Baby, we got a bubble!?

[Ric]

Ric,
The reality is the real estate commissions are the single biggest cost after the actual price.
It just seems a bit strange that the president of TREB is quoted as saying that people are leaving TO because of LTT.
Real estate commissions have remained at 5% despite prices almost doubling in the past 10 years. I know of few others in any other industry where their take home pay has doubled for doing the same job.
My personal preference would be to pay a realtor an agreed to reasonable hourly wage for work rendered.
However, I will probably end up paying 4 and 1/2% (2% to list and 2 and 1/2% to sell) when I sell my next property because as I said, I do not wish the aggravation of doing the work myself.

Interested,
I think along with higher prices, the LTT is a deterrent to anyone looking to purchase in Toronto. RE commission is a constant (percentage wise) whether you’re buying in Toronto or any other area in the GTA. I do understand that due to higher prices in Toronto the dollar amount going towards commission will be higher. But I’m also of the opinion, that it is easier to negotiate a lower commission in Toronto where the demand is higher than say in Barrie. I would therefore blame the consumer in Toronto for paying 5% commission.
If you look at the Toronto LTT from a first time buyer perspective, It didn’t really matter a couple of years ago as average prices were closer to $400K and this meant they had a rebate which essentially meant zero additional cost. Now, with the average price over $550K, Toronto LTT is now a “real” closing expense.

Brokerage commission is negotiable, LTT is not.

 

[interested]

Ric,
I appreciate your comments.
I just think a percentage which was based on much lower historic costs from many years ago are no longer commensurate with reasonable value for service provided. I appreciate that no sale equals lost time and no commission.
It is for this reason that I think a reasonable hourly rate would be fairer to all, though unlikely to occur.

 

[Ric]

Ric,
I appreciate your comments.
I just think a percentage which was based on much lower historic costs from many years ago are no longer commensurate with reasonable value for service provided. I appreciate that no sale equals lost time and no commission.
It is for this reason that I think a reasonable hourly rate would be fairer to all, though unlikely to occur.

Tell you what Interested. For your next sale, I'll charge you 3.5%, full service with all the bells and whistle (I will even throw in a Puppy - stole that from the Vonage Ad).
But guess what, that wont make you list with me (even though you have the opportunity to save on commissions) because you already have a great agent, who is knowledgeable, reliant, provides you with excellent service (all of which I'm btw) and you trust him/her. So you will gladly pay the 4.5% commission he/she is charging. And that's my point, we bitch about commissions but at the end of the day, we all have a choice to choose the service that suits our situation and we are willing to pay for it.

Now back to the bubble talk.........

 

[ISYM]

Aside from the fact that as stated commissions are negotiable; that no one is forced to pay higher a REALTOR at a commission fee they don’t wish to pay and that LTT is constant, is also the fact that LTT is on the purchase of a home not on the sale so it affects the decision of buyers only.

Additionally, and to Interested’s comment that commissions have doubled in value because of prices, it is also true that OLTT in the 905 has doubled but has almost quadrupled in Toronto.

It is a fact too that sales jumped tremendously when the TLTT was tabled with closings set before the implementation date. Nonetheless, I don’t totally buy-in to the poll’s results as represented.

Whether or not one wants to believe that commission fees are static at 5%, they must also consider all the additional costs REALTORS are now paying for in order to assist their clients – internet sites, internet access fees, computers, laptops, printers, cell phones and cells with internet, staging, photographers, virtual tours, floor plans, fees to get onto third party sites like the Zoocasas who get to carry their listings for free but will not promote the listing agent unless such fees are paid. Mileage is a huge cost in this business and gas has gone up significantly in the last three years alone, plus a host of others that must be paid in order to maintain one’s registration.

On the other hand, if it is wrong for these static fees to double because of doubled values, would it be okay then to triple them from 1990’s 6&7% rates whenever the market dives? What costs are involved to the numerous sellers who pay up front fees of $750+ to fsbo listing companies plus their advertising costs and then turn to a full service brokerage because their property doesn’t sell? There are far more of those than one is led to believe.

Discount brokerages serve a purpose to those who like js97 wonder why high fees are paid for “just taking pictures, making a few comparisons and filling in a listing sheet” that’s pretty much the extent of what those discount fees are supposed to cover. It’s a cost saving to the consumer and an expense saving to the REALTOR. Think about it for a minute – feeling pressured to accept a deal? how much time do you suppose one would invest for $2,000 on a listing or a 70% cash back on a 2.5% buy side commission?

I also believe that far too many paint a picture as js97 did frankly because they speak of REALTORS who offer the no frills services for no frills pricing.

This is not to say that there aren’t REALTORS out there who do very little and charge a lot, but it is up to the consumer to find this out before such a representative is hired and get their commitments in writing.

 

[Kenny]

ISYM, I'm sorry but I'm going to have to disagree with what you wrote regarding "additional costs", "market dives", etc.

People pay realtors listing fees because it simply makes financial sense to do so (no matter how much it pains them). Realtors would charge more if they thought people would be willing to pay more.

There's nothing stopping you from getting your own license and selling your own home (if you have the spare time). I even know of some people who've done so with no intention of become a realtor.

 

[Ric]

I find this article very interesting. http://www.theatlantic.com/business/archive/2012/03/why-dont-young-americans-buy-cars/255001/ “Why Don’t Young Americans Buy Cars?”

I think it shows a demographic shift from Suburban living to big cities for Young people and bodes well for investors in Cities like Toronto.
The average work commute each day in the GTA is approaching 2 hours. Think about it: that’s 12.5% of the day that you are awake (assuming 8hrs sleep). That works out to 33 days per year that is spent in traffic by the average GTA commuter. I don’t know about others, but for me that’s way too much wasted time. And I think that’s one of the reasons why the “Millennials” (generation born between 1980’s -1990’s) are choosing to live in the city. If we think of this group as the “I want it now, impatient bunch” then this shift does make sense. They are staying single, not buying homes (great for rental investors), cars and want to be close to the action.

I think this helps explain the allure and popularity of downtown condos and I don’t see this trend changing anytime soon. I think these are the trends that should be part of an investors research/analysis when looking at investing in the RE market; too bad many don't.

 

[realist123]

The last time I checked, real estate commissions were not set in stone at 5% and comsumers could negotiate the commission they paid. There are discount brokerage offering MLS listings for $499 (and even lower). Comfree also provides MLS listing. But I guess people just rather Bitch about 5% as if there are no other option.

I think the issue is that consumers want to work with "name brand agents", (who spend alot of time, effort and money building their brand through marketing etc.) but want to pay the Comfree price; Good luck.

I'm sorry, but I have to chime in here, because the "you have a choice" mantra is bullshit.

I've spent many years working in the investment brokerage business. Both full service and discount.

In full service clients pay either % or flat $ amounts. This is in return for advice.
If they opt for discount, they just pay for access to the marketplace.

The key thing is that clients get equal access to the market, if they are in full service or discount. There is no market access advantage to the full service path.

In real estate, there is a material difference between access to the market in full service and discount. As noted on these forums, *some* real estate agents refuse to show clients properties that are listed through discount channels.

When you pay a Real Estate broker, you are paying for access to their market in addition to advice and marketing. If you want full access, pay up.

So yes, there is a choice, but it is tilted in the Agent's favour.

 

[interested]

Aside from the fact that as stated commissions are negotiable; that no one is forced to pay higher a REALTOR at a commission fee they don’t wish to pay and that LTT is constant, is also the fact that LTT is on the purchase of a home not on the sale so it affects the decision of buyers only.

Additionally, and to Interested’s comment that commissions have doubled in value because of prices, it is also true that OLTT in the 905 has doubled but has almost quadrupled in Toronto.

It is a fact too that sales jumped tremendously when the TLTT was tabled with closings set before the implementation date. Nonetheless, I don’t totally buy-in to the poll’s results as represented.

Whether or not one wants to believe that commission fees are static at 5%, they must also consider all the additional costs REALTORS are now paying for in order to assist their clients – internet sites, internet access fees, computers, laptops, printers, cell phones and cells with internet, staging, photographers, virtual tours, floor plans, fees to get onto third party sites like the Zoocasas who get to carry their listings for free but will not promote the listing agent unless such fees are paid. Mileage is a huge cost in this business and gas has gone up significantly in the last three years alone, plus a host of others that must be paid in order to maintain one’s registration.

On the other hand, if it is wrong for these static fees to double because of doubled values, would it be okay then to triple them from 1990’s 6&7% rates whenever the market dives? What costs are involved to the numerous sellers who pay up front fees of $750+ to fsbo listing companies plus their advertising costs and then turn to a full service brokerage because their property doesn’t sell? There are far more of those than one is led to believe.

Discount brokerages serve a purpose to those who like js97 wonder why high fees are paid for “just taking pictures, making a few comparisons and filling in a listing sheet” that’s pretty much the extent of what those discount fees are supposed to cover. It’s a cost saving to the consumer and an expense saving to the REALTOR. Think about it for a minute – feeling pressured to accept a deal? how much time do you suppose one would invest for $2,000 on a listing or a 70% cash back on a 2.5% buy side commission?

I also believe that far too many paint a picture as js97 did frankly because they speak of REALTORS who offer the no frills services for no frills pricing.

This is not to say that there aren’t REALTORS out there who do very little and charge a lot, but it is up to the consumer to find this out before such a representative is hired and get their commitments in writing.

ISYM,
You make many good points but I still do not accept the "whole full service mantra" that costs have in any way risen by what the commission has.

20 years ago: House is say $200K. Commission is 5% for $10K. 50% goes to each brokerage with a portion to the agent...let's just say $5K for simplicity.
Back then, with no internet, the agents had to do I would suggest more work. Go and see most listings. Travel with their clients to many more listings. Yes, they had to do less prep work but more leg work.

Fast forward to today: Same house is closer to $800K. Now the commission is $40K. 50% to each brokerage with a portion to the agent or $20K. In fact the agents portion has grown for most as the brokerage houses have gone to "desk fees" because the amount of their share of commission was disproportionately high" (at least in many brokerages).

If fees were originally $1000 back 20 years ago and lets work the listing agent's side as the costs presumably are more, that is still $4000 and the buyer's agent gets more though less than the $5000. If the costs even say went up 8x that is still $8000 today, which means the listing agent now gets $12000 and the buyer's agent somewhat less than $20,000.

I would point out that other than North America, real estate commissions in many countries are much lower than 5%.

In Europe many places the fees are 1%.

This is colouring the data using statistics and percentages rather than real dollar amounts. It is a bit like taxation, I don't care what I make but rather what I make after taxes. Similarly, let's talk in real dollar amounts and I am sure no matter how one cuts the pie, the fees generated are up very significantly even allowing for more expenses.

The above said, I agree there is a large difference between a "true" full service agent and the bare minimum.

I believe realist 123 makes a very fair and cohesive argument in post #6086.

 

[cdr108]

Whether or not one wants to believe that commission fees are static at 5%, they must also consider all the additional costs REALTORS are now paying for in order to assist their clients – internet sites, internet access fees, computers, laptops, printers, cell phones and cells with internet, staging, photographers, virtual tours, floor plans, fees to get onto third party sites like the Zoocasas who get to carry their listings for free but will not promote the listing agent unless such fees are paid. Mileage is a huge cost in this business and gas has gone up significantly in the last three years alone, plus a host of others that must be paid in order to maintain one’s registration.

not to dump on realtors, but those same costs have gone up for everyone yet salaries have remained stagnant for the majority of middle-class citizens for the past decade, except those that are unionized and professionals like doctors and lawyers, etc.

 

[Eug]

5% is too much. However, in certain parts of the US, it's 7%.

Also, the fees don't always include those extra charges. They do in Toronto, but I suspect it's because the houses cost so damn much in the first place, so this eases the pain a little bit. Personally I'd rather pay 2%, and pay for the extra fees myself, cuz they're a heluvalot less than 3%.

It just makes no sense whatsoever that the brokers split over $40000 on the sale of an average detached home in the 416. Geez, is $16000 not good enough?

 

[ISYM]

Kenny, no worries. Disagreements tend to bring pertinent facts to light that haven’t been considered.

As in my disagreeing now with you on the statement that REALTORS would charge more if they could. Obviously that’s not correct otherwise there wouldn’t be any discounters offering services anywhere from $99 to $4500. I’ve had the same fee cap for 6 years while adding the services mentioned. On the other hand there isn’t a discounter today who started two years and who hasn’t raised their fees considerably. Either that’s because they can’t live on small fees or that it’s so popular they will raise the rates.

I don’t know how old you are but when I first used internet, the service was free, done via a modem, tied up my phone line and was pretty much worthless for dealing with clients.

And that was only a short 15 years ago. Now it’s necessary to have and thus pay for all the trappings. I could I suppose go back to mls book concept, get rid of the digital age trappings and drop my fee drastically so as to not net more, but how many clients do you suppose I will get?

What I find interesting with consumer opinions is how they vary so. JS97 sees no justification for the fees paid which s/he believes covers just the few items listed. It wasn’t stated but I believe the intent was to suggest the 5% range.

Interested prefers an hourly charge, yet, as much as many REALTORS would love to do that, the little thing called fiduciary duty gets in the way for starters and if you think fees are high now, that would be even higher. Past clients customarily contact me requesting research on a property they came across. It’s not unusual to spend several hours uncovering everything about its history, zoning, changes, legality, land it sits on etc., then compile and send a detailed report. They may ask for nothing else until the 20th arrives, which they want to see and decide they don’t like anyway. Why should they have to pay for all that when they know they get to ride out the last commission I earned through them until and if they ever buy or sell again with me?

You meanwhile, state that consumers use REALTORS because it’s financially worthwhile. Isn’t that the outcome every consumer who pays for service involving assets and finances expect? If this was not the case, the alternative is from the last type of consumer opinion – the, I can do it myself just as well or better type.

They believe a REALTOR adds zero value. The last such person who after visiting my open 10 houses away and insulting it for the 25 minutes they stayed decided shortly after they can sell theirs for as much as I got for my sellers 7 days later. They ploughed in 8 - 4 hour open houses, forked out for 6 local newspaper ads at $300 per, $750+ for a fsbo & mls listing and after 4 months on the market, coughed up 2.5% to the buyer’s brokerage. For all that effort and expense they grossed 5.9% less. Meanwhile my sellers were gone in 75 days and are thrilled that 14 months later their price, after 3 additional attempts on the street by others, still is not matched.

 

[ISYM]

I apologize for the long posts but sometimes they’re necessary to properly state a point.

Interested, let’s run your numbers with some real ones.

First, we’ll accurately depict your 4 times house price increase. 1992’s GTA’s average sale price was $214,971 at the end of last month it was $516,787 - 2.4 times.

20 years ago commissions were between 5 and 8%, but let’s use 5% split evenly between seller and buyer brokerages. For $5,000 a piece $2,500 after brokerage share., $6,000 net today.

You’re assuming that it’s okay to increase fees to match expenses, but nowhere do I see an allowable increase for a REALTOR’s personal salary or business expenses. Someone else mentions stagnant salaries, does that mean that everyone’s salary should be stagnant? Salary compounded at 3.0 per year is a 65% increase making that $8,250. I actually have household bills from 20 years ago where

Home phone was $37/month. That’s all there would have been, Today that home phone with internet is $97 the line is used for business calls as well as faxing. Base cell charge $66. Internet site $40. That $37/mth jumped 5.32 times to $197. Do you suppose that any other costs jumped by that as well? That’s not even including net services for cell or laptop/ipad. Last month’s cell bill included 157 chargeable text messages to and from just one person at .20c each. Today in the span of 10 minutes 8 text messages were received from a repeat client just in reference to placing a listing. What expenses did these actually replace from 20, 15, 10 years ago? None, they are additional.

But, I’ll provide something more. What this REALTOR actually does to earn her fees and hope it gives you food for though as it’s often stated no one knows what we do. This is just one example on the listing mentioned in my last post and this one was by far not the most expensive or time consuming listing to cover.

2 years before the sale - first contact with the sellers, 3 hours.

2 days later - delivered a recap of our conversation; summary of suggestions made; detailed excel reports on all sales and listings in the area over the last 4 months; market analysis and every pertinent details on each and a recommendation not to sell yet. At least 2 hours to research and prepare the reports.

3 month intervals – delivered a new listing and sales report and on about 5 other occasions the activity on the immediate surrounding street. These reports are never cut and paste but researched and personally created.

12 Months - they requested an updated market value assessment for financial planning.

19 months later- called in when my report finally suggested they consider listing. 3 Hour meeting. Spoke at least twice weekly since for another 4 months.

Bi-weekly to monthly - delivered a detailed report and summary of my market predictions. Updates to area sales and listings as they arose.

23 months - attended with my stager, 6 hours at a cost to me of $500.

Bi-weekly - visited and fielded calls several times per week.

Three weeks to listing- most of the pictures taken, measurements, pertinent information collected. 40 hours creating their draft brochure, (yes, each is unique to the property and very comprehensive) and virtual tour (not the basic mls) to be distributed via email.

Right about now, I’ve clocked at least 80 hours, not a dime needing to be spent by the seller for any of it.

1.5 weeks to listing - again attended with the stager, another 5 hours arranging everything from art to furniture, to help pack storage items, final pictures.

Two days to listing - walk through with stager; review and completion of the contracts and all the steps going forward. They were presented with a brochure and invited to change anything they wanted. 2 hours.

Day of listing - 25 brochures at a cost of $4/ delivered along with a digital equipment item marketing features of the property to be placed inside the property. 20 mins.

Days 2 & 3 - 3 Hour open house each day.

Calls fielded by buyers, REALTORS during the week.

Day 4 – newspaper ad created and submitted to be placed on day 8’s paper- $275

Day 5 & 6 - negotiations begin with a buyer’s rep. 1.5 hours spent with the sellers – 5 minutes with the REALTOR. Same thing the next day. In between there were about 15 calls with the buyer’s rep to day 7.

Day 7 morning 10AM- 1.5 hours to present for signature their negotiated offer at 99.3% of list price and chat about what comes next. Another 1.5 to 2 to complete the office’s paperwork, fax them all to office and lawyer.

Day 8 – deliver deposit cheque and original documents to office 40 minutes.

Day 9 - 4 hours attending buyer’s inspection (always). Another hour or so to finalize the sale, complete and fax the paperwork to office and lawyer.

From then to closing, also attended two buyer visits, conversations with the sellers, two visits when they were stressed from leaving their family home and a little help with packing, 2 more to check on the home as they were away for a long weekend.

Regardless of the price of the property, the same services are given and I’m not even including the rote ones. Sometimes even more – like shopping for dryer for a seller who lives in another province or dealing with the lawyer of a non-resident seller. Those brochures mentioned can cost upwards of $8 per piece depending on the property and in one instance 200 were handed out in the space of 6 days.

So there you have it. Sold firm in 10 days. What did the REALTOR do to earn those big fees? To recap with your numbers using the correct $480,000.

Commission at 2.5% = 6,000 net of brokerage share.
Stager cost = 500
Ad not needed = 275
Brochures = 100
Net = 5,125 approximately 130 hours.
Before the other expenses incurred that equates to approximately $39.42 per hour .

 

[interested]

Interested prefers an hourly charge, yet, as much as many REALTORS would love to do that, the little thing called fiduciary duty gets in the way for starters and if you think fees are high now, that would be even higher. Past clients customarily contact me requesting research on a property they came across. It’s not unusual to spend several hours uncovering everything about its history, zoning, changes, legality, land it sits on etc., then compile and send a detailed report. They may ask for nothing else until the 20th arrives, which they want to see and decide they don’t like anyway. Why should they have to pay for all that when they know they get to ride out the last commission I earned through them until and if they ever buy or sell again with me?

Forgive me but I do not understand how paying someone hourly means there is no fiduciary duty.

I pay my lawyer hourly, does he not have a fiduciary duty to me.

People who hire investment councellors and pay for advise, either through commission fees or a fee for the trade, by this rationale have no fiduciary duty.


My personal view is that one should pay for the services one uses. If you sell my house, I should pay you an appropriate fee for that service. If you give me advise on zoning I should pay whether I use the advise or not. On the other hand, the fee for when I sell should not be so large as to cover a lot of things I may never use or that someone else uses. I think a better argument would have been that you spend time/money marketing properties and taking people around who may not choose to buy. In other words, there is a lot of unseen time that a REALTOR spends that is unpaid for.

This rationale as put forth at least to me comes across as an attempt to justify an excessive fee. Furthermore, it seems like justification for a lot of useless work being done/ requested by people who may/may not buy and paid for by those who actually make a home purchase. If you offer a service for free, its demand will be endless. This serves no one well.

Again, just my opinion ISYM. I do respect that you feel the present system is justified. I personally view that REALTORS have a monopoly which they just want to continue, whether you feel it is one or not, I think most of us would agree who are not REALTORS that this is the case. The Competition Bureau found the same thing.

If it were not, open up the MLS fully and lets see if the current fee structures continue. Also, many if not most of your colleagues will go out of their way to not show privately listed homes because they view this as an attack on their monopoly. This has been candidly admitted to me by more than 1 realtors in private.

 

[interested]

I apologize for the long posts but sometimes they’re necessary to properly state a point.

Interested, let’s run your numbers with some real ones.

First, we’ll accurately depict your 4 times house price increase. 1992’s GTA’s average sale price was $214,971 at the end of last month it was $516,787 - 2.4 times.

20 years ago commissions were between 5 and 8%, but let’s use 5% split evenly between seller and buyer brokerages. For $5,000 a piece $2,500 after brokerage share., $6,000 net today.

You’re assuming that it’s okay to increase fees to match expenses, but nowhere do I see an allowable increase for a REALTOR’s personal salary or business expenses. Someone else mentions stagnant salaries, does that mean that everyone’s salary should be stagnant? Salary compounded at 3.0 per year is a 65% increase making that $8,250. I actually have household bills from 20 years ago where

Home phone was $37/month. That’s all there would have been, Today that home phone with internet is $97 the line is used for business calls as well as faxing. Base cell charge $66. Internet site $40. That $37/mth jumped 5.32 times to $197. Do you suppose that any other costs jumped by that as well? That’s not even including net services for cell or laptop/ipad. Last month’s cell bill included 157 chargeable text messages to and from just one person at .20c each. Today in the span of 10 minutes 8 text messages were received from a repeat client just in reference to placing a listing. What expenses did these actually replace from 20, 15, 10 years ago? None, they are additional.

But, I’ll provide something more. What this REALTOR actually does to earn her fees and hope it gives you food for though as it’s often stated no one knows what we do. This is just one example on the listing mentioned in my last post and this one was by far not the most expensive or time consuming listing to cover.

2 years before the sale - first contact with the sellers, 3 hours.

2 days later - delivered a recap of our conversation; summary of suggestions made; detailed excel reports on all sales and listings in the area over the last 4 months; market analysis and every pertinent details on each and a recommendation not to sell yet. At least 2 hours to research and prepare the reports.

3 month intervals – delivered a new listing and sales report and on about 5 other occasions the activity on the immediate surrounding street. These reports are never cut and paste but researched and personally created.

12 Months - they requested an updated market value assessment for financial planning.

19 months later- called in when my report finally suggested they consider listing. 3 Hour meeting. Spoke at least twice weekly since for another 4 months.

Bi-weekly to monthly - delivered a detailed report and summary of my market predictions. Updates to area sales and listings as they arose.

23 months - attended with my stager, 6 hours at a cost to me of $500.

Bi-weekly - visited and fielded calls several times per week.

Three weeks to listing- most of the pictures taken, measurements, pertinent information collected. 40 hours creating their draft brochure, (yes, each is unique to the property and very comprehensive) and virtual tour (not the basic mls) to be distributed via email.

Right about now, I’ve clocked at least 80 hours, not a dime needing to be spent by the seller for any of it.

1.5 weeks to listing - again attended with the stager, another 5 hours arranging everything from art to furniture, to help pack storage items, final pictures.

Two days to listing - walk through with stager; review and completion of the contracts and all the steps going forward. They were presented with a brochure and invited to change anything they wanted. 2 hours.

Day of listing - 25 brochures at a cost of $4/ delivered along with a digital equipment item marketing features of the property to be placed inside the property. 20 mins.

Days 2 & 3 - 3 Hour open house each day.

Calls fielded by buyers, REALTORS during the week.

Day 4 – newspaper ad created and submitted to be placed on day 8’s paper- $275

Day 5 & 6 - negotiations begin with a buyer’s rep. 1.5 hours spent with the sellers – 5 minutes with the REALTOR. Same thing the next day. In between there were about 15 calls with the buyer’s rep to day 7.

Day 7 morning 10AM- 1.5 hours to present for signature their negotiated offer at 99.3% of list price and chat about what comes next. Another 1.5 to 2 to complete the office’s paperwork, fax them all to office and lawyer.

Day 8 – deliver deposit cheque and original documents to office 40 minutes.

Day 9 - 4 hours attending buyer’s inspection (always). Another hour or so to finalize the sale, complete and fax the paperwork to office and lawyer.

From then to closing, also attended two buyer visits, conversations with the sellers, two visits when they were stressed from leaving their family home and a little help with packing, 2 more to check on the home as they were away for a long weekend.

Regardless of the price of the property, the same services are given and I’m not even including the rote ones. Sometimes even more – like shopping for dryer for a seller who lives in another province or dealing with the lawyer of a non-resident seller. Those brochures mentioned can cost upwards of $8 per piece depending on the property and in one instance 200 were handed out in the space of 6 days.

So there you have it. Sold firm in 10 days. What did the REALTOR do to earn those big fees? To recap with your numbers using the correct $480,000.

Commission at 2.5% = 6,000 net of brokerage share.
Stager cost = 500
Ad not needed = 275
Brochures = 100
Net = 5,125 approximately 130 hours.
Before the other expenses incurred that equates to approximately $39.42 per hour .

ISYM,
Thank you . You just made my point with your example. I am sure that 130 hours spent if the actual client was paying would have been stream lined.
I bought in Florida in our building calling up the agent to put in the offer. Time spent. 1 hour. Commission to my agent (her share over $10K) 1 hour.
I knew which building and which unit I wished. Waited a year. When a unit acceptable came up, I called the agent and told her to put in the offer.
I understand that your client may have never bought.
My point is that one should pay for service that one receives, not justify having those who actually use the service responsibly pay an excessive amount to "make a reasonable income" available to the realtor. While I appreciate realtors as everyone else need to make a living, the housing market does not exist primarily to serve this purpose.

As for your more accurate numbers, I will not dispute them other than to say that everyone else who runs a business has seen expenses rise. In many cases, people are making less than they were before take home. I am not saying this is right, just saying it is happening. There are obviously cases where people are making way more e.g. Bank Chairmen .

You have with due respect misinterpreted my thought process when you suggest that I do not allow for rising costs or for a cost of living increase for the realtors.
However, I feel the defense is a little too spirited and clearly is hitting a nerve so I will simply apologize to you for causing the grief.
Suffice to say that we can play with the numbers all we wish. I could provide numbers that would counter yours. One thing you did not mention which is worthy is that real estate is a business conducted at night and weekends (as well as weekday daytime hours) and there is a tremendous sacrifice in that regard by those in the field.

 

[James]

I do think it is worth noting that many buyers and sellers are fostering negative sentiment towards realtors and the "expected" fees associated with the sale, and indirectly with the purchase. This would be a moot point if it weren't for the seemingly neverending increase of real estate value in our current market. 2.5% on a $250,000 house is much, much different than 2.5% on a $800,000 house. Is the amount of work selling the former any different than the latter?

I think in this market, a fee per service structure makes more sense, however sellers simply aren't familiar or comfortable enough to accept it widespread. There should be a modification of the expected 2.5% buying agent commissions as well. Simply put, buying or selling a property really shouldn't be directly related to the purchase/sold price of the property. When selling a commercial product (e.g. a piece of equipment to a hospital), a commission based on selling price makes sense. When selling a service to a client (e.g. a lawyer), a fee schedule makes sense. I associate realtors as "selling a service" moreso than "selling a product".

As an incentive to sell a client's property for the highest price possible, why couldn't there be a signed agreement indicating a minimum sell price by which the seller agrees to sell the property at? If the seller sells for more than this baseline price, a percentage of the overage could be added to the realtor's fees as a bonus. Just a thought.