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Do real estate agents deserve their commission?

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Whether real estate brokers are useful is a question we've addressed before and answered with a qualified yes--as in, yes if the agent is a capable one whose long-term and short-term interests are aligned with yours.  Whether agents deserve the amount of commission typically paid is a somewhat different issue.

Over on UrbanBaby.com's forums, an anonymous broker defends commissions this way:

"I work a fairly 'boutique' business, so to my clients, a lot of the value is time: they make $400k-$5MM a year, so to pay me what ends up being maybe $75-$100/hr to take care of a financial transaction so it doesn't blow up in their face is well worth it to them."

The agent then breaks down the value-add by client type:

  • "To the Hollywood relos (who in my business are mostly renters), it's that I can find something that they can't: like I'm another kind of personal shopper.... 
  • To the tech kids (who are mostly buyers), the value is in using me as insurance: yes they can walk through an apartment themselves, but no, they can't see the incipient mold or understand the building financials, so I can keep them from making a big mistake.... 
  • To the two-income families (who are mostly sellers), it's just outsourcing the complexity of the task. Yes they could hold open houses and conduct negotiation, but not as well as I can, and these are people who outsource everything from laundry to school tutoring, so to them I'm just another part of the service economy....
  • The highest value-add is really in non-cookie-cutter properties, where the pricing is uncertain and I can really define pricing and make a market -- more like being an art dealer. Of course that's both the most fun and the most competitive part of the business."

While some commenters insisted that fees are too high for the services of a glorified "door opener," others maintained that the "gems" (versus the "duds and scumbags") were worth it:

  • "I have only sold once, but it was worth it TO ME. We relocated quickly and listed our home after we moved and my realtor was quite good. We didn't pay the standard 6% either - the fee varied based on the price and also whether or not there was a co-broker. I'm sort of indifferent as a buyer, but on balance I'd probably prefer to pay the increased market price associated with a commission than have to deal directly with the seller. 2 of our 3 sellers were difficult bordering on completely insane."
  • "The value in our realtor was that had lived in the building, been a member of the board and knew who would/ not pass the interview. The board was notoriously bad( we did not know this when buying the apt). He returned the board application 3 times to the buyers realtor until it was complete and would be accepted."
  • "Just to put the $ in perspective - the fee on a $1M apartment is $60K. Generally, the listing agent themselves sees only $15K of that....He/she pays her own taxes and FICA. So take home is probably around $6K. And don't forget, while the transaction that goes through might not seem like a lot of work or time, the agent has put in a lot of time on the many apartments you looked at or buyers that jerked you around and never closed."

(UrbanBaby.com; previously)

Related:

New York Times warns buyers to get their own broker

7 signs that it's time to break up with your agent

Find a great agent with BrickUnderground's Agent Referral Service

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