There have been several articles lately, mostly in the New York Times, about real estate commissions. It’s a hot topic. The comments on the articles are often as interesting as the articles. Realtors usually come out in force to defend their commissions. That’s not surprising. Most Realtors like the way they get paid.
What is wild to me is the way many of them defend the commissions. Many agents say something to the effect of, “Yes, I make a lot of money, but I also have to pay for E&O insurance, training, taxes, MLS fees, lockbox fees, etc.”
I don’t know anyone in any business who doesn’t pay taxes, insurance, and other overhead-type expenses. If that is how your Realtor justifies their value, they aren’t providing value. They are rent seeking.
Rent seeking is an economic term that refers to people who gain wealth at the expense of others without providing any value. The classic example is when the king goes to the river where all the ships pass. He puts a chain across the river, and charges money to lower the chain. This increases the cost of traveling the river but provides no value.
If a real estate agent is defending their fee by telling you about their costs, they are rent seeking. You do not want to hire this Realtor.
On the contrary, let’s take a real estate agent who says this: “Mr. Seller, go ahead and start packing boxes. We’ll get this house sold quickly. I know your time is valuable, so I’ll do all the heavy lifting.
“I will take care of the marketing. I’ll hire a professional photographer so we can show your home in its best light and generate a lot of interest.
“I will vet the buyers before bringing them to your home. I don’t want to compromise your safety by bringing looky-loos to your home. I will show the home only to safe, qualified buyers.
“I will handle the paperwork. I know which disclosures are necessary for your home. For example, a recent law passed and now we have a new disclosure about widget wadgets. I will ensure your buyer gets that disclosure, protecting you from future lawsuits.
“Selling a home is not a fun process, but I will make this process as seamless as possible.”
That is the agent that earns their money. That is the agent you should hire.
Please note that Karen Climer has no affiliation with Climer School of Real Estate. Her father, Ron Climer, sold Climer School of Real Estate in 2014. It has since been involved in several mergers and acquisitions and is owned by a large investment company. Karen owns Demetree School of Real Estate in Orlando, Florida.
