I came along this great story about a realtor trying to double their real estate agent commission. This story depicts a ideal client (home buyer) for DoorFly.com and shows how a lot of people are doing upfront legwork in the home buying process these days with the power of the Internet. The idea to negotiate real estate agent fees is coming to the forefront.
This story was written by WestsideCelt’s WunderBlog
Armed with my Macbook, I settled in to stalk the quarry on Realtor.com. A few clicks later and I had some prime contenders identified. Soon I had Mapquested my targets and cruised the neighborhoods inspecting the manicured lawns and looking for any signs shoddy maintenance or obnoxious neighbors.
Yes, I was alone, unaccompanied by a safari guide (aka real estate agent). I admit it. But I am an adventurous soul and never liked the confines of a stranger’s passenger seat or their sticky 6 month contracts.
I soon found a home that could be “the one” and made my move. I picked up the phone and dialed the listing agent on the sign. A pleasant enough woman answered the phone.
“Hi, I saw your listing on River Bend Ave and am very interested in seeing the inside. Is there anyway that I can get in to see it.”
“That is great. It is a wonderful property priced to sell! Are you currently working with an agent?”
I lied and told her I was. I didn’t want to get the sales pitch on why I would be better off with her representation and all the benefits of using her as my realtor. What came next struck me like a slap in the face.
“I can’t show you the house unless you sign an agreement with me to represent you as the buyer or I’ll have to charge you a showing fee.”
A “showing fee?!?” I confirmed that she was a full service listing agent who was being paid a sizable commission by the seller to list, market, and SELL the home. Doesn’t the $13,000 commission the seller is paying this agent cover opening the door to potential buyers? She said flatly that she can’t afford to go around showing people her listings unless she is representing them. I pressed her pointing out that she was essentially asking for both the buyers and sellers agents commission to actually show the home - $26,000. She fell back on “it’s our office policy, sorry.”
Could the seller who hired this agent possibly know that this was happening? Was there some fine print in the listing agreement that allowed them to do this? Wasn’t this behavior directly detrimental to their clients who agreed to pay them 3% of the sales price to market and sell their home?
I moved on to other homes and while I did find many agents who were more than happy to show their clients homes, my first experience was not unique. I came across the same response from different agents and some had slightly different variations. Some agents claimed that if they showed me the house even once then they would take 2% of the buyer’s agent commission. In effect, they would get paid 3% for listing the home, 2% for showing the home, leaving 1% to an agent that represented me. Interesting. Apparently these agents feel that opening a door is not standard service for their 3% listing fee and that if the laborious task is asked then it is at least worth several thousand dollars.
Sitting on my couch one evening, I realized why some agents were turning to these desperate measures because there are companies out there that offer to share part of the commission they earn with the buyers they represent. A common discount model asks buyers to do their own legwork in finding their home and in return they will split the commission with the buyer. They have licensed agents that work from a call center who will help them submit offers once they locate a property. In California with $800,000 homes, commissions are huge and “rebates” can be $15,000 to buyers. No wonder traditional agents are getting scared! The sacred 6% real estate agent commission was finally being challenged. These traditional brokers are being threatened on both sides of the deal as other discount brokers are opening Pandora’s box by agreeing to post properties on the MLS (real estates’ master property database) for flat fees of several hundred dollars versus the standard 3% commission structure.
In addition, a few daring souls are offering similar flat fee listings and home buyer rebates in Atlanta such as Silverback Realty, Duffy Realty, and Century 21. These companies have embraced the new model and structured their fees to reflect the level of service a client wants not an arbitrary percentage. The similarity between this commission structure for real estate brokers and what happened with stock brokers is obvious. What’s less obvious is what has taken the real estate industry so long to react to the opening of data resources and the free flow of information the internet has created. I think this speaks to the powerful lock on the market traditional brokers have secured through lobbyist and a tenacious grip on real estate information and apparently the keys to front door. I’m not saying real estate brokers have no role. Certainly, for some people their full service is valuable and needed. Just as we haven’t seen Merrill Lynch go under with the advent of E*trade, I think the ReMax‘s of the world will survive discounts or a rebate realtor. I guess what I’m saying is that real estate is the last bastion of price collusion and it looks like customers are finally going to be able to get what they pay for–and I’m guessing the market for $13,000 doormen will be a little smaller than it was in the past.
And now there is DoorFly.com– a place to come when you sell your home or as a home buyer to compare real estate agents as they bid portions of their commission for the privilege of serving you.