I m not going to repost my last reply to agent bashers located here.
Suffice it to say the basing of real estate agents as a class is retarded in the extreme. The existence of the job of real estate agent is almost purely a function of efficiently functioning supply and demand marketplace forces and the fact that their services are deemed to be useful and valuable or they would not exist. Like any business or human endeavor some residential agents are great, and some are not so great, and some are just not great with an individual client they don’t mesh with, but can be great with others.
I’ve been selling commercial real estate for over 20 years now and it always amuses me when some people who should know better start to go into a frothing “I hate real estate agents” bash frenzy. Most real estate agents effectively work for free until they make a sale, and this generally requires more fortitude than the average bear possesses. When people remark that agents make too much money on an individual sale that settles, I ask them to look at the big picture, and think how about many thousands of hours and huge chunks of advertising and marketing dollars etc. the agent expends when listing and marketing properties that don’t sell. These go right down the rat hole, and there are a LOT of properties that don’t sell for one reason or another, even when you have experienced agent, and a big marking push. People only think about the houses that sell, not the money wasted and time lost when properties fail to move.
Beyond this, people often have little understanding of how real estate splits and commissions work. Most residential agents typically have splits that hover around the 45%-65% range for the majority of their sales where the brokerage is taking 55% to 35% of the total commission dollar BEFORE the agent’s bill for signs, E&O insurance, advertising, local and regional real estate board membership, multiple list membership, key-boxes, continuing education, website maintenance, automobile expenses, (and assistants if they have them), etc. etc. etc. costs. In addition as independent contractors agents get no insurance coverage or benefits, no pensions, no retirement. You are on your own.
Some plans exist where an agent can retain all their commission (after co-brokering the commission 50/50 with another agent in most cases) if they are willing to pay upfront, non-refundable and non-adjustable “desk fees” of (typically) 3,000 to - 6,000 per month depending on the office and the market. All this buys you in most cases is the right to sit at a desk. All the aforesaid fees and more are still the agent’s complete and total responsibility. In addition in these 100% scenarios the agent generally pays for their phone charges, office supplies, pro-rated copier use etc.
Another thing people don’t understand is that when an agent gets a referral, the referring entity (including the brokerage itself in some cases!) the agent typically pays between 20-30% of their total listing or selling commission to the referring party (corporate or individual agent). Corporate re-locations or RELOs are even more fun where the corporate RELO department will often demand 50% of the total listing selling or commission depending on what side is being referred. The amusing thing is that many of these (often high maintenance) corporate clients have no idea the agent is only going to make three quarters to nine-tenths of one percent of a commission after the deal is done, and before expenses (ie 6 % x 50/50 co-broke with another agent = 3% x .50 - .60 broker split = 1.5% - 1.8% x 50% RELO fee = .75 to .90 - Those agents are rolling in money!
Agents exist because in modernity selling real estate is often a complex and expensive endeavor, and beyond this not many people want to incur the upfront costs and risks of expending the money to put the property on the market and advertise it properly.
If real estate was a pure commodity item salespeople would be significantly less needful, but it’s not. For most people their residential property reflects the time and work they have invested into it, and is the ultimate non-commodity. It’s the largest, and most complex asset most people own, and everyone wants to get top dollar for their precious unique snowflake of a property, even if it’s a condo in a 1000 unit complex.
Many “Do It Yourself” real estate marketing plans have been promoted over the years to allow homeowners to save commissions and sell their properties themselves. These have mostly been abject failures because the majority of homeowners who try this soon discover that selling real estate is a lot more work, frustration and cost than they bargained for. If you have a sophisticated buyer or seller in an active market the need for an agent is less pressing, and people with some degree of savvy can often minimally advertise and sell their properties themselves if they are so inclined. Interestingly, these sophisticated buyers and sellers often find themselves somewhat less sophisticated in down markets, and turn to agents when their efforts don’t pan out or get the number they desired.
Which brings us to necessity of knowing know how to deal with people and more importantly knowing how to sell. The loudest objections to the value of good salesmanship usually comes from arrogant doofuses that are clueless in handling the subtleties of interpersonal negotiations, and have no idea how to be an effective salesperson. The most amusing crashes and burns in real estate are retired people (often men in these scenarios) who previously worked in occupations where selling and the ability to deal with people on a cooperative, non-authoritarian basis were never primary requirements. These people find out in short order what it’s like to deal with real world home buyers and sellers. A few of them succeed and do well, but most run whimpering out of the business after a year or two.