My Commissions are not Negotiable

I've said it before, I'll say it again: Commissions are not payment for services - they are payment for risk mitigation. It's the insurance policy the consumer takes out that if their house doesn't sell, they pay nothing. But that insurance policy is expensive - it has to be! Economics 101 says high risk = high reward. As long as the consumer wants you to work and carry all the risk, you have every right to tell them that you must get a high reward if successful. But you can't equate a commission with services rendered - the math does not add up and the consumer knows it.

Of course, trained real estate consultants believe that the consumer should have a choice and we provide them. They can pay for the services when rendered and they can pay a lot less but we still get paid very well for our time, services, and expertise. Their choice. I can tell you that offering choices in the services offered and how they can be paid for takes away the whole commission-ectomy argument. If they go with a commission they understand that they will pay a premium to have no risk. Or they can pay for the services and/or time - like they do almost any other professional. Their choice but either way, they hire us.

What a pathetic rehash of all the cliches and memorized sales school responses when ever more astute consumers are consistently telling us they want better value, fairness and transparency around the services we provide and how we're paid.

Most professions/industries survey consumers to find out how they can improve what they do. Not us, we just ignore them and console ourselves by regurgitating the worn out arguments by which we hope to defend and perpetuate the indefensible. Perhaps turning our thoughts to what consumers want and what we must do to satisfy their needs would be a worthwhile endeavor. How about expending some mental energy to grapple with some difficult, thought-provoking questions we might rather ignore?

What if the accountant who prepares your tax return demanded a percentage of last year's gross income for his work? What if the attorney drafting one's will demanded a percentage of the estimated value of the estate as her fee? These absurd scenarios essentially parallel the terms our industry has offered consumers for the better part of a century. Why should the owner of a $600,000 property pay twice as much as the owner of a $300,000 property for us to provide exactly the same services?

In most North American jurisdictions the common law holds that we owe our clients agency duties within a fiduciary framework, nothing less than a requirement to put the client's interests above all others, including our own. Our entrenched sales culture and preoccupation with commissions quite overshadows such considerations and yet we insist on calling ourselves professionals!

How about offering consumers an opportunity to choose the services they want and pay what they're worth? We certainly deserve adequate compensation for our work but one wonders how long consumers will be willing to tolerate present arrangements.

As long as the real estate community continues to ignore the possibility of providing other options, we will continue to work ourselves out of a job.

Over the next 10 years, I believe most real estate agents are going to have to radically change the way they do business. Specifically, listing agents will likely disappear. They will be a convenience for the elite, not a requirement for the average homeowner.

Educated, do-it-yourself buyers will be negotiating directly with sellers and will look to a local real estate expert for advice and contract assistance. Any agent who believes the 6 percent commission will survive in 2020 is fooling herself. Just take a look at what the Internet has done to travel agents, stock brokers, literary agents, and other middlemen.