Realtor Fee Rip Off -- Why 6 Percent?

An article written by Mark S. Nadel, a government attorney, concludes that "residential real estate brokers and salespersons have long quoted their fees as a straight percentage of a home's sales price. This traditional forumla, however, ill serves the interests of both home buyers and sellers, and is the primary reason why such fees may be inflated by, on average, more than 100 percent or $30 BILLION a year."

There is intense competition in the real estate industry, but not in terms of price or fees. In his article, Nadel compares the real estate industry's "flat fee" "take it or leave it" practices to those of the funeral industry, as exposed in the 1963 book "The American Way of Death," which found that families were regularly ask to pay a single price for a bundle of funeral services, many of which they did not need or want.
Nadel charges that consumers would be substantially better off if residential brokers used fee structures similar to those used by professionals in other advisory/consulting service fields, such as law and accounting.

Nadel's Cry...Consumers Take Action:

Traditional brokers revenue could be cut by $30 billion dollars per year with price competition. To level the field and insist upon true price competition, consumers should be armed with the following 5 pieces of information.

1. Buyers should receive an estimate of the dollar amount of the fee that their broker expects to receive in a home-sale transaction.

2. Buyers should be told whether their broker's agent may refuse to inform them about homes that meet their criteria, if those homes are not listed by traditional brokers.

3. Buyers should be advised that fees paid to a buyer's broker can be treated as part of the sales price for mortgage purposes.

4. Sellers should be informed that many buyers have no broker, that others have brokers who have agreed to receive less than the customary 3 percent buyer broker co-op fee, and that both groups of buyers expect to be able to translate that savings into a price reduction.

5. Sellers should be told whether their listing broker will attempt to limit the distribution of their listing by competing brokers.

In conclusion, the traditional 6 percent rate structure in the real estate industry has serious drawbacks and the structure is not defensible. 6 percent fee's provide an incentive for a broker to sell quickly because their fee is based on the sales price, rather than on the time, effort and marketing dollars required to sell the home. Buyers and Sellers owe it to themselves to learn all the information before they hire a real estate broker.

Home Seller Survey Results Show

According to a new survey released by HouseHunt, buyers have taken the drivers seat. For the first time in years, price appreciation has slowed to low single digits and demand has cooled, as the number of sellers is now greater than, or equal to, the number of home buyers.

Other Findings in the Survey Include:

*Days on the Market: With home for sale signs sprouting like weeds, only 26 percent of agents reported that homes were selling in less than 60 days. One year ago, 77 percent said homes were selling in 60 days or less.

*Sales Versus List Price: 50 percent of sellers were getting 95 percent or more of their homes listing price. In the Northeast, only 72 percent of sellers were getting 95 percent or above.

*Seller to Buyer Ratio: Over the entire nation, home sellers currently out number home buyers 52 to 36. 12 percent of markets reported a 50/50 split between buyer and seller. Biggest exception was reported in the Chicago area with 62 percent of the market made up by sellers and only 31 percent composed of buyers.

*Annual Price Appreciation: 43 percent reported 0-5 percent appreciation. 16percent reported 5-10 percent. Negative price appreciation was felt by 33 percent of respondents.

*Multiple Offers: What a difference a year makes. One year ago 89 percent of sellers reported they received multiple offers for their home. This year, only 25 percent of sellers have received more than one offer.

Move Ups versus First Time Buyers: Move up and repeat buyers outnumbered first timers 57 to 43. The ratio in the south was even larger at 70 to 30.

Let me know what is happening with your sale and market. Email questions and comments to tommi@infotube.net