A large number of people are plagued by the issue of realtors charging exorbitant commissions. The commission for selling a property is 6 percent on an average. This means that on most occasions agents will make more money than their principals. Moreover the system is set in such a way that one of the two things must be true:
- The realtor must be foolish
- The realtor will maximize his benefit at your cost
It is weird and unbelievable that the system has been set up in such a way. This situation is called a “conflict of interest”. Imagine being a realtor for a minute. Your earnings are dependent on a price. If you want your earnings to go higher, so should the price. As a buyer, you hire an agent to inflate prices! Can it get any more absurd?
The Problem: A large number of people realized this and tried to eliminate the services of real estate agents altogether. The era of internet listings came up, but soon people realized that realtors do more than make buyers and sellers meet. They take care of legal, financial and documentation issues. If you do not hire an agent, you will most likely pay for it with your time. Now, things are worse as big brand real estate agents charge a two-part remuneration:
- Fee for listing online
- Commission on closure of transaction
Fixed Payment: What followed was completely expected. The population already believed that the realtor compensation was way above the mark and had a conflict of interest. The popular public opinion gave rise to a new type of intermediary called the flat fee realtor. They would charge you a realtor fee which remains the same irrespective of the price of the property. This ensures that both the problems stated above are eliminated:
- There is no conflict of interest
- The realtor fees are generally lower than the commissions
Single Payment: It has also become an effective way to get rid of some of the high priced internet listings. In fact paying realtor fees is the cheapest solution. Even if you were to list yourself on the internet it would be expensive.
These realtors would list you for free. They will charge their realtor fees only on completion of the transaction.
Conclusion: The recent slowdown has brought the best out of the real estate industry. With volumes falling and the need to correct prices, the consumers finally get an offering which would create value. Realtor fees would ensure that agents do not pursue deals which are not in the best interest of the clients.
If you are looking to buy or sell property, a flat fee realtor would be a worthwhile alternative. At least paying them a visit will do no harm. It is however important to understand that flat fee realtors will have different fees for different areas.