Who pays the piper?

It isn’t exactly a secret, but how the real estate industry earns and spends its money isn’t as clear as it perhaps ought to be.  Not without some cynicism, it can be said that the commissions paid on houses that sell cover the costs of handling those that don’t.  In that even the most successful agents rarely find buyers for more than a third of the properties they list, some sixty-five percent of their expenses therefore relate to the time, effort, and fairly hefty advertising bills involved in promoting listings that are simply going to expire.

The sales ratio in numerous other industries is no better, of course, and quite often it’s a great deal worse.  Even so, few real estate practitioners bother to explain the economics of the business they’re in or do much to dispel a general opinion that they’re overpaid for the work they do.
Another failure – if I can be forgiven for taking so jaundiced a view – is the impression given by most agents that the vendor pays the commission.  Admittedly, this is true in terms of who actually cuts the cheque, but the reality is that the buyer’s money makes it possible – which also means that every buyer helps defray the costs of promoting two additional properties that no one wants to purchase!

But can anything be done to change this lopsidedness, as it perhaps deserves to be called?
Well, unfortunately the odds seem to be against it.  The real estate industry set things up this way in the beginning and there is little indication of an interest in altering the arrangements – and never mind a willingness to do so.  Instead, a few real estate companies specialize in discounted commissions, several Sell-It-Yourself packages have become available, and, needless to say, there is the For-Sale-By-Owner idea that some vendors see as the right and sensible answer.
In turn, some futurists predict that the industry will eventually start to take a Transaction Fee approach – “Pay me $1000 and I’ll list your house” or “Pay me $1000 and I’ll find you a house to buy” – although this could well be a forecast that’s no more reliable than the one the weatherman has just given out.

Whatever the case though, my personal view as an Exclusive Buyer Broker (which means I no longer list properties but work solely for buyers) is that the only tune purchasers should dance to is an insistence in getting value for their dollar.  Let the money go where it will, but let’s make sure it’s no more than it ought to be!

If you'd care to call and discuss any of these points with me, I'll be only too pleased to hear from you.
Thank you for your time.

Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake, Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812 Cellular: 905-704-9037
email: dsp.pru@sympatico.ca
website: http://www.duncanpollock.com