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5 Jul 2008
Homeowners in Sequim and Port Angeles, and for that matter throughout the country, are not satisfied with paying typical 6% real estate commissions. Hence the rise of discount brokerage services, flat fee consulting services, and for-sale-by-owner websites.
There are some very good reasons. The whole business of buying and selling real estate has been changing. Traditional advertising has been loosing its appeal to consumers. Remember cold calling? That used to be popular. The public grew to hate cold calling so much, we have stringent laws controlling that distasteful practice, and we have "do not call" lists. Remember the cigarette ads on billboards in the ’60’s and ’70’s? Billion dollar judgments have been entered against cigarette companies, the advertising has been regulated by law, and billboards have become passe.
The invention of computers, the rapid explosion of technology, and the vast power of the Internet has dramatically changed the ways that real estate can be listed, advertised, and found on the Internet. There has been fierce competition by thousands, not hundreds, of companies promoting their platforms to help sell real estate and connect with potential buyers. Marketing has changed. The whole business has been evolving slowly, but the rate of change has been accelerating.
Consumers have been changing the rules, and as always, even today consumers are ahead of real estate brokers. They always are. Sequim & Port Angeles Real Estate, LLC has been listening, and created an entire business plan that responds.
Why are homeowners struggling with paying 6% commissions today? Thirty years ago 6% on a $100,000 home was only $6,000, and that was split four ways between the listing broker and his listing agent, and the selling broker and his selling agent. Everyone was happy. As home prices have steadily increased over the years consider how that works out now for the homeowner. Today a 6% commission on a $600,000 home is $36,000. Wow! For any homeowner that is a lot of money. It is a wheel barrel full of money. Of course, brokers don’t want anything to change. But homeowners will change the rules, or brokers simply will not get the listings anymore. In fact, many brokers round the country are offering reduced commissions, and the FSBO services have been growing, although their effectiveness is limited.
Now here is what traditional brokers will argue. The costs of advertising and doing business have increased. It takes a lot of money to run major newspaper ads every Sunday and in real estate magazines. It costs a lot of money to build a large real estate office with nice conference rooms and large screen TV monitors, and to pay the debt service and property taxes. And brokers will argue that by the time the real estate commission is split four ways, he as the listing broker, doesn’t get that much money. On a $600,000 house at 6%, he only gets 1/4th or $9,000.
Homeowners rebut, "Wait a minute. I purchased my home eight years ago. I came up with the down payment. I had to qualify for a loan with my good credit. I’ve maintained my home all these years. I put in landscaping, an additional room, and replaced the roof. I’ve paid the property taxes and assessments for eight years. I have $70,000 in equity now, and you want me to pay half of my equity to you for a few months work that requires no commitment and no risk? I don’t think so."
No matter how strenuously a broker may argue for a 6% commission today, or even 5% on higher priced homes, homeowners are not going for it. Times have changed. The Seattle Times has a blog with a lot of comments on the issue of commissions, and it’s worth reading at: The Real Estate Deal, Seattle Times. Don’t take each comment as gospel, because you have a number of comments by people with very limited experience. Sill they are sharing real experiences, and their comments are very relevant today. You will recognize a couple of comments by agents who are trying to justify high commissions, but their arguments seem a bit self-serving.
I created an entirely new business model at Sequim & Port Angeles Real Estate, LLC, an entirely new marketing plan, and a whole new way of working with sellers and buyers. I still am a strong advocate of principles that work. I just don’t believe in forcing practices that are no longer effective on my clients. I still do some print advertising, and a variety of traditional advertising, but times have changed, and what was effective is not so effective anymore, and there are new tactics that have their place in a comprehensive marketing plan. I created a unique commission structure in a full service brokerage that really pleases clients. After 30 years in the real estate business, 20 of which were in real estate law, I am able to offer our clients greater depth of knowledge and experience in all aspects of real estate than the majority of agents out there. At the same time, because of my business model, which has far less overhead than 98% of other brokers, I can offer substantial savings to my clients. Because I am the broker/owner, I have far more flexibility to work with individual client needs.
For more details on my services and commission schedule, email or call (360) 775-5424.
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