Palos Verdes Real Estate

Are Realtors Are Overpaid?

I’ve heard this question before, and I understand where it comes from.  The answer is generally no, however, and here’s why:

1)  When you pay your Realtor a commission to sell your house, you are paying for the accumulation of (presumably) many years’ experience being brought to bear.  While you are not generally paying your realtor to attract buyers (if you read my stuff you already know this), you are paying him/her for what happens when an offer(s) appears.  I get into this elsewhere, so I won’t here.  This doesn’t change even if your house sells on the first day — again, the Realtor’s job really begins when offers are received, and the experience/competence of him or her can make a big difference in whether or not the escrow closes and how pleasant the experience is.

2)  Some escrows are easy, some are not.  You don’t know where yours will fall on that continuum until it closes, and neither does your agent.  While none of this is rocket science, he/she and you must therefore be prepared for whatever comes down the pike.  There are a few variables here, but the amount of time I have spent on difficult escrows, if broken down by commission dollars made on that sale per hour spent, would make me look for the nearest cliff, or at least leave the business.  And that is yet another point — this is a contingency business, and it doesn’t matter how much work the Realtor has done; if the escrow doesn’t close, he doesn’t get a dime. 

Successful agents can’t and don’t look at it that way:  you have to get what we used to call in the manufacturing business, the “breakage”; ie, the business has to average out to be a viable proposition over all the agent’s escrows.  From your point of view, think of it like insurance — you don’t know if you’re going to get sick, your house burn down, your car get T-boned, etc, and if you’re fortunate enough that none of those things happen to you, then you could say that you overpaid for your insurance against it.  Same with real estate commission.

3)  You may balk at paying the buyer’s agent his commission.  After all, all he did was show up with his buyer the first day, write an offer which you accepted, and he gets a seemingly insane amount of money, right?  Wrong.  Odds are high that that agent has spent many months schlepping that buyer around looking at dozens of houses each of which, if the agent is good, he had to “preview” before showing.  In fact, he may have previewed twice as many houses as he ended up showing the buyer.  And if the buyer’s spouse couldn’t come, he/she had to be brought back to look at the good ones (not a good system, but I won’t digress here).  That buyer may even have written multiple offers over the months on houses that he didn’t get, each of which required a fair amount of work on the part of his agent, none of which resulted in a dime of income.  The agent also had to get his buyer pre-qualified for each of those offers (and for yours) if he had any hope of them being accepted.  And this doesn’t even get into the activities of the buyer’s agent once his buyer is finally in escrow.  It also doesn’t count the ones that fall out due to no fault of the buyer’s agent because the house was discovered to sit on an ancient Chumash Indian burial site. 

But, the fact is that all of that helped your eventual buyer recognize the merits of your house when he saw it.  Absent that perspective, he may not have appreciated it the way you did and do.  In fact, there might have been a house he would have bought on his first day out looking, but he didn’t yet have enough looking under his belt, and was still looking for the Taj Mahal.  It’s a process.

4)  Then there is the matter of legal exposure.  Licensed agents know how to protect you from any post-escrow calls from an attorney.  There are myriad forms to complete when selling a house, many of which are designed to elicit whatever you might know about the house that would be of interest to the buyer.  If you are honest with your agent and fill these forms out truthfully and completely, they pretty much define your duty to disclose and you can sleep at night afterward.  While there is no guarantee that your buyer won’t try something, your best defense is to behave as above.  It is also true that, with the enlistment of a Realtor, some of the liability transfers to him/her, who is assumed to know what he/she is doing, while you are not.

5)  Lastly, you may come across that rare agent who is willing to go above and beyond to make your sale/purchase as smooth as it can possibly be.  By “above and beyond”, I don’t mean driving you to escrow to sign your deed, or showing up at the buyer’s inspection, or meeting with you to sign escrow instructions, or even helping you dispose of unwanted stuff before you move; those are things any agent ought to do (tho some don’t).  No, I’m talking about doing stuff it would probably never occur to you that an agent would do:  stuff like sweating copper pipes to fix a leak on short notice when a plumber can’t be found; repairing a roof when the seller refused to have it done; flying to Cleveland to make sure papers were notarized correctly; painting out graffiti that showed up inside the garage of a house 2 days before escrow was due to close; flying to Marin County multiple times to help a newly widowed seller find a new house; selling the car of a client’s deceased mother; driving a 90 year old client’s car to Livermore for her; repairing windows the buyer’s inspector said would have to be replaced, and so many similar things that I can’t recall them now.  Yes, all those were me.  I’m not applying for beatification or anything, but when I got into this business (as you’ve probably heard me say before) I was determined to do the kinds of things I wished my agent had been willing to, and capable of, doing.  I don’t care what other agents do; to me, real estate is more than driving around in a fancy car (I do that too) or prancing around in designer outfits with 4″ heels (I don’t do that — I know you’ll be relieved to hear).

So I suppose one could conclude that, if you still think agents are over-paid, you could narrow the gap between what you pay and what you think they’re worth by calling me, where you are guaranteed to get the biggest bang for your buck.  310 613-1076 or [email protected].

This entry was posted on Thursday, August 8th, 2013 at 9:38 am and is filed under Buyers, Everything I've Written, Myths and Misconceptions, Real Estate General Info, Sellers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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