You get what you pay for?

Jeff Konstant, "jkonstant"
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This point is brought up so frequently when discussing FSBO's and/or flat fee/limited service brokerages that it begs further and expanded discussion in order to fully appreciate costs as they relate to expected services from traditional or full service brokerages and the agent.

Agents often defend commissions by pointing out how little they themselves actually receive as a total percentage. The most commonly expressed example has them splitting the 6% with another brokerage leaving them with 3% that must now be split in half, leaving them with just 1.5% before business related costs.

If you get what you pay for, is an accurate statement, then most certainly it must be true that hiring an agent that works on a 50/50 split with their broker would effectively mean the consumer is getting far less for their money than had they selected an agent who gets 70%, 80% or more from their broker.

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May 09 2010 - US

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Replies (4)

SoCal_Engr
Contributions:6591

LOL, but you're probably right. An effective, experienced agent should be able to negotiate a better split with their broker. It does seem strange that someone would try to hype their services as an experienced advocate and negotiator for their client - when they have not negotiated a decent split forf themselves.

Then again, the 50/50 broker/agent split sounds so much better when trying to explain why 3% of a 300K/500K/1M sale really isn't all that much.

So...

Does this mean asking an agent what their commission split is should be part of the agent interview process?

p.s. Before agents get on here and start explaining that some negotiate better splits but carry more of their own costs, etc., already heard all that. It doesn't negate the basic argument of "If you can't negotiate effectively on your own behalf, why should you be trusted to negotiate others?"

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May 09 2010

rockinblu
Contributions:7207

jkonstant,

I just posted a link to this thread at the end on my tips for choosing an agent blog. Your thread here is quite informative, but I'm sure there will be those that mention that a seller is actually listing with the brokerage, and all of its resources, as well as the agent.

http://www.trulia.com/blog/rockinblu/2008/12/i_ve_got_my_fingers_cros

BTW great commentary by socal.

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May 09 2010

Jeff Konstant, "jkonstant"
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Well, yes actually. I believe this to be an important part of the interview process. I think it goes into the agents ability to actually perform. The argument can be made that the 50/50 agent might be a slacker, relying on their broker to handle what are relatively simple tasks.

It is also a poor broker that does not teach it's people to be more independant.

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May 10 2010

Jim Basquette CRS, CNE, "Jim Basquette"
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You don't always get what you pay for. You can get less, but are unlikely to get more. In other words, paying a higher commission does not always mean you get more, but paying less guarantees you get less. Usually less services mean less for your home.

For evaluating agents, commission splits are irrelevant for several reasons. Brokers supply agents with different services and that can affect splits. Also some agents pay a faly monthly fee, but get a higher split (up to 100%). As long as the seller is receiving great services that relate to getting the home sold it does not matter who pays for them. Because of this knowing a commission split is meaningless to determine the negotiatong skills of an agent.