Real Estate Commissions: The Race to the Bottom. That’s my topic today.
It was just announced that another new real estate company (scheme) is coming to Austin to disrupt the real estate industry. The headline reads in part,
Shaking up Real Estate with Zero Commission to Sellers
So, this company is offering to sell your home commission free, yet with full agent representation. Sellers will sell the home as is, so there’s no worry about paying for repairs. And, buyers will pay a small fee.
Let me get this straight… Their plan is to disrupt the whole real estate industry by charging….(wait for it)….NOTHING.
Look, these companies are becoming a dime a dozen as they participate in what I call the “race to bottom” regarding real estate commissions.
Discount real estate companies have been around a very long time. Many of them have gone belly up and others are suffering to make a profit. Why does this new company think they are going to make a difference and why even try? Here’s why….
In 2018 there was $60 Billion dollars paid out in real estate commissions. Everyone wants a piece of this pie and some think they can get it by discounting.
The reality is this, the commission in a real estate transaction is the cost of selling and buying a home. Like any other business that brings sellers and buyers together there is an expense to be borne.
Here’s something I learned as a young man from my Daddy,
If it sounds too good to be true, it is.
Charging 0% commission is not disrupting the real estate industry. It’s really insane. Nothing in life is free and when companies go the route of discounting against each other it eventually leads to bust. The ultimate one to pay the price of this folly is the seller and the buyer.
This “new” idea is basically a bait and switch scheme. Part of it is to charge buyers to buy your home. Ok, let’s see how that works. Your neighbors are offering their home with no fee to the buyer and you are offering your home with a 1% fee to the buyer. Which home do you think buyers will look at first? And, if buyers are looking at everybody else’s home first, how often will your home be shown? Will it even sell?
What sells homes?
Marketing is what sells homes. And, marketing costs money. For me as an agent to spend my money to market a home involves a tremendous amount of business risk. I only get paid if the home sells. I get paid for delivering results and the commission I earn is fair to both seller and buyer.
When you are at the closing table it really doesn’t matter which side of the net sheet the commission is on. Both buyer and seller believe they are the ones paying the commission because it’s coming out of the transaction. Both are right.
Do not fall these schemes that are a race to the bottom in real estate commission. These companies will not disrupt the industry. They will fail. Sellers and buyers will be hurt.
People deserve better than this. Sellers deserve full service. They deserve marketing. They deserve selling their home for top dollar. Buyers deserve buying a home at a fair price.
