When times are tough, get creative

This is a good start, but the more important issue is for Realtors to break away from charging 5 or 6% to help sell a home. There is no justifiable reason in this internet day and age to charge a commission rate based upon last Century's business plans, which revolve around funding large brick and mortar offices with dozens or hundreds of Realtors in the office.
Selling homes is being done at Starbucks, on iPhones and closings in Lawyer's offices, so why the need to keep charging such high commission rates with little benefit to the consumer - who continues to fund this. Imagine how many more people could be qualified to buy a home if that home were 2 or 3% less, especially in this day and age with such tightened credit requirements?
Other than tradition and not wanting to go against tradition, there is no reason to charge the present rate and model of commission. It is no more difficult and a lot less expensive to market a home in 2009 than it was in 1999 when the homes were 1/2 as expensive, so there is no reason to keep commissions tied to the price of the home.
In addition, given the numbers of homes sold within a town, city, county or State, the numbers of dues paying Realtors are way too high. Many of them are and always have made this a part time job or one to augment the true breadwinner's salary. My late Mother was a Realtor and worked very hard, but she told me that the only difference between her and the thousands of other Realtors in the area was that their husband's knew a larger number of high net worth people and/or they had larger personal networks. Success was not judged on how competent you were but on how many personal contacts one had. This is and always has been a relationship business masquarading as a sales job.

Let me preface the following by saying my intention is not to be unkind or to say anything disparaging about brokers-- I know a lot of them and most are great people. But if I were in their shoes, I'd be looking for a different line of work. I say this for a few reasons. First, the industry is overcrowded and headed for a shake-out. The number of brokers ballooned in the past 10 years. This was fine in boom times when prices and volume were both very high, but as the market returns to normal the “commission pie” is shrinking. The market just can't support all the brokers anymore. Second, I think full service brokers are clinging to a dying business model. Long term, consumers will move toward much lower cost alternatives like Craigslist, eBay and Redfin. This phenomenon has already taken hold with younger buyers. It's only a matter of time before it becomes more widespread. Third, I think there is a lot of pressure on commissions. The main reason Realtors got away with charging so much for so long was that they acted as information gatekeepers. But now that MLS sales data is freely available and easy to get, the value of what Realtors bring to the table is greatly diminished. Most residential real estate transactions are routine legal affairs. Hire a decent lawyer (which I would recommend regardless of whether or not you go through a broker) and the closing pretty much takes care of itself. No hand-holding necessary. As for “expert knowledge” on the community, I personally don't care about a Realtor's opinion of a particular neighborhood or property. Most of the time they're telling me what I want to hear anyway.

Come on. What makes a realtor an expert on anything? They earn money only when they sell you a house. Do you really trust them to say, "This is a bad neighborhood" or "This location isn't ideal?" or "The school system blows" when you know it will cost them commissions? All you'll get is standard realtor-speak: "This neighborhood is transitional, so there are great values here!" or "It's up and coming!" Plus, there are many questions a realtor legally can't address. If you want to know where Boston's Armenian community is, or where most of the Swedish emigres live, or what the crime rate is in a given town, they can't tell you.

I agree with some of the other comments. The real estate agent 5-6% cut of the sale is too much.

We bought our house from a craigslist post. The negotiation happened between me and the owner. We went back and forth until we settled on a price. When we were in agreement my lawyer walked me through the offer letter. Then the inspections, further negotiations, P&S, and closing.

There was absolutely no need for a real estate agent, seller’s agent or buyer’s agent. It is too bad more FSBO transactions are not available. I felt much more in control of the whole process. I spoke directly with the seller. I wasn’t wondering if there was any collusion going on behind my back. I didn’t have anyone trying to “sell” me on the house or the neighborhood.

Marcus (#3): Last I checked a person needs to attend a 24 hour class and pass a 100 item multiple choice exam in order to become an “expert”.

As long as realtors are paid with a percentage of sale price, sellers are well represented, but how can any buyer believe that a realtor truly has his best interests at heart? How exactly is the service rendered related to the price of the property? If this market is really fostering creativity, why haven't I heard about credible flat-rate or hourly buyer's broker services?

As an agent, I would love to be paid hourly. Yes, I would.

It's one thing to get a license and it is quite a different thing to become a *good* agent who adds value to the transaction. It is hard work and dedication to have success and longevity in real estate. Some agents actually take their profession seriously. always looking to learn and offer more value. For example, MIT has a real estate program, the MIT Center For Real Estate. Check it out.

Not this topic again. I could not agree less with the comments posted here. The logic seems fine but the premise is wrong. Agents’ main purpose is not to find buyers or find sellers. That task is the easy part (craigslist, etc.). The other 99.9% of the value of an agent cannot be provided by computerized services. Sorry guys, you cannot objectively price your home. Secondly, you can’t show your home. Thirdly, you can’t negotiate a price for you home without alienating you buyer of giving your property away. Well actually you can, you just will compromise the process enough that you will lose far more time and money than the commission you “saved”.

On the buy side you might actually get lucky. An unskilled FSBO might be just desperate enough screwing up his sale (see above) to let you have his house for a song.

Wilie LoMein. Arthur Miller is turning over on that name change. Agents’ main purpose is not to find buyers or find sellers. Wrong! Since Realtors do not receive leads from their company, they are on a never ending search for new and repeat business, just as it is in other straight commission jobs. A Realtors job is to promote the house in the best possible light and to cast the widest net to attract buyers. Sellers control access to the house, the listing price and condition.

The other 99.9% of the value of an agent cannot be provided by computerized services. Sorry guys, you cannot objectively price your home. Wrong! Most often, the Realtor is at cross purposes with the seller in establishing an asking price for the home. The seller wants as much as possible and often suspects the Realtor wants to list it at the lowest price possible for a quick sale, all the while not cutting his/her commission to compensate for a price reduction. Many sellers feel they need to compensate for the lack of business acumen, sales and negotiation experience of most Realtors, outside of simple “If I can, will you” closing techniques and the memorizing of sales scripts. The ‘comps’ database agents use to establish a listing price isn’t accurate anyway, as it does not include FSBO, probate or foreclosed properties.

Secondly, you can’t show your home. Wrong! Following around prospects and attaching yourselves to them like a cheap suit is a turn off, and just opening up a door and saying “this here is the kitchen” is not worth tens of thousands of dollars.

Thirdly, you can’t negotiate a price for your home without alienating you buyer of giving your property away. Wrong! Many Realtors alienate their fellow Realtors and their buyer clients all the time and many of them are the deal breakers, not only with their attitude, but with the amount of commission dollars to be paid.

All this goes to show is that there are 2 arguments to this issue and elements are true with both.

Perfect example of a FSBO gone wrong. Last fall I represented a buyer of a FSBO. The seller priced the property significantly under value (the bank's conservative appraisal came in $40k higher than the negotiated price). Then the seller became emotional and started throwing about insults in emails to all parties that would listen, jeopardizing the sale. Without my expertise and skills in managing emotional sellers and buyers, the deal probably would have fallen apart. The seller needed a quick sale but risked putting the property back on the market right before they were about to move out of town, making a FSBO nearly impossible.
There is more to it than just posting a listing. Yes, some can do it on their own, but most are not skilled at negotiation and crucial conversations that generate a positive outcome. These are skills not learned in a class but after years of experience. Residential real estate transactions are often highly emotional and it is hard for most to separate themselves from it.

I would love buyer agency where I got paid per hour or showing. Unfortunately, my buyers don't want to pay ahead and prefer that it come from the sale's proceeds.

MLS CMA function allows you to pull comps that are certainly foreclosures and FSBO's. We have full access to public records both on MLS and masslandrecords.com. However, foreclosures are rarely used as comps to market properties and vice versa. Most BPOs and Appraisals have significant restrictions to using like properties including the terms of sale.

I'm a realtor and i charge 5 or 6% and i can tell you that i earn every penny of it. i agree that there are large percentage of agents who do little for the money but they are fast becoming dinosaurs in a fast moving industry. at the end of the day, one's expertise in all facets of selling a home and one's ability to get the client(s) to the finish line is what any reasonable consumer is paying for. to economist bill: if you're thinking that 2 or 3% is sufficient do you understand how many transactions a realtor would need to process in order to make even the median income ($60K)? as it is i work 7 days a week and avail myself to clients at all hours to accomodate their busy work schedule. There’s not been once that I haven’t earned my fee entirely. Folks like you utterly fail to see the value in brokerage and feel that our roles have diminished in the internet era. Certainly our roles have changed over the years and agents who have adapted in kind have succeeded and shown their clients real value for the 5 and 6% they charge. Our world (no matter the economic system we’re working within) is a “get what you pay for” world and if you expect already hard-working, knowledgeable and professional brokers to take bath just because you think you can transact a property sale at your local starbucks, you are mistaken and I guarantee that if the “traditions” of yesteryear fall by the wayside and brokers begin taking commissions at a 30-50% discount you’ll find only the bottom feeders and hacks taking your charge. The rest of us will find intelligent and reasonable consumers who understand the elements of making a deal and the care and expertise that goes into what we do and pay us what we should rightfully earn. I have yet, in almost 5 years in this industry, to have a client express any dissatisfaction with my work after we’ve finished at the closing table—in fact more often I get “you don’t earn enough for what you’ve gone through” from my clients. Scott’s article highlights the need for brokers/agents to find new and exciting ways to sell properties and negotiate deals and I agree 100%. I have prided myself on out-of-the-box approaches and internet savvy marketing. But I still require the day-to-day market experience and social skills that help keep me and my clients successful. And for what its worth, there are already a number of agents and agencies out there who already offer rates at precipitously low discounts and guess what? I’ll leave that answer to your imagination.

Peter (#6): Your assumption about a seller's agent being motivated to hold out for a high price is wrong. There is a strong “bird in the hand is worth two in the bush” mentality which is seldom discussed. Most of the agents I've talked candidly with over the years don't really care if a house sells for $1 mil or $1.2 mil or $800k. All they care about is getting the deal done so they can pocket a juicy commission. If the price is high, great. If it's not, oh well, take the money and move on to the next deal. This is the truth... Especially in the current market where business is very slow and many agents are broke.

We had our house for sale for 18 months. When we took it away from the realtor we could set the price realistically to sell because we didn't have that commission overhead to deal with. We listed our house on boston.com and craigslist and our house went under agreement within two weekends.
Anyone with enough common sense can make up a nice handout with all the applicable information and organize an open house. Do you really want to pay someone 5% to do that?
So 7 years later, we have bought 3 properties; one FSBO, one dirt cheap fire sale set-up, and one home for sale by a realtor...we have turned around and sold our home by ourselves for a negligible profit (down market before it turned to a loss) on craigslist and now live in the other two properties, which are upstairs/downstairs condos.
If two under 30 year olds can buy and sell without a realtor than pretty much anyone can do it.

Well, well, well...this topic is an old one, being recycled for 100th dz. time. I read with amusement on both sides. A full time professional REALTOR for 23 years with expanded educational credentials pertaining to contract law, land use, tax issues, lending programs and advanced marketing skills. I work 8-12 hrs a day 7 days a week and rarely have a vacation. No I am not overpaid! I provide expert service and counseling for those that value that service. For those that do not see the value, they have the option of choice, work on their own or with another type of provider. How GREAT it is to be an American and have the freedom of choice!

I see that Pat Brewer in Washington is a full time professional REALTOR for 23 years with expanded educational credentials pertaining to contract law, land use, tax issues, lending programs and advanced marketing skills. That is great and it's too bad that most other Realtors aren't at her level.

However, if Pat were to give out any contract law or tax issue advice to any of her clients, she could and would be sued if any problems arose based upon her advice. Even though she sells in a Title Company area - no Lawyers needed to close as in MA. - she doesn't have a professional license in any of those areas.

As far as advanced marketing, having a static Web 1.0 site and uploading pictures to Realtor.com isn't very cutting edge in this day and age.

How's this for creativity- lower your overinflated asking price.