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Give consumers what they want, ask for more in real estate commissions

Technology has made this housing crash more bearable, not easier, so why haven’t real estate commissions increased tenfold? They haven’t, yet there is still this burning need to negotiate from a floor – do you think your home seller respects this? No way, they love easy prey, sucker.

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An innocent question posed in a Facebook group this morning was about the 6% commission debate and why commissions are 6% if it’s a myth. It is a simple question with a simple answer that I can give because I am no longer a Realtor, and I’m absolutely entitled to my opinion whether you like it or not, as are you.

The 6% isn’t really a myth, albeit the average actual paid real estate commission is much lower at around 5%. It is a fact that the commission is negotiable, but what consumers and Realtors have never understood is that from a sales perspective, that 3% per side has become more of a fictitious floor than a ceiling. When you ask a Realtor why, quite honestly, no one really knows, but the default knee-jerk response is, “but commissions are negotiable.”

Sure they are, it’s an absolute fact, but again, from a sales perspective (a lesson for any sales related business, not just real estate) negotiating from the floor is a failed proposition as a business.

Sure, people like to say it’s so easy to list a property because they have an iPad now, and possibly a responsive MLS they can enter data into, but quite frankly (and I know listing agents will mostly agree, or at the least successful ones anyway) the expectations on listing a property have grown exponentially, as well as the expectations on the property agent themselves. The amount of hours it takes to actually hammer a square transaction through the round hole of closing has indeed increased tenfold – this is just a round number factoring shortsales, troublesome financing, or combating a neighborhood marred by failed mortgages and foreclosures.

Technology has made this housing crash more bearable, not easier, so why haven’t real estate commissions increased tenfold? They haven’t, yet there is still this burning need to negotiate from a floor – do you think your home seller respects this? No way, they love easy prey, sucker.

As milk prices have increased, gas prices have exploded, the cost of paper, ink, technology, supplying real estate porn to aggregators, the costs of featuring property within online environments and so many other factors of day to day life and business have risen due to the cost of doing business, yet real estate commissions have remained the same – around 5%?

These costs have to be passed on somewhere, and to be quite blunt, volume listing of property is costly and in high demand – just ask Trulia, Zillow, and Homes.com and others why these portals are not out acquiring their own property listings? Their answer will be that it’s not profitable. And why aren’t consumers uploading their own properties for sale in greater numbers? Because in the end, real estate search sites cannot support the consumer demand side in service of the listing, and that’s a fact. Instead, that’s laid on the backs of the listing agent and broker in their model – another cost of doing business.

So, in summation, I’m not going to tell you what you should be charging as a real estate commission per side, but I do think listing agents that are really in business have to look at the reality of the cost of doing business. Buyers agents say every day that it’s easier because of technology, but that’s not true of the listing side.

It wouldn’t surprise me if in this very year you don’t see listing brokers increase their commissions for their side of the transaction and lower the buyer side offering, and if they are the smart sales professionals I believe them to be, that fictitious floor and cieling could burst upwards to 8 or 9%, and why stop there? In some ways the cieling is regulated, but I’m not sure that’s really been challenged in court. If you’re truly negotiating commissions, shouldn’t you negotiate from a position of strength? It’s just good business.

So I say that each broker needs to do a real analysis of their business models and listen to their consumer – they want to negotiate, and it’s about time listing brokers gave them what they’ve asked for.

Benn Rosales is the Founder and CEO of The American Genius (AG), national news network for tech and entrepreneurs, proudly celebrating 10 years in publishing, recently ranked as the #5 startup in Austin. Before founding AG, he founded one of the first digital media strategy firms in the nation and also acquired several other firms. His resume prior includes roles at Apple and Kroger Foods, specializing in marketing, communications, and technology integration. He is a recipient of the Statesman Texas Social Media Award and is an Inman Innovator Award winner. He has consulted for numerous startups (both early- and late-stage), has built partnerships and bridges between tech recruiters and the best tech talent in the industry, and is well known for organizing the digital community through popular monthly networking events. Benn does not venture into the spotlight often, rather believes his biggest accomplishments are the talent he recruits, develops, and gives all credit to those he's empowered.

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28 Comments

28 Comments

  1. Jeff Brown

    April 9, 2012 at 12:53 pm

    Not sure what’s ‘regulating’ commission ceilings, unless you’re referring to market forces.

    Though I’ve known a few top producers who consistently get 7-8% on a large portion of their listings, since the late ’90s, they added value in return.

    I can’t see commissions rising, at least not industry wide. Just don’t see it.

    • Benn Rosales

      April 9, 2012 at 1:01 pm

      Nope, not market forces, they’re (regulation) real life reality on the ceilings on builders, and lenders that red flag transactions in residential real estate. I’ll investigate a little more and bring you a case study as I’ve had to deal directly with this issue. 🙂

      • Jeff Brown

        April 9, 2012 at 1:11 pm

        REO/ShortSale specialists have long told me about lenders ‘red flagging’ commissions they feel are too high. That’s ‘market’ forces, imho. They’re the 800 pound gorilla in those transactions, so the brokers knuckle under 99% of the time.

        There’s no gov’t agency of which I’m aware telling brokerages how much they can charge. Have I missed a new development? Thanks

        • Benn Rosales

          April 9, 2012 at 1:14 pm

          This is another article all together, Jeff. 🙂

  2. Greg Cook

    April 9, 2012 at 5:20 pm

    Benn, in markets dominated by REOs and short sales. the 3% is the ceiling not the floor. The banks dictate the commissions paid and they have absolutely no desire to pay for services rendered.
    The “wholesale approach” of awarding listings makes the concept of “value added” as archaic as a rotary phone.

    • Benn Rosales

      April 9, 2012 at 5:33 pm

      In that case, you would have to determine it by the hourly rate, and if you’re making less than minimum wage per unit on a case by case basis, and being required by a non-human, ie, a corporation to earn a wage less than the minimum based on any requirements set by that entity that would require you to work more than 40 hours in a work week, then you could potentially be seen as an employee and demand over time and benefits by that employer.

      Now if all you’re required to do is enter it into a database, and put up a sign, then yeah, 3% is a good day when and if the deal gets done – ever.

      Again, It’s your business model, and your decision, but in macro there is no shortage of properties that need to be sold making it even more competitive and more valuable.

  3. Brian Hickey

    April 9, 2012 at 5:21 pm

    Benn,

    Hope you’re right, though IMO the real estate transaction model is headed more towards direct-connection between buyers and sellers (of course, agents may play a part on one-side or the other).

    Under this model, which is perpetuated by the Internet, commissions will head south, possibly big-time.

    We’ll see.

    Thanks,

    Brian

  4. Cristine Gritz

    May 10, 2012 at 6:32 pm

    When we finally get to closing…we have made about a dollar an hour!!! LOL We spend a lot of time and money on our clients. It takes at least 30 days to close. We don’t make that much in the grand scheme of things. How many slam dunks do we get nowadays??? Not many. Buyers take their sweet time and Sellers want to price their listings too damn high. 3% just isn’t enough as far as I am concerned!

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IBM is putting blockchains to work for banks

(BUSINESS NEWS) IBM is putting blockchain tech to work so that they can launch a banking system for international transactions.

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Earlier this year, IBM unveiled its “Blockchain as a Service” based on Hyperledger Fabric, creating a public cloud service for customers to build secure blockchain networks.

Now the tech company announced they’re teaming up with payment company KlickEx Group and blockchain startup Stellar to change up the cross-border payment game.

The team is launching a blockchain-based system for banks, aimed to lower the cost and reduce settlement time for global payments for both businesses and consumers. International transactions typically take days, or even weeks, to complete.

Blockchains could speed things up, minimize errors, and provide more flexibility and transparency to banks. According to IBM, the collaboration “is intended to improve the speed in which banks both clear and settle payment transactions on a single network in near real time.”

In case you forgot what blockchains are, here’s a refresher course. Blockchains are a secure digital ledger of transactions with bits of information stored across multiple nodes in a network.

Since there’s no centralized hub, it’s less vulnerable to hacking.

Any time an action is taken, the ledger updates and that data is available to anyone with access to the blockchain. Additionally, each transaction is secured with digital signatures and encryption, providing transparency and security.

Blockchains can be used to trace and track transactions along every step of the way, providing a handy place to combine all product information besides just financial dealings.

For example, IBM suggested a hypothetical in which their system connects a Samoan farmer with an Indonesian buyer.

In this transaction, they stated, “the blockchain would be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, obtain letters of credit, and finalize transaction terms with immediate payment, conducting global trade with transparency and relative ease.”

Instead of scattered information, blockchains collect all relevant steps in a transaction. Currently, they system is used in twelve currency corridors, including New Zealand and the UK, as well as Australia and the Pacific Islands.

Within the next year, the system is expected to handle 60 percent of the South Pacific’s retail industry’s cross-border payments.

Bridget van Kralingen, Senior VP of IBM Industry Platforms, said in statement, “with the guidance of some of the world’s leading financial institutions, IBM is working to explore new ways to make payment networks more efficient and transparent so that banking can happen in real-time, even in the most remote parts of the world.”

Over a dozen banks are part of the initial pilot program, and plan to expand to Southeast Asia, South America, and other areas by early next year.

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A real life robot battle: America vs Japan

(BUSINESS NEWS) Robots are real and America is fresh out of a battle with Japan in a real life robot battle royale.

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What’s the future of sports look like?

Giant. Fighting. Robots.

That’s right, your childhood dreams have arrived, at least I know mine have.

Two years ago, American robotics firm, MegaBots Inc., challenged Japanese rival, Suidobashi Heavy Industries, to a showdown of the battle of the mechs. The challenge was accepted, but with one simple caveat: the inclusion of melee combat.

And so the Super Heavyweight Title Fight two-years in the making premiered on leading social video platform, Twitch, yesterday evening to tech and sci-fi fans alike who waited with baited breath for such an event.

In order to prepare for the match, the American team needed to build a new bot capable of fulfilling the duel requirement, as well as one that would be a force to be reckoned with against the Japanese fighting machine.

MegaBots, or “Team America,” was able to crowdfund the robot battle through a Kickstarter campaign earning over $500,000 by just under 8,000 backers. With this campaign, they were also able to upgrade their Mk.II behemoth that would be entering the rumble.

Meet Eagle Prime.

More metal. More power. More American.

According to MegaBots, Eagle Prime “weighs in at 12 tons, stands 16 feet tall, seats two, is powered by a 430 horsepower V8 LS3 engine, and costs a cool $2.5M.” This robot is massive; a good foot higher than its predecessor.

Founders Matt Oehrlein and Gui Cavalcanti commented on the design of Eagle Prime, quipping, “We made it huge and strapped guns to it;” as American as apple pie.

Suidobashi’s robot, KURATAS, stands a few feet shorter (about 13 feet tall), but carries a more sleek and elegant design to it. With a tripod-wheeled base and twin Gatling BB canons with the ability to fire 6,000 bullets per second, it seemed a toss-up as to who would reign supreme in the first mech battle.

While this sounds like an epic episode of awesomeness, don’t expect Pacific Rim level combat just yet. Rather than give a play-by-play of the event, I’ll just tell you straight away that Eagle Prime came out on top in the brawl. To be fair though, it really wasn’t much of a brawl.

Eagle Prime had two years of extra time to be built in preparation for such a match against Kuratas. It was made bigger (and for “funzies”, added patriotic colors to the bot as well as a head of a bald eagle for a “head” as well as a chainsaw-sword-type of device that likely, and ultimately, ended up costing Kuratas a pretty penny in damages.

Really, Kuratas had no chance: there was a bit of overkill on the part of Eagle Prime.

The chain-sword alone raises some safety concerns, especially when we’re talking the future of sports. That said, the pilots of both mechs, Eagle Prime piloted by both Oehrlein and Cavalcanti and Kuratas by Kogoro Kurata, could use a bit more protective gear than helmets, even if the robots in action look like a couple of toddlers fighting.

But hey, it’s a start. And that’s the point.

Maybe one day we will be in giant stadium arenas watching huge robots piloted by humans hashing it out, but we’ve got a long ways to go. And maybe, just maybe, these things could be of use in natural disaster efforts.

Who wouldn’t want to be saved by an Optimus Prime-like, human-piloted “robot” that could withstand whatever was thrown its way?

It’s going to be an expensive endeavor that will require a nice chunk of change in investments and endorsements, though I will say, what a time to be alive.

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These stores refuse to start Black Friday early

(BUSINESS NEWS) There is a rising trend of stores being pressured to open their doors earlier and earlier each holiday weekend but these companies refuse.

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This year, Target, Walmart, and Best Buy are among a group of retail super villains who have decided it’s appropriate to begin the Black Friday shopping nightmare on Thanksgiving Day, with some opening as early as 5pm on Thursday.

As someone who has only had the misfortune of working the retail tornado of Black Friday once, I would never wish it upon anyone. Yet many stores feel pressured to begin the doorbusters earlier every year.

To compete with online shopping, brick-and-mortar retailers implement drastic measures to get customers in stores during the discount season.

Last year, eMarketer reported internet users in their survey were likelier to shop online during Black Friday and Cyber Monday. This comes as no surprise to anyone who’s been watching retail stores crumble as online shopping continues to dominate the market.

To lure in shoppers, physical stores must come up with deals so alluring that people would kill for them.

Literally. I just googled “did anyone die on Black Friday last year” and found out that there’s a handy site called Black Friday Death Count. The answer is yes, some people died last year in Black Friday-related incidents, and in fact two of the three deaths took place at separate Walmarts.

So that makes this year’s disturbingly early foray into deal hunting even less enticing.

While I don’t hold Thanksgiving sacred by any means, moving the even unholier Black Friday back to impede on a holiday is ludicrous. But a handful of heroes are saying no seriously guys, we’re not doing this.

Over fifty retailers are collectively putting their foot down, and will remain closed on Thanksgiving Day. While some may still be party to next-day discounts, they’re at least taking a stand.

Here’s a list of all the places you can’t go on Thanksgiving, because mercifully they’re closed:

  • A.C. Moore
  • Abt Electronics
  • Academy Sports + Outdoors
  • At Home
  • BJ’s Wholesale Club
  • Blain’s Farm and Fleet
  • Burlington
  • Cabela’s
  • Cost Plus World Market
  • Costco
  • Craft Warehouse
  • Crate and Barrel
  • DSW – Designer Shoe Warehouse
  • Ethan Allen
  • Gardner-White Furniture
  • Guitar Center
  • H&M
  • Half Price Books
  • Harbor Freight
  • Hobby Lobby
  • Home Depot
  • HomeGoods
  • Homesense
  • IKEA
  • JOANN Fabric and Craft Stores
  • Jos. A. Bank
  • La-Z-Boy (all corporately owned stores)
  • Lowe’s
  • Marshalls
  • Mattress Firm
  • Micro Center
  • Music & Arts
  • Neiman Marcus
  • Office Depot and OfficeMax
  • Outdoor Research (closed Black Friday too)
  • P.C. Richard & Son
  • Party City
  • Patagonia
  • Petco
  • PetSmart
  • Pier 1 Imports
  • Publix
  • Raymour & Flanigan Furniture
  • Sam’s Club
  • Sierra Trading Post
  • Sportsman’s Warehouse
  • Sprint (Corporate & Dealer Owned Stores; Mall Kiosks May Open)
  • Staples
  • Sur La Table
  • The Container Store
  • The Original Mattress Factory
  • TJ Maxx
  • Tractor Supply
  • Trollbeads
  • Von Maur
  • West Marine

And while that’s a pretty hefty list, the fact remains that many unfortunate employees will have to show up to work on Thanksgiving when they should be taking naps, or avoiding helping their family clean up after lunch.

Thinking about some retailers’ decision to open a day early for Black Friday almost makes Cards Against Humanity’s crowdfunded hole stunt last year seem reasonable. Maybe if we’re lucky, the tradition of Black Friday will get sucked up in a black hole, never to plague us again.

I guess staying home is also an option. If you opt into the shopping this year, stay safe. And if you choose to do so on Thanksgiving, maybe just don’t tell anyone.

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