I have been a licensed real estate broker for more than 50 years. In that time, I was a member of different realtor boards in three states. I am now retired, but the last time I acted as a broker in a single-family transaction was in the mid-1970s.
I became a commercial sales and leasing broker and property manager because it was much more lucrative than selling homes. For the most part commercial real estate was strictly business. The numbers had to add up. There was too much drama in home sales.
With the recent $1.8 billion decision against the residential real estate industry for artificially high commissions, the way brokerages operate is going to change. In the UK, the average commission rate is 1.25% while in Denmark the fee is 1.75%. In most places, who pays the fee is negotiated between the parties. In France, the fee is on top of the price of the property.
About 30 years ago, I wrote a column for a national real estate newspaper. One of my pieces stated that fees based on percentages were unprofessional. If we don’t pay our doctors, lawyers, or accountants that way, then why real estate brokers? I guess I was ahead of my time.
There are big changes coming to the residential real estate market. There will be a shakeup in how business is conducted. The way the business is seen by younger generations will probably lead to paying professionals to do certain parts in real estate sales and not others. That will probably lead to what I wrote about years ago. Brokers will be paid by the hour or service not based on a percentage of the total price.
This will probably shake out the marginal producers. Part timers may become a thing of the past. I even expect the mega offices that have emerged in the last two decades to devolve. There will be more “Mom & Pop” offices catering to niches in the market.
Consumers will be better served. Many will seek specific professionals who understand their needs. Others may choose a full-service broker to handle the complete transaction. What will happen going forward will be more the consumers’ choice and not the industry’s.