Why Oh Why Do We Pay!

I will tell you why. It is because we are willing to.

Seems a bit simple Nes'Cafe; consider the basic premise of the sale of goods and services. Supply and demand. Demand goes up for a product, supply goes up to meet this need. As demand goes up so does the price especially if supply can't meet the demand. Alternatively if demand goes down, price goes down and supply is negatively affected. Elasticity!



In real estate terms, due to our economic crisis we have a great deal of houses for sale because of foreclosures and financial pressure; however' the demand for homes is down. People are holding on tight to their money, or they have no money at all. Combined with a tight credit market, this begins to slow down the market.

So what about real estate agents?

Traditionally, when we are forced to sell our homes because of our changing economic situation we seek out the services of a realtor. It would therefore make sense then that because we have a glut of homes on the market we also have a surplus of agents with listings. Either that or dare I say, a culling of the agents herd is taking place because if homes are not selling they are not making a living.

Let's face it, realtors are a dime a dozen: plus three percent on the first 100K and one percent on the balance.

Over the last ten years real estate has been a pretty good gig. Hang a sign and it was sold. People were in line to sign up, bidding wars were taking place, and agents were arranging for appointments with clients to present multiple offers. Seems a bit cocky but no one has ever experienced a sellers market like that one.

What services did you get for the commission you paid?

Well there is the listing on their private web sites, which is close to free and a synch to do. Posting on the multiple listing service, which is also minimal. They show your home to perspective buyers. I'll give them that but why put a lot of effort into that when another agent will sell it and you still get a healthy commission. Why do anything except list and present when the home will sell anyway? All those other things like marketing and networking to sell your home that's what agents had to do back in the old days, in the 1980's.



Here we are in the year 2009 and things have changed but commissions for the most part have stayed the same. Interesting, considering the extreme fluxuation in the home market. Would it not stand to reason that the cost of services to sell and buy a home would also change?

I am not an economist by any means but someone with a lot of questions. For example; if we have so many homes for sale why are real estate agents not changing their commissions to meet the lack of demand for homes? Well the lack of demand for their services has not fallen, in fact one could argue that it is increased, therefore commissions are justified.

Greed, can be a terrible thing, it is one of the seven deadly sins. Does that have something to do with it?

When a market bears the pressure of increased prices for increased profits because of increased demands, well that's just the wheels of commerce in motion. Add greed to that mix and the pressure grows and grows to a point of saturation whereas no one can afford to pay anymore. But wait, banks come in to play by lending you more to create the illusion that yes; you can afford to buy with our help. Then, you know what happens next,...

I wonder how much of it has to do with our willingness to pay someone out of the cloak of ignorance. In general we don't all have an MBA so we rely upon the bank to be forthright, to do business in our best interests. We also don't have law degrees so we rely on real estate agents as our intermediary, again working in our best interest so as contractual agents they will make sure everything is above board when buying and selling a home. Are their intentions in our best interests or is it essentially because they wish to make profit. Bottom line.

Don't get me wrong, banks and realtors do have an important role to play.

However, the premise of my whole rant here is that we should take a closer look at value for cost and pay only for the service levels we should expect. Times have changed and no longer should we agree to pay exorbitant commissions for little to no service. It is time to lower commissions to meet service levels, or increase service levels to meet existing commissions. Here's what we should do collectively:

• Ask more questions about the services we will receive with agents.


• Create benchmarks and deliverables that they must meet.


• Stop thinking that they are doing us a favor; they are our employees as agents.


• Negotiate your commission, it is not written in stone.


• Ask what their formal marketing plan is going to be; be involved with it.


• Make them show up when showings take place by other agents.


• Fire them if they are not doing their job.
  

Our situation is such that we need to avoid the high commissioned oligopolies (limited companies controlling the market) and allow for other options to be competitive. Companies like One Percent Reality and the Property Guys are a step in the right direction. Larger real estate companies have cast a shadow over their efforts by downplaying their capabilities. They are very capable and provide all the services that a larger company provides without the overhead of expensive offices that we as consumers pay for in agent fees.

I urge you to vote and participate in the poll. We want to open up the market to competition from other realtors that who will not be intimidated by promoting a smaller commission that will allow the ordinary consumer to explore their options. It is written right in our Competition Acts. We want to pay for what we get. If we are willing to pay up to 25K on a 500K sale then we want 25k worth of work. It takes most of us at least six months of full time work to make that much money. I would expect the same from real estate agents if that's what they wish to charge.

Service for value!