Just a few notes about Realtor commissions, something to read when deciding between an agent and FSBO 177

Posted by Admin2 Mon, 24 May 2010 03:17:00 GMT

Originally published by Mark S Nadel and since widely circulated.  The article http://bit.ly/cym7Oz was first posted on the AEI-Brookings Joint Center for Regulatory Studies website, about the flaws in the commission structure used by Realtors.  If you're considering hiring a real estate agent versus going FSBO, at least give this a read.  At a minimum it will allow you to feel empowered to negotiate the commissions that you're paying to list on the MLS.  Or, you could try listing on http://choicea.com as an FSBO first. 

Summary: While real estate brokers have long set their fee as a straight percentage of a home’s sale price, this formula is an anomaly and a primary reason why such fees may be inflated by more than $30 billion annually. Although competitive pressures ordinarily produce a fee structure reflecting costs, real estate broker commissions are strangely unrelated to either the quantity or quality of the service rendered or even to the value provided. Rather, this fee has been based solely on the price of the home. (It is as if tax preparers set their fee as a flat percentage of a client’s gross income, irrespective of how difficult the return was to prepare or how much their efforts saved the taxpayer). Oddly, not only is there no evidence that it is any more costly to sell higher-priced homes than median-priced properties, but it is possible that the opposite may be true! Furthermore, the straight percentage fee formula creates little incentive for real estate agents to provide home buyers or sellers with additional value.

policy advisor with the federal
government in Washington,
D.C. He has published articles
on public policy issues in law
journals at Harvard, Yale, and
Stanford, and in the Wall Street
Journal. He is a graduate of
Amherst College (1978) and
Harvard Law School (1981).
This article began as a
footnote to in his 2000 analysis
of how new communication
technologies can dramatically
improve the consumer product
selection process
policy advisor with the federal
government in Washington,
D.C. He has published articles
on public policy issues in law
journals at Harvard, Yale, and
Stanford, and in the Wall Street
Journal. He is a graduate of
Amherst College (1978) and
Harvard Law School (1981).
This article began as a
footnote to in his 2000 analysis
of how new communication
technologies can dramatically
improve the consumer product
selection p

A link to the complete study can be found here:

 http://realestate.cornell.edu/crer/images/uploads/article/Abridged_RateStructure_Nadel.pdf