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Realtor Commissions | Your approach


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#1 Mixed365

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Posted 16 February 2015 - 09:24 PM

Just curious Marko, I see you reduce the amount you take in as a realtor, is there a reason you do this? I'm just surprised, I assume it's been incredibly successful and haven't found any other realtor who has chosen to do the same. 


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#2 MarkoJ

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Posted 17 February 2015 - 09:18 AM

Just curious Marko, I see you reduce the amount you take in as a realtor, is there a reason you do this? I'm just surprised, I assume it's been incredibly successful and haven't found any other realtor who has chosen to do the same. 

 

When I started out almost five years ago I was really passionate about real estate commissions in that I felt they were way too high.  My thought at the time in 2010 was that by 2015 the landscape would completely change and consumers would look for alternative business models such as cash back to buyers, mere postings for listings, etc.  For the first four years I was excited about trying to educate consumers on how the system works, how to save money on commissions, etc.  However, it terms of a market as a whole absolutely nothing has changed.  In fact, in Victoria I think the alternative business model market share has actually dropped.

 

Late last year I went to a listing presentation and I'll make up the actual numbers but this is effectively the scenario.  A couple called me wanting to sell their house, in the Victoria core, beautiful street, awesome legal suite, house in great shape, etc., basically a property that sells itself.  I explain everything to them in detail and finish it off with, "If you go in at $799,000 this will sell itself, it doesn't matter who you list with as long as they do professional photos, a floor plan, and meet the minimum level of competency it will sell at market value; however, I can save you $7,000 on commission with my full service package or you can save about $12,000 if you do the mere posting and do some of the work yourself."

 

A week later they list with a full pop brokerage at $789,000 and it sells in a day at $789,000 and they fork out $27,000+tax in commission.  It was at that point I kind of gave up on the futile effort to bring change and lower commissions to the market place.  The consumer complains about real estate commissions but they do nothing about it?  Hard to explain.

 

The reason I continue to offer lower commissions is huge volume....there is the 3-4% of the niche sophisticated consumer market that seeks out my services and I cater to those individuals.  While it isn't a huge part of the market as a whole, it is a very sustainable business for me personally.  Last year I carried out 82 transactions and when you do the math, (6700 sales last year and 1205 REALTORS®) 82 for an individual is a lot of sales.

 

The other 96% of the consumer will continue being content and paying $21,000+tax (on an average $600,000 home) sale.  Will it ever change? I have a hard time believing it will but you never know.


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#3 MarkoJ

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Posted 17 February 2015 - 09:26 AM

Just curious Marko, I see you reduce the amount you take in as a realtor, is there a reason you do this? I'm just surprised, I assume it's been incredibly successful and haven't found any other realtor who has chosen to do the same. 

 

To answer your second question I have no idea why others haven't copied my business model to any significant extent.  There is money to be made in doing volume at a lower fee structure.  I guess if the vast majority of consumers are still willing to pay the market place commissions why change your business model?


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#4 Szeven

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Posted 17 February 2015 - 09:36 AM

In my experience people do not understand costs/money/fees etc, and your scenario Marko is another great example.  It boggles my mind what people pay in advisory fees in the financial industry. They don't mind though as long as you pay for coffee/lunch, and the office is professional.


Edited by Szeven, 17 February 2015 - 09:37 AM.


#5 MarkoJ

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Posted 17 February 2015 - 09:56 AM

In my experience people do not understand costs/money/fees etc, and your scenario Marko is another great example.  It boggles my mind what people pay in advisory fees in the financial industry. They don't mind though as long as you pay for coffee/lunch, and the office is professional.

 

+1, I've had my online TD Waterhouse account since I was 19 - other than $10/trade have never paid any other fees....in my opinion you can't get ahead in life working a middle class job paying a MER of 2.5% and paying 21k+tax to sell your average Victoria house.

 

What's mind boggling is all you have to do is google some of these things.


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#6 Gary H

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Posted 17 February 2015 - 10:06 AM

 

... I was excited about trying to educate consumers on how the system works, how to save money on commissions, etc. ...

 

Well, you educated us, such the "sophisticated consumer".  :thumbsup:


Edited by Gary H, 17 February 2015 - 10:07 AM.


#7 Jimmyrig

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Posted 17 February 2015 - 12:04 PM

I sold my home using Marko's "mere posting" service last week. We spent 1 month removing clutter and staging the home and it looked great online. Marko's pictures and bio were perfect.

 

I got the first offer on day one, and a back-up offer for full listing price on day four. The process was very easy and I saved about $8000 total. This money may seem like nothing compared to the value of the home, but it will pay for hardwood floor re-finishing and professional painting in my new house - thanks Marko! 

 

-Matt


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#8 pherthyl

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Posted 17 February 2015 - 01:29 PM

I still think the self-service info will disrupt this business in the future.   It just takes longer with assets that are so expensive and people don't want to risk anything on.   "Better go with that full service guy, we don't want to gamble on saving a few thousand for a million dollar property"

Also I think a factor is the easy money made in appreciation.  If the place appreciated by $300,000 since you bought it it's easy to accept the $20k in commission.   If you're barely scraping out with the sale price covering the outstanding mortgage, then people might look closer at how to save money on the transaction.



#9 lanforod

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Posted 17 February 2015 - 02:33 PM

I still think the self-service info will disrupt this business in the future.   It just takes longer with assets that are so expensive and people don't want to risk anything on.   "Better go with that full service guy, we don't want to gamble on saving a few thousand for a million dollar property"

Also I think a factor is the easy money made in appreciation.  If the place appreciated by $300,000 since you bought it it's easy to accept the $20k in commission.   If you're barely scraping out with the sale price covering the outstanding mortgage, then people might look closer at how to save money on the transaction.

 

Most of the info is not available yet freely.

 

Folks are free to do whatever they want - there is no obligation to use a Realtor. There are some lower commission options as well as selling yourself, just be prepared to do the work.

Sometimes, the commission does not actually make a Realtor much money - they can spend a lot of time and money on one property.

 

I wonder how many people are taking advantage of the simple $500 fee to just list on MLS, which is probably all that needs to be done for anything in a good location with a justifiable price to get offers.



#10 MarkoJ

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Posted 17 February 2015 - 06:30 PM

I still think the self-service info will disrupt this business in the future.   It just takes longer with assets that are so expensive and people don't want to risk anything on.   "Better go with that full service guy, we don't want to gamble on saving a few thousand for a million dollar property"

Also I think a factor is the easy money made in appreciation.  If the place appreciated by $300,000 since you bought it it's easy to accept the $20k in commission.   If you're barely scraping out with the sale price covering the outstanding mortgage, then people might look closer at how to save money on the transaction.

 

It is not really growing or gaining any sort of meaningful traction....in 2013 we had 80 individuals list with the mere posting service and there were 12,794 listings in total.  In 2014 that number grew to 90 mere postings with 12,948 listings in total.  Looking at my invoices I personally went from 25 mere postings in 2013 to 27 mere postings in 2014.......very poor growth there.

 

Last year the mere postings I listed had a better list to sales ratio than my full service listings and had a much better sales ratio compared to the market average.  This year the first three mere postings I've listed are already all sold.

 

Yet, still no growth.  I don't know if I agree with the appreciation theory anymore.  I've pitched that particular appreciation/home equity point myself for years but in real life my mere posting clients on average do not fit the picture of those that can barely clear title.  I would say that someone with no appreciation/home equity is just as likely to go with a full commission realtor as someone with a ton of equity and vice versa.

 

Everything I predicted personally in 2010 when the Competition Bureau came down with the mere posting ruling/agreement has been way off.  I've been more wrong about the landscape of real estate commissions than Garth Turner has been about housing prices and interest rates :)

 

Just a note, don't confuse full service and full commission.  Full service can be offered at a lower commission rate, the two are not tied in any way.  Sometimes you pay more but receive less service.


Edited by MarkoJ, 17 February 2015 - 06:32 PM.

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#11 MarkoJ

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Posted 17 February 2015 - 06:47 PM

Most of the info is not available yet freely.

 

Folks are free to do whatever they want - there is no obligation to use a Realtor. There are some lower commission options as well as selling yourself, just be prepared to do the work.

Sometimes, the commission does not actually make a Realtor much money - they can spend a lot of time and money on one property.

 

I wonder how many people are taking advantage of the simple $500 fee to just list on MLS, which is probably all that needs to be done for anything in a good location with a justifiable price to get offers.

 

There is a lot of info on websites like redflagdeals and similiar and I mean like hundreds of threads and thousands of posts discussing the subject matter in detail from every single perspective.

 

Honestly, there isn't a lot of money spent on any listing in relation to the commission.  Professional photos are like $85?  Print advertising is like burning money so no point in spending money on it.

 

A lot of other myths out there like 30% of a REALTORS® commission goes to their brokerage or something ridiculous.  There are a lot of companies out there that take $250 per transaction and the more expensive ones usually take 10% up to $150,000 and then 5% after that.   Certainly not 30%....that was like 30 years ago.

 

There is no good argument in my opinion for having to pay 21k to sell an averarge house in this day and age.


Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2023 | Fair Realty

www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#12 pherthyl

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Posted 17 February 2015 - 06:56 PM

Most of the info is not available yet freely.

 

No but there is a lot more access now than a few years back.  More info available on the market from more sources, and way more options for DIY, the most important being flat fee MLS listings from multiple providers.  



#13 pherthyl

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Posted 17 February 2015 - 07:01 PM

 

 

There is no good argument in my opinion for having to pay 21k to sell an averarge house in this day and age.

 

 

I guess it's mostly marketing.   Realtors have convinced the public they are professionals on par with lawyers and doctors and scared people with ominous warnings about how they protect the public.

 

I dunno, I'm still hopeful that the industry will move in the direction that most other industries are going with younger buyers more apt to do their own research rather than be carted around in the back of a Jaguar and fed the party line.  But maybe I'm too optimistic about the average buyer and seller.



#14 MarkoJ

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Posted 17 February 2015 - 09:03 PM

But maybe I'm too optimistic about the average buyer and seller.

 

I think you probably are too optimistic.  I can't mention any brokerage names but one of the better known alternative business model brokerages here in Victoria has lost significant market share in the last five years.

 

There is nothing in the actual market share numbers to support that the average consumer is leaning towards anything other than the traditional status quo.  

 

In 2010 I was predicting that by 2020 mere postings would make up 15% market share....we'll be lucky to get to 1.5%.


Edited by MarkoJ, 17 February 2015 - 09:23 PM.

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www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#15 arfenarf

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Posted 18 February 2015 - 06:23 AM

Marko,

 

Do you get any sense that mere postings and/or discount brokerages are effectively blackballed by the traditional crowd?  There are many subtle ways to steer a buyer in another direction...

 

I think the availability of the MLS helps expose a property to many buyers, but I just wonder whether those working with the traditional guys are less likely to follow through and come have a look.



#16 lanforod

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Posted 18 February 2015 - 08:24 AM

One of the issues is that on the flip side of the transaction, the 'buying' side, there is very little advantage to going on your own. You typically want a Realtor, and the Realtor doesn't cost you anything! So often, many people who are buying, and already own, sell with the same Realtor.



#17 MarkoJ

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Posted 18 February 2015 - 08:46 AM

Marko,

 

Do you get any sense that mere postings and/or discount brokerages are effectively blackballed by the traditional crowd?  There are many subtle ways to steer a buyer in another direction...

 

I think the availability of the MLS helps expose a property to many buyers, but I just wonder whether those working with the traditional guys are less likely to follow through and come have a look.

 

Showings and offers are vastly buyer driven in this day and age.  The sales to list ratio is higher on my mere postings than my full service listings.  This year 4 of my 5 sold listings have been mere postings and of the 3 mere postings that I've listed since the New Year all three are sold and had at least two offers each.  

 

It really comes down to a reasonable price, good pictures, and offering the cooperating brokerages a reasonable commission.  Mechanism it is listed via does not really affect the odds of a sale, in my opinion.


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#18 MarkoJ

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Posted 18 February 2015 - 08:51 AM

One of the issues is that on the flip side of the transaction, the 'buying' side, there is very little advantage to going on your own. You typically want a Realtor, and the Realtor doesn't cost you anything! So often, many people who are buying, and already own, sell with the same Realtor.

 

But as the buyer you actually provide the funds to pay for the commission.  You buy a house for $600,000 - you/your bank give $600,000 to your lawyer - your lawyer gives $600,000 to seller's lawyer - seller's lawyer gives $10,500 to each REALTOR®.  Where did the money come from?

 

There are REALTORS® out there offering cash back programs.  For example, they take the $10,500 and from that they cut you, as the buyer, a cheque.


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www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#19 lanforod

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Posted 18 February 2015 - 12:04 PM

 

But as the buyer you actually provide the funds to pay for the commission.  You buy a house for $600,000 - you/your bank give $600,000 to your lawyer - your lawyer gives $600,000 to seller's lawyer - seller's lawyer gives $10,500 to each REALTOR®.  Where did the money come from?

 

 

There are REALTORS® out there offering cash back programs.  For example, they take the $10,500 and from that they cut you, as the buyer, a cheque.

 

Ultimately, what I'm saying is, that if you're buying with a Realtor, you sell with the same and vice versa, typically.

 

I agree, the money comes from the purchaser. But does it cost the buyer, or does it cost the seller money? Probably both. Could the seller have sold for a higher net gain without a Realtor, costing the buyer less (yes, I realize that often FSBO does not translate to savings this way).

 

Purchasing without a Realtor rarely means saving money unless you strike a deal with someone also selling without a Realtor, which would be a rare case. Typically, if the purchaser does not have a Realtor, the selling Realtor gets full commission instead of splitting it with the buyers Realtor. Never go to a Realtor home showing without your Realtor. The buyer's money will pay a Realtor regardless if they have their own or not.

 

Purchasing with a Realtor means access to tons of information that is necessary for prudent Real Estate transactions - history, neighbour history, etc.

 

I'm certainly scratching my head as to why more people who are not buying, are not selling without a Realtor now, other than the mere posting transaction.



#20 MarkoJ

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Posted 18 February 2015 - 03:54 PM

I'm certainly scratching my head as to why more people who are not buying, are not selling without a Realtor now, other than the mere posting transaction.

 

I've stopped my scratching my head, I just roll with it now.....either people get it or they don't.  That is my new theory.


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www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


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