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