Realtor Commissions. The Great Hush Hush Exposed.

Are 6% Realtor commissions “customary” or “prevailing,” or the “average?” (hint=no). Do you get what you pay for? (hint=oftentimes no) This post is long but it uncovers the unspeakable… COMMISSIONS!

Why does it matter? Because on a $500,000 home each percent is $5,000! Any ignorance about commissions may lead to a royal ripoff. The trick is that less commission isn’t always more “savings”, but the flipside is also true, because a higher commission isn’t always followed with better performance. Knowledge is power.

Background: Ever wonder why there are nearly no Realtor blogs discussing commission structures openly? (probably not, but for the other 3 of you…) It all has to do with an AntiTrust price fixing case against a few Realtor brokers decades ago. (I just covered it in my AntiTrust Law class, this is my last semester at AU! for those that are curious followers.)

These brokers got together for a dinner at Congressional County Club in MD. The organizer was F0LEY, the then President of the Local Board of Realtors. He got up and said he was changing his firms rates to 7% from 6%. (insert tons of details here). 

His excuse was the market was horrible and tons of homes were listing, but nothing was selling, so they were in dire straits. Ultimately, several were found guilty of conspiracy to raise commission rates in violation of the Sherman Act, an Antitrust law.

Fast forward 30 years, the Realtor community is still terrorized and instructed to NOT TALK ABOUT COMMISSIONS publicly with other agents. And to even get up and leave a room if somebody talks commissions. I have seen it, it is pretty funny when the word commission is mentioned and everyone freaks out and becomes a lawyer “You can’t talk about that!”

It got so bad that the Virginia Assoc. of Realtors’ legal counsel didn’t want to say “6% commissions” when teaching agents, so he referenced a number of hypothetical “chickens” instead of using actual percentages. He happened to use the number 600 chickens. Hum, if that isn’t a wink wink to the number 6, then I don’t know what is. (see Blog post on topic or video see minute 11:20) Gimme a break.

In my opinion, in the end, this chill effect & gag order has the opposite result. Instead of colluding to increase prices, the new silence solidifies what the consumers (and press) think is the “Normal” Realtor Commission. And the press make it worse with headlines like: “Chipping Away At Realtors’ Six Percent” (link). Or Wikipedia’s “The median real estate commission charged…  6%”. This is WRONG. (more…)

  • 21
  • February
  • 2011
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Posted in Listing Advice., Realtor Commissions, Realtor Rebates | 33 Comments »