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You would have to live under a large rock not to be aware that the real estate industry is in turmoil after the National Association of Realtors (NAR) proposed settlement of most of the commission lawsuits it’s battling. Commissions, agent value and what’s next for the role of the buyer agent are being turned topsy-turvy because of historic and career-changing lawsuit settlements.
Many agents are happy to pass around the NAR’s “179 Ways Agents Who Are Realtors Are Worth Every Penny of Their Compensation,” which outlines all the tasks an agent does for a consumer. Still, if we’re being really honest, a good portion of those items on the list are not complicated or impressive to do.
Instead of being a concise document that consumers can digest quickly and identify value, they have to sort through a laundry list of jargon that they may not identify with or understand. And in my personal and very unpopular opinion, it reads like a list my 16-year-old might create to justify a raise in allowance and not a professional means to communicate value to busy and overwhelmed consumers.
Tech-savvy consumers may even look at that list and say they are more capable of making a phone call or sending an email on their own behalf, rendering a good portion of that list null for value for consumers looking to save on costs.
ChatGPT has been agents’ sweetheart favorite tech tool for the past year or so to create efficiencies in marketing and customer service. Because agent value is under a microscope, we thought it would be fair game (and good entertainment) to ask ChatGPT what it thought about agents, the value they bring to the table and commissions.
So join us for a quick dive into the interwebs with ChatGPT, which often hallucinates but does its best to tell the truth — whether we like the answers or not.
Key questions and similar answers
Q: What value do real estate agents have?
A: Real estate agents provide several valuable services to both buyers and sellers, including:
- Market knowledge: Real estate agents have a deep understanding of local market conditions, including trends in pricing, inventory and neighborhood dynamics. This knowledge helps clients make informed decisions about buying or selling property.
- Pricing expertise: Agents can help sellers determine the appropriate listing price for their property based on comparable sales in the area and current market conditions. They also assist buyers in evaluating the fair market value of properties they are interested in purchasing.
- Marketing and advertising: Agents have access to various marketing channels and tools to promote properties effectively. They can create professional listings, showcase properties online and in print, and host open houses to attract potential buyers.
- Negotiation skills: Negotiating the best deal is a crucial aspect of real estate transactions. Agents advocate for their clients’ interests, negotiate offers and counteroffers, and work to achieve favorable terms for both buyers and sellers.
- Legal and transactional support: Real estate transactions involve complex legal documents and procedures. Agents guide their clients through the paperwork, ensuring compliance with relevant regulations and helping to avoid potential pitfalls.
- Network and connections: Experienced agents have established networks of professionals in related industries, such as lenders, inspectors, contractors, and attorneys. They can provide referrals to trusted service providers, simplifying the buying or selling process for their clients.
- Time and convenience: Hiring a real estate agent saves clients time and effort by handling the numerous tasks involved in buying or selling property. Agents coordinate showings, facilitate communication between parties, and manage logistics to streamline the process.
Overall, the value of a real estate agent lies in their expertise, resources and support throughout the entire real estate transaction, ultimately helping clients achieve their goals with confidence and peace of mind.
Q: Are real estate agents paid too much?
A: The question of whether real estate agents are paid too much is subjective and can vary depending on individual perspectives and market conditions. Here are some factors to consider:
- Services provided: Real estate agents offer a range of services, including market analysis, pricing guidance, marketing, negotiation, legal assistance and transaction management. The fees they charge typically cover these services and the time and expertise required to facilitate successful transactions.
- Commission structure: Real estate agents are typically compensated through commissions, which are based on a percentage of the property’s sale price. The standard commission rate can vary but is often around 5 percent to 6 percent of the sale price, which is split between the buyer’s agent and the seller’s agent. Some argue that this commission structure may seem high, especially for higher-priced properties, while others believe it reflects the value of the services provided.
- Market dynamics: Real estate agents operate in a competitive market where commissions are negotiable. Sellers and buyers have the flexibility to negotiate commission rates with their agents based on various factors, such as the complexity of the transaction, the property’s value, and the level of service provided.
- Expertise and experience: Experienced real estate agents bring valuable expertise and industry knowledge to the table, which can help clients navigate complex transactions, negotiate favorable terms and achieve their goals. The level of expertise and service provided by an agent can impact whether their commission is perceived as justified.
- Market conditions: Real estate commissions may fluctuate based on market conditions, such as supply and demand, housing inventory and economic factors. In competitive seller’s markets, where properties sell quickly and at higher prices, some may question whether agents are earning their commissions, while in slower markets, agents may need to invest more time and effort into each transaction.
Ultimately, the perceived value of real estate agents’ services and whether they are “paid too much” is subjective and can vary depending on individual circumstances, market conditions,and the quality of service provided. It’s essential for consumers to carefully evaluate the services offered by agents and consider their expertise, experience and track record when determining whether their fees are reasonable.
Q: I’m confused about real estate commissions. What do I need to know?
A: Real estate commissions are crucial for both buyers and sellers involved in real estate transactions. Here are some key points to know:
- Commission structure: Real estate agents typically earn a commission as a percentage of the final sale price of the property. The commission is split between the buyer’s agent and the seller’s agent. The standard commission rate can vary but is often around 5 percent to 6 percent of the sale price, with each agent receiving a portion of this total.
- Negotiability: Commissions are negotiable. Both buyers and sellers can negotiate the commission rates with their agents before signing a listing agreement or buyer representation agreement. Some agents may be willing to adjust their commission rates based on factors such as the property’s value, the complexity of the transaction, and the level of service provided.
- Who pays the commission: In most cases, the seller is responsible for paying the real estate commission. This payment is typically made at the closing of the sale and is deducted from the proceeds of the sale before the seller receives their net proceeds. However, there are situations where buyers may agree to pay a portion or all of the commission, especially in cases where the seller is unwilling or unable to pay.
- Dual agency: Dual agency occurs when the same real estate brokerage represents both the buyer and the seller in a transaction. In dual agency situations, the brokerage may receive the full commission, or the agents involved may agree to a reduced commission. Dual agency is legal in some states but may be subject to certain disclosure requirements and limitations.
- Value of services: Real estate commissions compensate agents for a range of services provided throughout the transaction process. These services may include market analysis, pricing guidance, marketing and advertising, negotiation, legal assistance, and transaction management. The value of these services can vary depending on the expertise, experience, and level of service provided by the agent.
- Comparing agents: When selecting a real estate agent, it’s essential to consider not only the commission rate but also the agent’s expertise, experience, reputation and track record. A lower commission rate may not always translate to better value if it comes with reduced service or expertise.
- Understanding contracts: Before entering into any agreements with a real estate agent, buyers and sellers should carefully review and understand the terms of the contract, including the commission structure, duration of the agreement, and any other relevant terms and conditions.
By understanding these key points about real estate commissions, buyers and sellers can make informed decisions and more effectively navigate the real estate transaction process.
Q: Are real estate commissions negotiable?
A: Yes, real estate commissions are negotiable. Both sellers and buyers can negotiate commission rates with their respective agents before entering into a listing agreement or buyer representation agreement. Here are some points to consider regarding negotiation of real estate commissions:
- Market conditions: Commission rates can vary based on market conditions, property value and the level of competition among agents in a particular area. In a seller’s market where demand is high and inventory is low, agents may be less willing to negotiate their commission rates. Conversely, in a buyer’s market with more inventory and less competition among agents, there may be more room for negotiation.
- Agent flexibility: Some agents may be more flexible than others when it comes to negotiating commission rates. Agents may be willing to adjust their commission rates based on factors such as the property’s value, the complexity of the transaction, and the likelihood of future referrals.
- Services provided: When negotiating commission rates, it’s essential to consider the services provided by the agent. A lower commission rate may not always translate to better value if it comes with reduced service or expertise. Sellers and buyers should evaluate the agent’s expertise, experience, reputation, and track record in addition to the commission rate.
- Dual agency: In situations where the same real estate brokerage represents both the buyer and the seller (dual agency), agents may be more willing to negotiate commission rates. However, dual agency arrangements may be subject to certain disclosure requirements and limitations, so it’s important to understand the implications before proceeding.
- Clear communication: Effective communication is key when negotiating commission rates. Sellers and buyers should clearly express their expectations and discuss commission rates with their agents upfront to avoid misunderstandings or disagreements later in the process.
- Competing offers: In some cases, agents may be more inclined to negotiate commission rates if they anticipate competing offers from other agents or brokerages. Sellers and buyers can leverage this competition to negotiate more favorable commission terms.
Overall, while real estate commissions are negotiable, it’s essential to approach negotiations with a clear understanding of market conditions, agent services and the transaction’s specific needs. Working with a skilled and experienced agent can also help facilitate successful negotiations and mutually satisfactory outcomes for all parties involved.
Final thoughts
ChatGPT seems to understand that there is value in what agents do but that there definitely needs to be more of a heavy lift on the consumer’s part to interview, screen and educate themselves about the services they are receiving and be accountable for their personal outcome.
Where is the compromise? As the bot said, it’s subjective, which is the keyword in all of this.
You have to prepare to adjust your perspective and realize that every consumer’s needs and expectations will be subjective and different from one transaction to the next. Commissions are not a one-size-fits-all solution, and as we further dissect what’s next, for those of you who boast a custom hospitality-like experience, consumers may put you through the paces to receive it.
In other words, consumers may start using all the flowery marketing language on your website and bios to explain how unique and special your services are and put you on task to follow through. ChatGPT is always good for some generous food for thought.
