I’m in St. Louis, and though we have our share of $1mm-2mm+ homes, the vast majority of homes sell for $200-400k. I recently switched brokers, but I spent 5 years working for an exclusive buyer’s broker that specialized in corporate relocation. I worked with people moving from all over the country to St. Louis. Clients moving from Boston, NY, California, and Florida were thrilled with our prices. But those coming from Oklahoma, Dallas, Atlanta, and many many other areas found us to be more expensive than their departure market.

I also want to chime in about the relo fees. My former broker provided to the agents most of the leads, and the broker agent split was 50-50. In my market, most properties offer 2.7% to the buyer’s agent. The relo companies usually took 35% of that 2.7%. After the 50-50 split, I would earn 0.88% of the sale price…and then I had to pay self-employement taxes, my own health insurance, etc. Most of the homes I sold were around $250k, earning under $2500 after working with the buyers for 6 months and spending countless hours in the car and huge amounts of money on gas. I also worked with many first time buyers that were buying their very first condo or home. I would find them a moderate, small property in a nice part of town for between $100k-175k resulting in a commission that could be between $900-1500 for lots of work and quite a bit of liability if someone would decide I did them wrong (which has never happened thankfully).

In the $750k+ market, most of the homes only offer 2.25 to 2.5%, and at $1mm+, many only offer 2.0% to the buyers side.

I did recently switch to a new brokerage that doesn’t provide me with leads, but has a much better split. I’m currently bringing in around 1.8% of the sale price after my split on most of my buyers, and that will soon be 100%…for a few months until my annivarsary date hits. Then I’ll be back to the 1.8% until I bring in enough to earn my way back to 100%.

I’m not looking to make a fortune off my clients, but given that I am available to the 7 days a week (I’ll be working on Easter too!), I truly believe that I earn every penny that I make. I’m also one of those agents that will tell buyers to walk away from homes, and have done so many times even though the clients didn’t end up buying anything which means I never earned a penny for my work. Still, it’s the right thing to do and I wouldn’t have it any other way.

We are considered one of the priciest areas in the Country, and yet:

1,703 condos sold since 1/1/07 in Kirkland & Bellevue

21% of them sold for $250,000 or less
58% of them sold for $350,000 or less
77% of them sold for $450,000 or less

2331 single family homes sold since 1/1/07 in Kirkland & Bellevue

15% sold for $450,000 or less
36% sold for $550,000 or less
50% sold for $650,000 or less
60% sold for $750,000 or less
70% sold for $850,000 or less

Go to the next area of Kenmore, Bothell still in King County and you have:

73% of all condos sold for $300,000 or less
47% of all single family homes sold for $450,000 or less
83% of all single family homes sold for $600,000 or less

Often public perception is based on what they can readily see, which is what is for sale. Often a high percentage of what is for sale is very high priced, and not a clear picture of what things actually cost and sell for.

Back to the topic of commissions and the NAR and the Country in general. Clearly if we are one of the priciest places to live in the Country, most agents are not raking it in hand over fist.

Most sales involve a 2.5% to 3% commission to each agent that they split in some way with their broker, and not a 6% commission to one agent.

Most sales of very high priced homes involve Teams of Agents and staff and not a single agent.

Still, the fault of the industry and what people are and can be angry about is that there was no adjustment for sold in 3 days for the most part. There was no adjustment for higher priced property. There was no adjustment for only one agent in the room from the full 6%.

The greed points created the anger, but the perception that all commissions are at and past greed point, is not accurate for most agents or for most of the Country.

I have experimented with all kinds of commission issues since I started blogging on 1/1/06 and am ready to formulate a transparent fee schedule. I will post a link to it here and it will be based on personal experimentation and experience.

I appreciate your thoughts as my experimentation suggests that $400,000 is the break even point for some situations and more or less for others. I have done enough research to break it down. See my next comment for reality check for you as well as our local readership here in Seattle.

For properties in the $200-300K range (obviously you are in a place far, far away from the SF Bay area), you will likely go broke at anything less than 3% per side, after everyone gets their cut. And then only if you have sufficient volume.

Once the current market conditions shake out to some equilibrium, Mrs. PatentGuy and I will likely purchase a second home in the $500K-$1M range. I’m not sure how will approach the agent commission situation when that time comes, but if this blog is still around, I’ll be sure to ask Ardell for guidance!

“Since you are in CA, though I know not where,” [Saratoga, see comments 68 and 120. We are 50 mi. south of SF]

“I’m assuming since you paid over a million dollars in your example that your thinking is based on numbers not readily available to most NAR members.” [Yes - Guilty as charged. But not uncommon in this area, yet they still think they should get at least 2.5% per side.]

“If you are going to bring NAR into the picture, you can’t pretend that all Realtors work in areas priced similar to yours.” [Yes Mam'm. So chastized, and deservedly so. My apologies to all for using the term "unwashed" - I did not mean it literally. I am certain each and every one of you are well-washed.]

First, I have a question. Would your feelings be different if all property in your area had prices of $400,000 on average. Say a two bedroom condo was $200,000 a one bedroom condo was $100,000, a starter home was $400,000 and a decent house was $600,000.

Since you are in CA, though I know not where, I’m assuming since you paid over a million dollars in your example that your thinking is based on numbers not readily available to most NAR members.

If you are going to bring NAR into the picture, you can’t pretend that all Realtors work in areas priced similar to yours.

I have an appointment over in Bellevue at 3…that should give you some time to change your tude

I had better hopes. You started out the same way as agents…from YOUR situation and they start at THEIR situation and we get nowhere fast. Is it really true that not many can’t see things except from their situation? Maybe that’s why all of the masses are unwashed, as you say. I think I don’t go there because I’m from a family of 9. There was no “my” situation in my life, ever.

PG said: “Let’s see:My situation:”

I’ll go read what you said after that besides turning the quarters into nickels

My situation:

Buyer shows up without an agent; asks listing agent to agree to take just one quarter, and tells Seller he can keep the other quarter if he accepts Buyer’s (lowball-by-at-least-a-quarter) offer.

Let’s change it up a bit for these modern times:

Seller hires “discount” broker to list home on MLS for a nickel under the Seller shell, and puts five nickels under the Buyer shell. Buyer shows up with Redfin or Larry the Barrista (collectively “Redfin Larry” who works part-time at Starbuscks). A deal is struck; Larry keeps one-to-three of the nickels, depending on his agreement with Buyer, and the remaining nickets are left in secret envelope for Buyer at closing.

This is fun. NAR version:

Seller lists home with a Top Producer REALTOR(R) and puts two quarters under each shell. Savvy and discerning Buyer, who would not dream of showing up without their own REALTOR(R) for this most important financial decision in her life, makes an offer based on recent comps provided to him by her REALTOR(R), a knowledgeable neighborhood specialist. Seller counters, since their home is special and better than the comps, and they are not going to just give it away. Buyer does not walk, but instead meets Seller half-way, since Buyer plans to live in the home “long term” to raise a family, and real estate always goes up in the long run (typically 20% per year in normal times when there is no bubble), interest rates remain at historical lows, and they are not making anymore land. At closing, Seller’s REALTOR(R) and Buyer’s REALTOR each get two quarters. If Buyer or Seller complain that two quarters seems awfully high, the REALTORS(R) will simply remind Buyer and Seller that this is a two-way street, and they often do free work for other people.

Do I get it?