Setting The Record Straight About Current Real Estate Compensation
illi News/10262014

SAN ANTONIO - illiNews -- Just turn on your TV or go to any social media platform and you'll see sensational headlines claiming "6% real estate commissions are gone" "Realtors overcharge their clients" or "Commissions are now negotiable". Even worse still, you look at the comments bashing real estate agents, saying things like "the cartel is over" or "you've been screwing people for years". Upon further investigation, we've found that most of these hate-spewing respondents have never even owned a home or paid a fee of any sort to a licensed real estate professional.

In turn, real estate expert and broker, George Sanchez wants to set the record straight by educating consumers on what's really going on outside of the headlines that are written by the media to attract a maximum number of clicks.

The truth is, that commissions have ALWAYS been negotiable. There was never a "set fee" and frankly speaking, the average commission for a home sold in America has been below 6% and has consistently dropped year after year. Customarily, if a listing agent takes on a listing at 5.5% or 6% (or any fee for that matter), they've realized that rather than keeping that entire fee, they are often better to attract ALL agents working with motivated home buyers by offering half of their fee (approx.) to that agent for bringing their buyer to the home. This allows for more selection for every home buyer as ALL homes are available to them and it allows for a fair market value for the homeowner as it creates more demand for their home.

One of the reasons real estate sales have always seemed fairer or more ethical than auto sales or any other high ticket purchase is simply that the home buyer can also have their professional representation. They never had to worry about being taken advantage of by a real estate professional who could weigh things too heavily in the seller's favor because they have someone on their side, negotiating for them as a buyer. Imagine how much better you'd do buying a car if you had a professional representative who knows all of their sales tactics, upsells, financing, or negotiating approaches, and instead, your representative weighted those things in YOUR favor to get you a better deal. That's what we've been fortunate enough to do in real estate.

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Unfortunately, lately, there's been an uproar about the listing brokerage sharing their commission (and their own pay) to help the buyers and sellers. Though the agent has cut their own income in half to help all parties, apparently some folks think that shouldn't be happening and they are saying the buyers should negotiate their own representation, pay their buyer broker out of their own pocket, or otherwise negotiate it as terms of the purchase contract.

Let's be clear here. Any additional fee that may cost the buyer more money will actually RAISE the price of homeownership. That's true regardless if they pay it from their checking account or build it into the home price to finance it. If they have to build it into the price, home prices and thus mortgage payments will go up. Then every buyer that buys in that neighborhood will be buying homes based off comparable sales with that recently inflated sales price. This INCREASES the cost of home ownership in America.

For home sellers, yes, commissions have always been negotiable. The more incentive your agent can provide for buyers or buyer's agents to come to your home, the more demand you are creating for the property. The less incentive they offer, the less demand you'll find on your home. Remember, nobody works for free. That includes your own real estate agent. If you tell them you aren't paying them, they'll simply go work elsewhere. The same is true for any agent in your town. It's also true for your employer at the business you work for. Pay is negotiable in their business too. And if they don't provide an incentive for you to be there, you won't be there. I don't have to tell you that price is a function of supply and demand so the more demand your agent can create, the more your home may sell for.

For home buyers, the system has worked well for you to have a licensed real estate professional representing your best interests. Yes, you can go directly to the seller's agent. You've always been able to do that. But that's unlikely to save you any money at all and frankly, can put you at a disadvantage when they have a real estate professional helping them and you don't. Much like walking into a car dealership alone or even a New Construction Home Builder by yourself, where they have trained professionals there representing them, you may lose in more ways than you can ever imagine. Don't represent yourself as a client. If you find a great real estate agent, they'll be very clear about how their fee structure works. They'll usually be able to negotiate concessions from the home seller or the listing brokerage to cover the cost so that all (or most) of their fee is taken care of by them. YOU are exclusively represented in one of the largest transactions of your life.

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Nobody knows how all of this will play out at this point. But sellers need to know they want to do everything they can to get maximum exposure and create more demand. It's also important for buyers to know that they need a licensed professional representing ONLY them in the transaction. Speaking with a well-qualified real estate agent and having an open conversation about these things will be the best way for you to get the truth about how the fee structure works so that you can make an educated decision. Don't be afraid to ask questions. And don't be afraid to negotiate.

Ask a question as simple as "What can you do for me and what do you charge" is a simple way to find the very best representation you can find. Try to get as many services and benefits as you possibly can from that agent's service and representation. Negotiate for EVERYTHING they can offer you. Don't cut corners.
With something as serious as buying and selling a home, you need to keep your feelings out of the way and have a licensed professional on YOUR side who does what's best for YOU.

About George Sanchez:

George Sanchez is a highly experienced real estate broker who has 15 years as a bilingual real estate broker/advisor. He provides expert advice to clients that include individual home buyers, domestic and international sellers, investors, and nonprofits in the housing space. He's a no-nonsense person who looks out for the interests of his clients.  To learn more about what he does, visit www.simplerealestatesa.com or  https://www.facebook.com/simplerealestatesatx