The Real Truth About Real Estate Commissions

SAN ANTONIO - April 5, 2024 - PRLog -- If today you turn on your TV or go to any social media platform, you'll see sensational headlines claiming "6% real estate commissions are gone" and "Realtors overcharge their clients" or "Commissions are now negotiable." Even worse still, you look at the comments and it's people with ridiculous usernames bashing real estate agents, saying things like "the cartel is over" or "you've been screwing people for years." But if you were to investigate further, you'll probably find that most of these hate-spewing respondents have never even owned a home or paid a fee of any sort to a licensed real estate professional. For that reason, real estate broker & REALTOR® Bert Taddei wants to set the record straight by educating consumers on what's really going on, and outside all of those catchy headlines that are written by the media to attract clicks to their sites.

Let's begin with setting the record straight: commissions have ALWAYS been negotiable. There was never a "set fee" or a "standard 6%" because we are taught on Day 1 of real estate school that such statements in public would be in violation of the Sherman Antitrust Act of 1890 which prohibits activities which restrict competition in a marketplace. And, by the way, a December 2023 survey concluded that the average commission for a home sold in Texas is 5.73% and the national average is 5.49%. Customarily, when a listing agent/brokerage takes on a listing, they've realized that, instead of keeping that entire fee and going on vacation to the Bahamas with that money, that they are often better off to drive more traffic to the listing by offering approximately half of their fee to another agent/brokerage for bringing their qualified buyer to the home, thereby attracting ALL agents working with motivated home buyers. This practice creates more selection for every home buyer as ALL homes are available to them and it allows for a fair market value for the homeowner as it creates more demand on their home.

One of the reasons real estate sales has always been perceived as more ethical than perhaps auto sales, or any other high ticket purchase, is simply that the home buyer can also have their own licensed, professional representation. Consumers never had to worry about being taken advantage of by a real estate professional that could weigh things too heavily in the favor of the home seller because, simply put, they have someone on their side of the table and negotiating for them as a buyer and ethically protecting their best interests. How much better would you do buying a car if you had a professional and trusted pro on your side that knows all of the dealer's sales tactics, upsells, financing or negotiating approaches and, instead, your representative weighted those things in YOUR favor to get you a better deal? Proudly speaking, that's exactly what buyers' representatives in real estate have ALWAYS been able to accomplish for their clients.

Lately, however, there has been an uproar about the listing brokerage sharing their commission (and their own pay) to help the buyers and sellers. Though the listing agent has cut their own income in half to help all parties, apparently some folks think that shouldn't be happening and they are saying the buyers should negotiate their own representation, pay their buyer broker out of their own pocket, or otherwise negotiate it as the terms of the purchase contract.

But let's be clear. Any additional fee that may cost the buyer more money will actually RAISE the price of homeownership. That's true regardless if they pay it from their checking account or they build it into the home price to finance it. If they have to build it into the price, home prices and thus mortgage payments will go up. Then every buyer that buys in that neighborhood will be buying homes based off comparable sales with that recently inflated sales price. This INCREASES the cost of home ownership in America.

While all real estate agents will follow whatever rules, laws or guidelines are put in front of us to operate in a legal and moral manner, it's important to educate consumers about the TRUTH regarding what's really happening.

First off, commissions have always been negotiable for home sellers. The more incentive your agent can provide for buyers or buyers' agents to come visit your home, the more demand you are creating for the property. The less incentive that's offered, the less demand you'll have for your home. Remember, it's a simple fact that nobody works for free. That includes your own real estate agent. If you tell them you aren't paying them, they'll simply go work somewhere else so that they can earn a living wage - just like the entire world who needs to work to earn a living. The same is true for any agent in your town. And, guess what, it's also true for your own employer at the business you work for. Pay is negotiable in their business, too, and even you negotiated your pay when you first started working there. And, let's be honest, if they don't provide an incentive for you to continue being there, you won't be there. And I don't have to tell you that price is simply a function of supply and demand so the more demand your real estate professional can create, the more your home may sell for.

Now, for home buyers, the system has worked well for you to have a licensed real estate professional representing your best interests. Yes, you can go directly to the seller's agent. You've always been able to do that. But that's highly unlikely to save you any money at all because the seller is already under contract with their listing professional to pay them a certain percentage anyway and, frankly, that can put you at a real disadvantage when they have an experienced real estate professional guiding them but you don't. Much like walking into a car dealership alone or even a New Construction Home Builder by yourself, where they have trained professionals there representing them, you may lose in more ways than you can ever imagine. Don't represent yourself as a client. If you find a great real estate agent, they'll be very clear about how their fee structure works and, even in the upcoming new real estate landscape, they'll usually be able to negotiate concessions from the home seller or the listing brokerage to cover the cost so that all (or most) of their fee is taken care of by them and YOU are exclusively represented in one of the largest transactions of your life.

Nobody has a crystal ball and therefore no-one truly knows how all of this will play out at this point. But it's important for sellers to know they still want to do everything they can to get maximum exposure and create more demand for their property. It's also important for buyers to know that they need a licensed professional that represents ONLY them in the transaction. This will ensure they won't overpay for a home, the terms of the sale line up with their goals and expectations, their Earnest Money is protected every step of the way, the home they're buying is properly inspected and that repairs are properly negotiated, and that they understand the purchase documents from start to finish. Whatever we have to do to make that happen, we should do it. Regardless of what's going on in the courts or what's sensationalized in the headlines, you DESERVE to be represented by a competent professional with integrity and years of experience navigating through the pitfalls and complexities of the purchase of what is the typically the largest one in people's lives. Speaking with a well-qualified real estate agent and having an open conversation about these things will be the best way for you to get the truth about how fee structure works so that you can make an educated decision. Don't be afraid to ask questions. And don't be afraid to negotiate.

Asking a question as basic as "what can you do for me and what do you charge" is a simple way to find the very best representation you can find. Try to get as many services and benefits as you possibly can from that agent's process and representation. Negotiate for EVERYTHING they can offer you. And Do Not cut corners.

The headlines and click-bait are really good at creating emotional triggers and negative responses. That's how the media works and how they compete for eyeballs. But with something as serious as buying and selling a home, you need to keep your feelings out of the way and have a highly trained, licensed professional on YOUR side that does what's best for YOU.

About Bert Taddei:
Bert is Broker/Owner of Santino Properties LLC, a boutique San Antonio, TX - based real estate brokerage helping buyers and sellers win in the local marketplace through the unique and effective use of marketing. He has been serving the public here for nearly 10 years and is committed to honesty, transparency, and "passionately helping real estate consumers achieve the American dream, one home at a time."  For more information about his practice and to browse his listings, find him on social media or visit http://www.BertKnowsSanAntonio.com