After college and teaching for several years I decided that I wanted to try the corporate world. When I went shopping for appropriate business attire, a close family friend advised that when I bought a suit to always ask the merchant to throw in a shirt and a tie. Sometimes it worked and sometimes it didn’t.
By that time I had already bought my first home and between then and now I’ve owned about 15 different personal residences. Not once did I question the commission that the real estate agent got in any of those transactions. I really can’t explain why not. With that many transactions a little negotiation on a few of them might have bought a lot of shirts. But I probably wouldn’t have negotiated for shirts either if my friend hadn’t suggested it.
The advent of “discount” or “limited service” REALTORs in the 90′s encouraged a lot of consumers to start questioning the commissions that REALTORs traditionally received. The US Justice Department also jumped on the bandwagon. In 2005, Bernice Ross, author and luxury market blogger, wrote a book for agents entitled Waging War on Real Estate’s Discounters: How to Unlock the Door to Full Commissions. To every agent in this market the phrase “full commission” means the traditional 6%.
It may still be a shock to some, possibly even some agents, that there is nothing in law or regulation that sets the level of commission, or for that matter, that compensation to real estate agents even be based on a commission. Since that “traditional” commission is traditionally paid by the seller and usually also compensates the buyer’s agent, it is traditionally factored in during the pricing of a listing. In a market that is no longer traditional with buyers in control, it might be a good time to consider some non-traditional alternatives, especially for luxury properties.
When banking went through it’s marketing revolution during the deregulation of the 70′s and 80′s there was a strong trend towards “unbundling” of services. In the report on the Durham Luxury Market that is available here or through the link on the sidebar on the left, I describe a hypothetical and extreme example of how this might be negotiated and why it might increase the incentives for sellers, buyers and both agents to make a deal. As noted a few posts ago, the links go directly to the report and do not require submitting a name or email address any longer.
The property I used in the hypothetical situation was the most expensive listing in the Triangle Multiple Listing Service at the time at $20,000,000. It still is the most expensive listing in the TMLS at the reduced price of $12,000,000. It has been on the market for over 250 days. You can use the search tool available through the menu at the top of this page to see some of the details. Just enter Raleigh as the location and $10,000,000 as the minimum price and it should be the only listing that comes up (today, anyway.)
