I’ve received several questions about real estate agents. For example, most folks don’t understand the difference between full-service brokers and discount brokers. Among the public there are more myths than facts. I’m going to tackle some of the popular myths. Myth No. 1: Real estate agents make too much money. False. As a career, real estate is more challenging and pays less than most people realize. The majority of agents get out of the business in less than two years.
According to the Bureau of Labor Statistics, the average real estate agent made a little more $40,000 in wages, salaries or commissions in 2008. For 2009, the average agent’s income dropped to a little more than $35,000.
A real estate commission is split four ways: The listing commission is split between the listing agent and the listing broker, and the selling commission is split between the selling broker and the selling agent.
Half of all agents close fewer than four sales per year. Nobody can live on that, especially since agents must pay all of their business expenses, including signs, lockboxes, office fees, professional dues, office supplies and errors and omissions insurance.
If agents were valued for their expertise and charged fees accordingly, there would be fewer agents, no doubt. Those agents that remain would be paid higher salaries, commensurate with other professional practices.
Myth No. 2: The less commission you pay to sell your home, the more you make. False. Discount brokers like to promote this myth. They claim to save you money by charging less. In fact, the top-producing agents do not offer discounted services.
Why? Because they don’t need to. They are in demand because they provide extra value to their clients. Less-than-full-service agents can’t afford all the bells and whistles paid by their full-service counterparts.
Discount brokers make up for a lower commission by taking on more listings, reducing the level of services they can provide to each client or charging you from a menu of services. It boils down to the old adage, “You get what you pay for.”
A 2-percent reduction in commission sounds pretty good until you compare it to a 10-percent price reduction because your agent couldn’t afford to spend time or money to market your property. Myth No. 3: Agents get kickbacks from lenders, title companies and inspectors. False. Since 1974, agents have been prohibited from accepting any kind of kickback or favor from real estate vendors. The Real Estate Settlement Procedures Act, or RESPA, is a U.S. Department of Housing and Development (HUD) consumer-protection statute designed to help consumers better understand the homebuying process. HUD enforces RESPA.
Myth No. 4: All agents will say anything to make a sale. False. In nearly 25 years in the real estate industry, I have met agents who would say anything to make a sale. It’s unfair to paint all other agents with the same broad brush.
Top-producing agents — who have built a solid reputation in the community and practice real estate with honesty and integrity — are very careful to uphold a client’s trust. Nothing travels faster than bad news, and you won’t survive in the real estate industry if you mislead your clients.
Making misrepresentations or false statements is against the law. Agents that violate their fiduciary duties to their client or fail to disclose material facts will be subject to prosecution and the loss of their license to sell real estate in Washington.
RAY AKERS has been a licensed Realtor for more than 20 years. Send your questions to ray@gbk.com or call (206) 723-2800.[[In-content Ad]]
