Real Estate Agent Questions Industry Value

Posted on February 25, 2011 by | 2 Comments

Peter Mericka B.A., LL.Bby Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd


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“As it stands, Real Estate is the only consumer industry that manages to command percentage fees on selling prices. In an era where average agents will gradually be squeezed out by the internet, it’s a wonder the most costly agents have not been first on the chopping block!Questioning the value of real estate agents generally


This is one of the observations made by Michael Atwell, a real estate agent with 20 years’ experience, writing for the real estate industry blog Business 2.  Needless to say, Atwell’s observations do not go down well with his fellow real estate agents.


 Atwell is one of a growing number of real estate agents who can feel the winds of change approaching the industry, and anticipates growing criticism of what has become a greedy, grubby monopoly.  (For an example of just how grubby the industry has become, read through the promotional material for the upcoming “Real Estate Agent Marketing Summit” which will teach real estate agents skills such as “How to position yourself to be obeyed like a heart surgeon and treated like a king by your clients…”. )


An example of Atwell’s honest assessment of his industry is this observation:



“A typical real estate transaction takes between 4-10 productive hours to complete and generates a return before advertising costs of say $12,000 (based on 3% commission on a $400,000 property). That’s $1200 per hour!


Surely those numbers are unsustainable in any modern consumer-based industry? Of course, traditional agents will maintain that they spend endless hours marketing themselves and the properties they sell and that cost has to be factored in. Marketing costs are successfully factored in to prices in every other industry without charging percentage commission fees so why should Real Estate get special treatment?


The reality is agents spend most of their time prospecting for new clients and they show considerable favouritism to purchasers who are also resellers simply because of the commission value. Relying entirely on the commission structure also means agents don’t get paid until the sale is made – which can lead to less scrupulous agents pressuring vendors when an offer is made.


This pressurized, cherry-picking approach demonstrates that a commission only based fee structure has many real estate agents aiming to deliver value to themselves first and not the property seller.”


To read the full article, click on the following link.


“Where is the value in modern-day Australian real estate?”

2 Comments

  • real estate says:

    Paying an agent $500 to sell a home may be too much. It depends on the return they can provide in the sale price.

    Many agents in fact cost innocent vendors tens of thousands of dollars by encouraging buyers to offer lower prices. This may be due to low skill or low ethics.

    Very few agents can fully justify their fee. Those that can often charge the most.

    Working everything back to dollars earned by the agent per hour is never going to be particularly helpful though. True professionals will deliver outcomes quickly.

    For instance a great dentist might pull a tooth painlessly in five minutes. A terrible one might labour over your molar for a full excrutiating hour.

    If both charged the same amount then by the dollars per hour measurement, the first dentist earns twelve times as much as the second. Is this unfair? No. They both deliver the same outcome. If anything, the first dentist should charge more.

    What real estate consumers should be waking up to is that they can often do a better job than an agent and save money in the process.

    Very soon most properties will be sold person to person via the internet.

    Great real estate sales people, those that can more than justify their fee, will still be around. The tour guides won’t be.

    -Nicholas Rait

    http://www.therealestatehelpers.com

  • Shibalik says:

    @”Real estate”, I really appreciate your point of view. Property valuation in Melbourne has twisted a bit in the last couple of years. In that situation those who are looking to buy or sell properties, which can be commercial or domestic, should hire a buyer’s advocate for better solution. Well, I cannot simply disagree with Atwell at this point. See, as the cost of any property in Australia is facing ups and downs, real estate agents are making profit out of it. But it is also true that it takes a significant amount of time to generate a property valuation report as it is a professional and legal assessment of the value of your property. I think you just can’t deny that the cost of an experienced real agent should be a little bit higher than others and people are actually are not taking any risk and looking for the experienced ones rather losing money.

    Thanks

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