why do real estate agents get paid so much

with our real estate agent. He has led Young Life with us for the last couple years and he s a great dude. In fact, we had him over for dinner just the other night so we could show him all the changes we ve made to our house since we bought it. The dude is awesome and we love him to death, but I m not quite convinced realtors in general are worth the 3% commission they receive. We paid $357,000 for our house. That means our buddy made $10,000 when we bought our house (he doesn t have to split his commission). I estimate we spent a total of 40 hours interacting with him over the course of the six months it took us to find our first home.


This works out to about $250/hour. My parents also decided to buy a new home shortly after we did. They used my friend, and within three weeks of searching, they found themselves a new home. That s another $10,000 in our friend s pocket. Oh, and did I mention my parents are about to sell their previous home, so he will make another $5,000 to $10,000 when that happens from them. From just my family alone, our realtor will have made more than Girl Ninja makes all year as a kindergarten teacher.


That seems crazy to me. В
I mean, our buddy is a GREAT realtor. The best. That s why we used him and this should not be taken as a knock against him. It s not. I just don t think realtor commissions are justified. Think about it like this. Say Girl Ninja and I decided to buy a $100,000 house. Our realtor would have provided us the same service he did for our current house, but only made $3,000 from the commissions.


Fortunately for him, we bout 3. 5 times that amount. The amount of work he put in would have been the same regardless of our purchase price, but he charges us $7,500 more if we buy a $$350,000 house. Why is this not pissing off more people? What seems logical to me is a fee for service model. Where I agree to pay $100 each time my realtor shows me a house regardless of if I buy it or not, and a $2,000 В bonus if I buy a house he has shown me. This seems much more fair. He gets paid every time he provides me a service (showing me houses or helping me purchase one).


And I get to potentially save thousands (or tens of thousands) of dollars. Why the crap do we agree to pay commissions based off the purchase price of the home?! Who thought this was a good idea? And more importantly, why do we continue to allow it! I m starting to think I got in to the wrong industry. В There are alternatives to the typical commission structure. Flat-fee and discount brokerages list houses for a set dollar amount, rather than a percentage of the sale price.


You could also go the FSBO route -- for sale by owner, where you act as your own agent, advertising the home and fielding offers from potential buyers. Be aware, though, that most buyers will be working with agents -- buyers don't pay commissions, after all -- and those agents will probably expect a commission. If you go flat-fee or FSBO when selling and you want agents to bring their clients around, you might still end up paying commission, although not as much as you would if you'd hired a traditional agent.