of a $300,000 home, the commission that a buyer’s agent receives because a buyer chose that agent to assist them could be as much as $6,000 based on 3% of first $100,000 and 1.5% of the remainder of the purchase price of the home.

 

[fumbrunner]

QUOTE (gwasser @ Feb 10 2010, 11:59 PM) Millions? Really? I know a couple of programmers that could set it up for alot less. My response, outside the quote tags.Wow, you should tell CREA that they paid too much. Does that include data entry? Site advertising? Realtor software that you never saw unless you looked over a realtor`s shoulder, document management such as those virtual photo tours? Integration with municipal tax departments, links to maps, links to historical listings, automated e-mailing, client tracking and so on and so on?

Didn`t think so.

I don`t think people are asking for unfettered access. I would gladly pay a fee to access the data, similar to how realtors pay to be "members"

So why don`t you? Isn`t that what discount real estate brokerages offer?

Or you can become a broker yourself – annual fee $1500 or so. Lot cheaper than commissions. Even if you have to pay $1000 monthly brokerage fees it is still below what you spend on commissions. As you pointed out it is so easy!

Oh, I get it. You want to pay but not that much? As I said, you get what you pay for.

By the way, why don`t you ask a realtor to put you on his e-mail list. He probably custom searches the database for you and e-mails you the results (including instantaneous updates) and all for free! You probably won`t have to sign anything until you ask for advise or want to see the property inside. So where is that monopoly?

Sure, but as you well know, MLS is by far the most used tool.

Why is that? Craig list is a lot cheaper!

Must be all that `cheap` data and `cheap` programming he?

Realtors seem to tire of people asking for data. Especially if you follow Don`s advice about making potentially dozens of offers in a year.

So how is it that you need to make so many offers? One would think any reasonable offer would be happily accepted by those `stupid` sellers?

To be honest, I don`t mind making a low offer for my clients. I do it for myself as well. But I do check out whether the conditions warrant a low offer. If there is no chance of acceptance why bother?

Your realtor can tell you by market segment what the typical list prices are and how they compare with the sold prices for a particular time or market. He/she knows whether low bids have chance or not.

I don`t care as a buyer`s realtor whether the seller is `insulted` but I don`t want to waste my time making offers over and over just for the sake of making offers. Often, I can just give the seller`s realtor a call asking him/her whether such an offer has a chance or whether it will be outright wiped off the table.

You want data, just ask. But don`t expect that I run my b..ind off for you for months and then you make an offer behind my back, because you feel I don`t deserve your commissions. This is a two-way street buddy.

This is the only time I feel a realtor makes sense - first timers

And who lets you into the place to check it out? You think you can just walk into any place you feel like? There are renters and other occupants to be considered. People have to take off time from work just so you can have a look at a place on which you attempt to do a stink bid nobody in their right mind accepts.

I have bought a number of properties overtime, and I am usually with a realtor who helps to point out things I miss. Two opinions are better than one. Now I am on the other side, and I hope that I can do as good a job as my erstwhile realtors did. You truly get what you pay for. The times I bought without a realtor (yeah I did too) often ended up with some pretty big problems.

But by now I have learned, I got trained, and have a much more experienced broker looking over my shoulder. BTW I buy also a lot of stocks and bonds in the stock market. Some I buy by myself, but major purchase, even after 25 years successful investing, I do still through a full service stock broker. Guess why?

Yeah, I hear you... Godfried is a slow learner!

Thanks for `biting`. I liked the `challenge`. In spite of a bit of sarcasm on my side, or was it attempt of poor humour? I did appreciate the chance to discuss your perceptions. In the end, that is what it is all about how you see things from your corner and I from mine.

Don`t get me wrong Godfried.  I value the work that realtors do.  My realtor has done a great job for me and continues to.  I`m just playing devil`s advocate here.  I think more than anything, the current debate revolves around the fee structure charged by realtors more so than unfettered access to MLS.  Open MLS up and it would provide all sorts of different fee levels that realtors would be able to charge.  From that perspective, I support it.  The only realtors that have something to fear here are the ones that do very little for their customers and reap the rewards of an easy sale.  In reality, the proactive realtors, potentially armed with all sorts of different levels of service and fees could benefit greatly.  

On the subject of MLS data, I would love to have access, not to list or sell properties, but to mine the data myself and save my realtor the trouble.  I look at probably dozens of properties in a year and my realtor`s time is likely better spent showing me properties that I may make an offer on to than chasing down data for me only to say "the numbers dont quite work".  In the "new" system I would still rely on my realtor`s advice and use them to make an offer.

I get the sensitivity around the subject, but I think there are great opportunities for all involved in REI if the current system is tweaked a bit.

 

[RedlineBrett]

But answer me this guys... what right do you have to access a system that realtors have spent decades paying into for development and upkeep and through their commitment turned it into the marketing medium for 90% of all land transfers? Why should you get this for free?

If we open it up how can CREA recoup the cost of development? The investment I have made in the system by paying into it with every month I`ve been a member and with every deal I do? You can see why CREA doesn`t want to give this away.

Consumers would like to pay less realtor fees. I`m sure they`d also like to reduce interest rates, lender payout penalties, land transfer taxes, income taxes, legal fees, survey costs, insurance fees as well. By building this industry for 54 years and increasing the quality, quantity and speed of information realtors have added value to consumers and earned their right to charge whatever fees they can just like any other service that touches the real estate industry.

Should other professional associations open their doors to reduce their fees? Should we reduce barriers in other service industries such as law, medicine or engineering so that consumers can do more of it themselves?

If you don`t want to use the system you don`t have to... You can represent yourself just like you can in a courtroom... or pull your own teeth if you don`t want to pay a dentist.

 

[RedlineBrett]

QUOTE (wealthyboomer @ Feb 11 2010, 12:38 AM) Buyers do not typically negotiate commission with their agent because of the idea that the seller pays the commission. However, without the buyer, the buyer`s agent would not be receiving any commission. On the purchase of a $300,000 home, the commission that a buyer`s agent receives because a buyer chose that agent to assist them could be as much as $6,000 based on 3% of first $100,000 and 1.5% of the remainder of the purchase price of the home.

So? Do you feel this is too much? There are 100s of questions and many evenings and weekends that go into the sale of someone in the 300k home bracket. Every client is different.

Do you feel realtors should work hourly for minimum wage? Well I think you should work for $10/hr for whatever you do. Am I qualified to tell you you make too much? So what`s the difference between us?

It`s also not the seller that pays buyer realtor fees it is the seller`s BROKERAGE that does. The seller pays their realtor who in turn decides how much they need to offer to a buyer`s realtor to get a sale done. Most times it is 3.5/1.5. Many times it is less and many times it is more... but it is the seller`s broker that decides this.

 

[fumbrunner]

QUOTE (RedlineBrett @ Feb 11 2010, 08:02 AM) But answer me this guys... what right do you have to access a system that realtors have spent decades paying into for development and upkeep and through their commitment turned it into the marketing medium for 90% of all land transfers? Why should you get this for free?I don`t think anyone expects to get access for free

Consumers would like to pay less realtor fees. I`m sure they`d also like to reduce interest rates, lender payout penalties, land transfer taxes, income taxes, legal fees, survey costs, insurance fees as well. By building this industry for 54 years and increasing the quality, quantity and speed of information realtors have added value to consumers and earned their right to charge whatever fees they can just like any other service that touches the real estate industry.


See, this is the type of comment that has spurred on the debate. You cannot compare realtor fees to the other fees you mention because RE fees are astronomically higher than those others. Answer me this. For a home that is worth $600K, what is your fee? Probably what 25K at least? Probably upwards of 40K potentially? I don`t understand how realtors do not see that as excessive for ONE transaction.


Should other professional associations open their doors to reduce their fees? Should we reduce barriers in other service industries such as law, medicine or engineering so that consumers can do more of it themselves?

If you don`t want to use the system you don`t have to... You can represent yourself just like you can in a courtroom... or pull your own teeth if you don`t want to pay a dentist.

I think what has brought about this debate is the inability for realtors to charge a flat fee, which CREA has kyboshed every time a realtor attempts it. Consumers feel that the current cost structure is antiquated and with the value of homes nowadays I tend to agree. Allowing the introduction of flat fees would have saved CREA a ton of trouble. But most realtors enjoy the percentage structure for the obvious reasons.

 

[gwasser]

QUOTE (fumbrunner @ Feb 11 2010, 07:48 AM)
I think what has brought about this debate is the inability for realtors to charge a flat fee, which CREA has kyboshed every time a realtor attempts it. Consumers feel that the current cost structure is antiquated and with the value of homes nowadays I tend to agree. Allowing the introduction of flat fees would have saved CREA a ton of trouble. But most realtors enjoy the percentage structure for the obvious reasons.






Hi Fumbrunner (I don't know your first name)



If I remember right, you can negotiate a flat fee. But most brokers work with a percentage. Just try next time to offer a flat fee. Personnally, I don't mind at all provided I don't end up working for less than minimum wages (if you get my drift). As Brett says, there is a lot of work we're doing aside what you see upfront. Liabiltiy is the biggest issue here.



Suppose you tell your buyer, "Eh, do you see the playground accross the street. Isn't that great for your kids?".

Next thing you know, they're tearing down the playground and put up a strip mall. Buyers are angry because that is why they bought an you get sued, 'because you should have known'.



So, what should the realtor have done? He should have said: "If that playground is important to you Mr. and Mrs. buyer, you should check with the city planner whether there are any plans changing it". See, if you have to be this carefull in what you say because you are so exposed to liability, why would anyone dare to stick his/her neck out for low fees? Just one aspect.



This morning I saw a CREA bulletin that explained what the key issues are surrounding this fight with the CB. CREA has proposed certain amendmends to their by-laws and regulations, These changges are basically aimed at persons to list their properties on MLS without the need for an agent to present incoming offers to the lister/seller. CREA has proposed that a listing person (if I understand it right) has the opportunity to make a listing provided it is scrutinized by a realtor to ensure data correctness on the MLS. The realtor would be liable to ensure everything stated meet listing standards. But the seller has the option to represent him/herself in the offer presentation/negotiation when he/she does so in writing. Absolving the realtor from all liability except the listing's.



What I know from client/agent relations in common law as explained to us here in Alberta, there maybe issues. Such an arrangement may not be acceptable regarding Alberta real estate law, which is very specific when a realtor's fiduciary duties start. So, I foresee this may also require changes on provincial legislative levels and will leave consumers less protected.



As I see it, in order to save a few bucks for more experienced buyers and sellers, a lot of less experienced, especially new, buyers and sellers will be opened to the temptation of going this 'unprotected route' which will be quite a bit 'cheaper' and get fried. Anyway, this issue is getting too complex for me to understand all inherent consequences. I'll leave it up to lawyers and legislators. But as far as I am concerned, you can not have your cake and eat it too. Either realtors are liable or the are not. Either they have fiduciary duties or they don't.

 

[gwasser]

QUOTE (wealthyboomer @ Feb 11 2010, 12:38 AM) You get what you pay for? Payment isn`t made until the sale is complete.
-----------------------------


Most people feel that it is the `seller` who pays all of the commission to both the seller`s agent and the buyer`s agent in a real estate transaction. Although the seller is the party who is actually writing the cheque for the commissions, the buyer ....

Brett answered most of your concerns similar as I would.

One issue stands out. Yes, you may be right to assume that sellers include their commissions in their pricing calculations. But, they would still have to compete in pricing with the market overall where FSBOs,REIN and RLG practioners and numerous others scour the markets for deals. So if the seller asks too much based on your criteria (income driven, I presume) and there are enough of you, the prices will adjust. So, it truly is the seller who pays for the commissions.

Best example is RTO. Do you say to your RTO tenant that although the housing prices increase at 6% you are going to reduce the final purchase price by $20,000 because you do not have to pay the sales commission? No?? I thought so.

 

[TheVancouverMarket]

QUOTE (fumbrunner @ Feb 11 2010, 08:48 AM)
I think what has brought about this debate is the inability for realtors to charge a flat fee, which CREA has kyboshed every time a realtor attempts it. Consumers feel that the current cost structure is antiquated and with the value of homes nowadays I tend to agree. Allowing the introduction of flat fees would have saved CREA a ton of trouble. But most realtors enjoy the percentage structure for the obvious reasons.






I have added a comment further down.

 

[gwasser]

QUOTE (wealthyboomer @ Feb 11 2010, 12:32 AM)
Ya, 4 weeks worth of knowledge to get their license. That is a lot!

It is not weeks. It is a lot more read my initial postings and that does not include the training a new realtor gets at the brokerage. Afterall, the brokerage is liable too for any deal their realtors make. Also, nobody tells you to use a green realtor, you choose the realtor based on the services you expect he/she can offer and whether you feel you can get along/trust etc.

 

[TheVancouverMarket]

Someone gave me a wonderful analogy the other day regarding this issue:

Imagined you owned a successful second hand car lot and you were in the business of selling cars. You would have significant fixed and variable costs to run your business (rents, sales, marketing costs etc). You would have invested over the years considerable time, energy and money in the business. Perhaps you are the only car seller in a 100km radius. But then John Doe comes along and says to the owner of the car business and says:

"I am just gonna park my used car right here at the front of your sales lot. I feel like selling it. Hope you don`t mind. Oh and here`s $99. My contact numbers on the front windscreen, so I don`t need anyone from you company to help me. Buyers can just call me direct. Thanks. See you later"

Is that a fair analogy ?

Personally, I am very excited by the fact that this issue is front and centre and all over the news and I think it`s very important that there is so much discussion around the subject. Lots of good things will come out of it for realtors and consumers.

 

[gwasser]

QUOTE (TheVancouverMarket @ Feb 11 2010, 09:01 AM)
Someone gave me a wonderful analogy the other day regarding free (or lo-fee) and unfettered access to MLS idea.



Imagined you owned a successful second hand car lot and you were in the business of selling cars. You would have ......





Personally, I am very excited by the fact that this issue is front and centre and all over the news and I think it's very important that there is so much discussion around the subject.






I 100% agree. Look at all the discussion on this forum. A lot of people finally start to think about what their realtors are actually doing for them including liability and protection. A realtor is not a sales clerk at chapters. He/she truly does a lot of things that are not often discussed in most detail. Fiduciary duties are really big!



Some of the scary issues are 'latent material defects' and stigmatism - i.e. a recent murder in the listed house or a grow-up.



If the seller knows of a significant building problem not readily observable but that can lead to major repairs or a condemnation of the building, this is called 'material latent defect'. Material meaning 'substantial' and latent meaning 'hidden'. The seller is supposed to disclose it, but may not - they sometimes lie you know.



The seller's realtor is obliged to disclose all he/she knows about the house in regards to such defects. He sees signs of a grow-up but the owner remains quiet. Does he disclose or not? If he does not, a court of law may judge that based on his skills as a realtor he should have known and consider him liable. If he does and it turns out that he just saw symptoms but it was not a grow-up after all, he is liable to the seller who may sue him. See how difficult this can get?



Or, a seller discloses in confidence that their was a murder in the property a month ago. But, he relies on the Realtor's duties of confidentiality and instructs him not to disclose this to potential buyers. What does the Realtor do?



Just a few 'minor' issues.

 

[fumbrunner]

QUOTE (TheVancouverMarket @ Feb 11 2010, 10:06 AM) Someone gave me a wonderful analogy the other day regarding this issue:

Imagined you owned a successful second hand car lot and you were in the business of selling cars. You would have significant fixed and variable costs to run your business (rents, sales, marketing costs etc). You would have invested over the years considerable time, energy and money in the business. Perhaps you are the only car seller in a 100km radius. But then John Doe comes along and says to the owner of the car business and says:

"I am just gonna park my used car right here at the front of your sales lot. I feel like selling it. Hope you don`t mind. Oh and here`s $99. My contact numbers on the front windscreen, so I don`t need anyone from you company to help me. Buyers can just call me direct. Thanks. See you later"

Is that a fair analogy ?

Personally, I am very excited by the fact that this issue is front and centre and all over the news and I think it`s very important that there is so much discussion around the subject. Lots of good things will come out of it for realtors and consumers.

I`m not sure that is the greatest analogy. The used car saleman essentially own the title on the vehicles and is not selling the vehicles on behalf of anyone. But that is beside the point.

What I would like to ask the realtors on this board is: Do you think the amount of work that you put into a given sale justifies commissions in the neighbourhood of 20-30K per transaction (as is the case in many instances). That is the crux of the discussion and is what has caused these challenges to be brought forward.