Sell your house: Flat fee model, not commission based

Liar Loan said:
USCTrojanCPA said:
Did that time include all the time that they showed every single home that you did not purchase?  How about the drive to and/from their home or office?  Yes, some transactions are easy and don't take a lot of time and some take longer as you show dozens and dozens of homes to a client.  Also, there is no guarantee that you close every buyer or seller.  That being said, if I had to calculate my hourly pre-tax rate it would be north of $200/hr. 

Don't get me started on how easy it is to get a real estate license versus let's say a CPA license.  I so wish they would require a degree with some kind of apprentice program working under a broker for 1-2 years but they won't because that would reduce the "fees" that the NAR/CAR/local associations collect.
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Redfin has a highly structured system for touring homes.  You book a 2-hour block of time and they will show you up to 6 homes in that time.  (The homes have to be in close proximity in order for this to be possible.)

In my case, we toured a total of 36 homes, which required 6 appointments of 2 hours each - so a total of 12 hours was spent touring homes.

Maybe for a normal broker it would be fair to include their time spent driving to and from the office, but since these two hour blocks of time are stacked back-to-back, presumably they were showing homes to other clients both before and after my appointments with them.  I guess we'd have to amortize the time spent driving to/from the office over the number of clients each day.  :D

I agree that what I paid helps to compensate them for the time wasted with other clients, but doesn't that point out a glaring inefficiency in the system?  If we got rid of all the time wasters, the realtor fees could probably be cut in half.  We should re-align incentives away from closing a sale to get a commission, to something that incentivizes working with high-value clients and ignoring the time-wasters.
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That's the problem right there, you don't know how many homes you'll have to show a client before they buy or even if they will end up buying through you.  This uncertainty is one of the factors why commissions are higher than they should be.  How about a model where buyers pay per home shown or hourly to their agent plus a flat fee for helping them close on a home?  There is no right answer here but my commission rebate structure (along with a pay for performance listing commission structure for sellers) seems to have worked fairly well for my clients and I so I'll just go with that for now.
 
The compensation complaints tend to bell curve based on market swings. When it's lean, and Agents work for every deal - and every deal they can't close - then no one really questions compensation. When it's a "shooting fish in a barrel.... one listing photo from an iPhone....why answer your call when I have a cash buyer?" kind of  market, the gripes about Realtor compensation rise. That's also when "low fee to seller" models come in, believing that a sustaining stream of income will never end and low margin companies will thrive. Nothing here is new, just the same sort of endlessly recycled dream chasing.

As noted earlier, anyone with a GED could start in the business earning the near equal salary of a mid cap company CEO. Those agents get flushed out the system pretty quickly, One could say they don't get filtered out early enough given they are often 90 percent (IMHO) of the sources for complaints about a 'stereotypical realtor"

My industry is little different from that of the Realtors. During refinance booms, everyone is "in the mortgage biz". I see a lot of BMW's and MBZ's get leased during these huge waves of great income. Every wave however must crash on the shore. When the refi boom closes, those freshly minted loan officers cause a great deal of trouble trying to catch up on the income stream they thought would go on forever. I try to buy my luxury cars right after a refi boom For some reason dealers are flooded with cars once mortgage rates move .50 percent.....

My .02c

Soylent Green Is People

 
One nitpick, if that greenhorn GED agent is closing so many deals in the hot shooting fish in a barrel market, that he makes compensation approaching a mid-size CEO, JIMHO, he's a much better hustler and salesperson than your average mid-sized CEO which are mostly just overinflated sales guys anyway.
 
In the rarest of cases, a few greenhorns do make it past first cull. The herd though is getting bigger by the day due to the impression that easy money can be had, and trees grow to the sky.

A CEO might not get kicked to the curb when there's a turn down (as an inexperienced Realtor would) but survive to fight another day and revive the company. Even then with the right connections, a credentialed but inept CEO usually ends up at another company making the same CEO pay they did before.

Having listened to more than my fair share of "Oh, I used to be in the Real Estate/Mortgage/Title/Escrow business..." conversation starters, I'm reminded of when Dinosaurs looked into the sky and wondered what that bright, ever growing light was, then instead of planning for an extinction level event, they turned back to eating all that low hanging fruit. It's not a low margin start up that's going fix the commission conundrum, but tech in general that will likely wipe the slate.

My .02c

SGIP
 
nosuchreality said:
One nitpick, if that greenhorn GED agent is closing so many deals in the hot shooting fish in a barrel market, that he makes compensation approaching a mid-size CEO, JIMHO, he's a much better hustler and salesperson than your average mid-sized CEO which are mostly just overinflated sales guys anyway.
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It's like that with most other sales jobs, top sales guys can make more than a CEO at many companies.  That being said, the CEO job is the slow, steady, and a lot more secure job when sales dry up.  The total real estate available commission dollars are a function of total sales and average sale prices and that doesn't increase with more realtor newbs coming into the market so the landscape becomes a bit more competitive which ultimately is good for the general public.  Sure, most of the newbs will go nowhere but some will go on to do well and take the business from the veterans who are either hanging it up or aren't keeping up with the times.  I've already talked about how the licensing standards are way, way too easy to become a realtor and need to be changed but the NAR/CAR won't do that because that'll mean less $$$ in fees to line their lobbying pockets.  Heck, just increasing the standards to requiring a college degree with some quantitative courses will weed out a ton of newbs.  I guess I was lucky that I started doing real estate for a living 10 years when all the craziness was going on and the idiots were getting weeded out of the system which enabled me to grow my customer base.  As SGIP mentioned, another downturn will come and that'll flush out the weak links quickly.
 
USCTrojanCPA said:
Sure, most of the newbs will go nowhere but some will go on to do well and take the business from the veterans who are either hanging it up or aren't keeping up with the times.
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This reminded me of a realtor in my area that promises a free "computer report" to help determine your home's value.  I'm not sure if he's targeting older people or just behind the times, but I laugh every time I see it.  It's like something straight out of the 90's.
 
Soylent Green Is People said:
Every "low fee" sales strategy - and there have been hundreds of them over time - have all failed. The quality of agents is extraordinarily low...well, considering just how low the bar is to begin with, it's surprising just how low the bar can get.... (even I have a RE License, enabling me to slur the industry all day thank you!) The oldest saw in the books - "you get what you pay for" is still true today.

6 percent commission transactions only exist in the minds of old timey broker shops. I'd be amazed anyone selling a home today is daft enough to accept that kind of charge. If they did, I tip my hat to the Agent who pulled it off, wondering how they sleep at night ripping people off like that.

Once you get over the agent quality issue, and the average commission split around 4%, there's the name."Purplebricks" a brand fail IMHO. Anyone with Nationstar? They're now called "Mr. Cooper". Try explaining that name to people. Redfin took many years to establish a brand presence. When companies try to attract business with nonsensical names, you know the end is nigh.

When a Purplebricks agent darkens my walkway trying to drum up business, I'll be waiting on the front porch later sipping a freshly made smoothie from my Juicero machine, letting them know I'm not selling because the loan I have with Mr. Cooper is so affordable, I'll never sell.

My .02c
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Currently w/ Nationstar Mr Cooper here. Name changes can be challenging. Feel free to PM me for further discussion. Been lurking but just had to make an account because of your post.  ;D
 
Just saw my first "Purple Bricks" commercial.

Problem 1) It was during "Jeopardy"... not a home flipper / remodel show. Pretty odd choice of shows to play it on. Hats off to the advertising salesperson who sold that block of time.

Problem 2) The characters in the ad were very negative and unsympathetic. I asked everyone in the room if after watching the commercial if it made them in any way interested in find out more about the company. Most couldn't even tell what was being sold. A big zero impact.

6 month... maybe 12... then Purple Bricks will get Juicero'd IMHO

My .02c
 
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