The cult of professional specialists

[sdrealtor]

BG,
Just so ya know. Russell is also a part time agent. Before he jumps in, I’ll point out that there are ways to be in the RE business on a peripheral basis that are much cheaper.

You do bring up a good point about all the whining that goes on about RE agents from people who contribute to the problem. The model that we have is there because for better or worse it works. Without a system like we have the rich would slaughter the poor. The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

Edit: Ironically I was typing this up while nj was asking about hourly services. I would gladly accept that arrangement.

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

How about the discount model you ask? Remember Ipayone which was backed by some of the wealthiest individuals in SD? They offered 1% listings and I said they would be gone in a year or 2 at most because that model couldnt work either. How long did it take for that flawed business model to implode?

[njtosd]

[quote=sdrealtor]An organic sale is another name for a traditional sale or an equity sale. It is one where the seller has equity and can accept a buyers offer and close whenever the buyer& seller agree as opposed to be under the control of a 3rd party.

[/quote]

So what’s wrong with simply saying “traditional sale?” Whenever I see jargon like “organic sale,” it sounds to me like the person using them is trying to impress others with the fact that they know the lingo. I guess I also hate the word organic being used to indicate something of higher quality. Snake venom, tetanus toxin and ricin are all organic, but that doesn’t make them good.

[njtosd]

[quote=sdrealtor]An organic sale is another name for a traditional sale or an equity sale. It is one where the seller has equity and can accept a buyers offer and close whenever the buyer& seller agree as opposed to be under the control of a 3rd party.

[/quote]

So what’s wrong with simply saying “traditional sale?” Whenever I see jargon like “organic sale,” it sounds to me like the person using them is trying to impress others with the fact that they know the lingo. I guess I also hate the word organic being used to indicate something of higher quality. Snake venom, tetanus toxin and ricin are all organic, but that doesn’t make them good.

[njtosd]

[quote=sdrealtor]An organic sale is another name for a traditional sale or an equity sale. It is one where the seller has equity and can accept a buyers offer and close whenever the buyer& seller agree as opposed to be under the control of a 3rd party.

[/quote]

So what’s wrong with simply saying “traditional sale?” Whenever I see jargon like “organic sale,” it sounds to me like the person using them is trying to impress others with the fact that they know the lingo. I guess I also hate the word organic being used to indicate something of higher quality. Snake venom, tetanus toxin and ricin are all organic, but that doesn’t make them good.

[njtosd]

[quote=sdrealtor]An organic sale is another name for a traditional sale or an equity sale. It is one where the seller has equity and can accept a buyers offer and close whenever the buyer& seller agree as opposed to be under the control of a 3rd party.

[/quote]

So what’s wrong with simply saying “traditional sale?” Whenever I see jargon like “organic sale,” it sounds to me like the person using them is trying to impress others with the fact that they know the lingo. I guess I also hate the word organic being used to indicate something of higher quality. Snake venom, tetanus toxin and ricin are all organic, but that doesn’t make them good.

[njtosd]

[quote=sdrealtor]An organic sale is another name for a traditional sale or an equity sale. It is one where the seller has equity and can accept a buyers offer and close whenever the buyer& seller agree as opposed to be under the control of a 3rd party.

[/quote]

So what’s wrong with simply saying “traditional sale?” Whenever I see jargon like “organic sale,” it sounds to me like the person using them is trying to impress others with the fact that they know the lingo. I guess I also hate the word organic being used to indicate something of higher quality. Snake venom, tetanus toxin and ricin are all organic, but that doesn’t make them good.

[njtosd]

[quote=sdrealtor] The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

…

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

[/quote]

Why do you think that the reduced price models don’t work? And I’m definitely not following you on the thuggery issue. Hourly fees work for lawyers, doctors and accountants. And most lawyers offer to work on a contingency fee (commission) basis if the ultimate award would justify it. On the other hand, I generally associate commissions with the saleswomen at clothing stores.

Finally, what do you think a fair hourly fee would be for an agent of average experience? Referring back to the other thread, would the hourly system work because clients might get an idea of the experience/inexperience of an agent from the hourly fee that that person is able to charge?

[njtosd]

[quote=sdrealtor] The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

…

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

[/quote]

Why do you think that the reduced price models don’t work? And I’m definitely not following you on the thuggery issue. Hourly fees work for lawyers, doctors and accountants. And most lawyers offer to work on a contingency fee (commission) basis if the ultimate award would justify it. On the other hand, I generally associate commissions with the saleswomen at clothing stores.

Finally, what do you think a fair hourly fee would be for an agent of average experience? Referring back to the other thread, would the hourly system work because clients might get an idea of the experience/inexperience of an agent from the hourly fee that that person is able to charge?

[njtosd]

[quote=sdrealtor] The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

…

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

[/quote]

Why do you think that the reduced price models don’t work? And I’m definitely not following you on the thuggery issue. Hourly fees work for lawyers, doctors and accountants. And most lawyers offer to work on a contingency fee (commission) basis if the ultimate award would justify it. On the other hand, I generally associate commissions with the saleswomen at clothing stores.

Finally, what do you think a fair hourly fee would be for an agent of average experience? Referring back to the other thread, would the hourly system work because clients might get an idea of the experience/inexperience of an agent from the hourly fee that that person is able to charge?

[njtosd]

[quote=sdrealtor] The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

…

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

[/quote]

Why do you think that the reduced price models don’t work? And I’m definitely not following you on the thuggery issue. Hourly fees work for lawyers, doctors and accountants. And most lawyers offer to work on a contingency fee (commission) basis if the ultimate award would justify it. On the other hand, I generally associate commissions with the saleswomen at clothing stores.

Finally, what do you think a fair hourly fee would be for an agent of average experience? Referring back to the other thread, would the hourly system work because clients might get an idea of the experience/inexperience of an agent from the hourly fee that that person is able to charge?

[njtosd]

[quote=sdrealtor] The Irvine Companies of the world would continue the thuggery they employed to steal land from long time owners. If anyone offered to pay me for my work on an hourly basis, I would jump at the opportunity as I beleive my income could easily double for the work I put in if paid on an hourly basis. Of course, anyone who paid on an hourly basis would quickly realize what a raw deal it was in comparison and ask to go back to the old system.

…

Also flat fee services have been widely available for years with HelpUsell, assit2sell etc. Theya re easy to find also. Just pop by a local strip shopping center and look for the remains of their now closed business because the business model doesnt work.

[/quote]

Why do you think that the reduced price models don’t work? And I’m definitely not following you on the thuggery issue. Hourly fees work for lawyers, doctors and accountants. And most lawyers offer to work on a contingency fee (commission) basis if the ultimate award would justify it. On the other hand, I generally associate commissions with the saleswomen at clothing stores.

Finally, what do you think a fair hourly fee would be for an agent of average experience? Referring back to the other thread, would the hourly system work because clients might get an idea of the experience/inexperience of an agent from the hourly fee that that person is able to charge?

[drboom]

[quote=justme]6% is siphoned off each time

[quote=bearishgurl]
Fascinating, njosd, I’ll look up the book.

I stand by my assertion that buying a FSBO does NOT save the buyer any money. Therefore, I would surmise that eliminating commission would shave little to nothing off the the purchase price for the buyer.[/quote]

Possibly, the total purchase sum would always be what the market will bear, or as we have seen recently, what a fraudulent mortgage lender and borrower will bear.

But that is not the point. When the FSBO buyer later becomes a FSBO seller, s/he would also have no sales expense of 6% and get ALL the money back.

There is no way that siphoning off 6% of each transaction will get either buyer or seller as good a deal as they otherwise would have.[/quote]

Correct.

There are social and economic benefits that would accrue from making housing more liquid, too. Without the RE industry’s monopoly rents, it would be far easier for people to go where they can find work, etc.

But it occurred to me that thinking of a percentage the headline price is misleading. If you put $100k down on a house, pay your 5% fixed loan for the industry average 7 years, then sell the dump for a 20% nominal profit, what does that 6% do to your bottom line?

Let’s see what it looks like in round numbers (and stipulating that the seller pays commissions to avoid another side argument):

$35k in tax savings
+ $100k profit
--------
$135k
- $6k loan origination, other purchase costs
- $36k commission
-------
$93k net before other transaction costs


The commission will lower capital gains if applicable, but most folks will be rolling over into a new house so we can ignore it here.

So what happened? It kind of looks like Uncle Sam is giving you a break so you can pay your agent, for one thing. 🙂

Coincidences aside, it appears the agent sucked up over a quarter of your gains. YOU took all the risk, performed all the maintenance, etc., but the RE industry wants to be a junior partner in the venture for 26% of the action.

This is a favorable scenario, too. If the house only went up 10% in the same period–quite likely–then You’ll be asked to hand over about two thirds of my profits. Who’s the junior partner now?

I’ve ignored maintenance, property taxes, inflation, etc. to counter any arguments along the line that “you have to live somewhere so you would have been spending the money on rent anyway”.

So, that 6% assumes a little bigger role than it appears. I’ve never seen it explained this way before, but I’m sure someone has done a more complete analysis. I’ll go look for one to see how I did.

[drboom]

[quote=justme]6% is siphoned off each time

[quote=bearishgurl]
Fascinating, njosd, I’ll look up the book.

I stand by my assertion that buying a FSBO does NOT save the buyer any money. Therefore, I would surmise that eliminating commission would shave little to nothing off the the purchase price for the buyer.[/quote]

Possibly, the total purchase sum would always be what the market will bear, or as we have seen recently, what a fraudulent mortgage lender and borrower will bear.

But that is not the point. When the FSBO buyer later becomes a FSBO seller, s/he would also have no sales expense of 6% and get ALL the money back.

There is no way that siphoning off 6% of each transaction will get either buyer or seller as good a deal as they otherwise would have.[/quote]

Correct.

There are social and economic benefits that would accrue from making housing more liquid, too. Without the RE industry’s monopoly rents, it would be far easier for people to go where they can find work, etc.

But it occurred to me that thinking of a percentage the headline price is misleading. If you put $100k down on a house, pay your 5% fixed loan for the industry average 7 years, then sell the dump for a 20% nominal profit, what does that 6% do to your bottom line?

Let’s see what it looks like in round numbers (and stipulating that the seller pays commissions to avoid another side argument):

$35k in tax savings
+ $100k profit
--------
$135k
- $6k loan origination, other purchase costs
- $36k commission
-------
$93k net before other transaction costs


The commission will lower capital gains if applicable, but most folks will be rolling over into a new house so we can ignore it here.

So what happened? It kind of looks like Uncle Sam is giving you a break so you can pay your agent, for one thing. 🙂

Coincidences aside, it appears the agent sucked up over a quarter of your gains. YOU took all the risk, performed all the maintenance, etc., but the RE industry wants to be a junior partner in the venture for 26% of the action.

This is a favorable scenario, too. If the house only went up 10% in the same period–quite likely–then You’ll be asked to hand over about two thirds of my profits. Who’s the junior partner now?

I’ve ignored maintenance, property taxes, inflation, etc. to counter any arguments along the line that “you have to live somewhere so you would have been spending the money on rent anyway”.

So, that 6% assumes a little bigger role than it appears. I’ve never seen it explained this way before, but I’m sure someone has done a more complete analysis. I’ll go look for one to see how I did.

[drboom]

[quote=justme]6% is siphoned off each time

[quote=bearishgurl]
Fascinating, njosd, I’ll look up the book.

I stand by my assertion that buying a FSBO does NOT save the buyer any money. Therefore, I would surmise that eliminating commission would shave little to nothing off the the purchase price for the buyer.[/quote]

Possibly, the total purchase sum would always be what the market will bear, or as we have seen recently, what a fraudulent mortgage lender and borrower will bear.

But that is not the point. When the FSBO buyer later becomes a FSBO seller, s/he would also have no sales expense of 6% and get ALL the money back.

There is no way that siphoning off 6% of each transaction will get either buyer or seller as good a deal as they otherwise would have.[/quote]

Correct.

There are social and economic benefits that would accrue from making housing more liquid, too. Without the RE industry’s monopoly rents, it would be far easier for people to go where they can find work, etc.

But it occurred to me that thinking of a percentage the headline price is misleading. If you put $100k down on a house, pay your 5% fixed loan for the industry average 7 years, then sell the dump for a 20% nominal profit, what does that 6% do to your bottom line?

Let’s see what it looks like in round numbers (and stipulating that the seller pays commissions to avoid another side argument):

$35k in tax savings
+ $100k profit
--------
$135k
- $6k loan origination, other purchase costs
- $36k commission
-------
$93k net before other transaction costs


The commission will lower capital gains if applicable, but most folks will be rolling over into a new house so we can ignore it here.

So what happened? It kind of looks like Uncle Sam is giving you a break so you can pay your agent, for one thing. 🙂

Coincidences aside, it appears the agent sucked up over a quarter of your gains. YOU took all the risk, performed all the maintenance, etc., but the RE industry wants to be a junior partner in the venture for 26% of the action.

This is a favorable scenario, too. If the house only went up 10% in the same period–quite likely–then You’ll be asked to hand over about two thirds of my profits. Who’s the junior partner now?

I’ve ignored maintenance, property taxes, inflation, etc. to counter any arguments along the line that “you have to live somewhere so you would have been spending the money on rent anyway”.

So, that 6% assumes a little bigger role than it appears. I’ve never seen it explained this way before, but I’m sure someone has done a more complete analysis. I’ll go look for one to see how I did.

[drboom]

[quote=justme]6% is siphoned off each time

[quote=bearishgurl]
Fascinating, njosd, I’ll look up the book.

I stand by my assertion that buying a FSBO does NOT save the buyer any money. Therefore, I would surmise that eliminating commission would shave little to nothing off the the purchase price for the buyer.[/quote]

Possibly, the total purchase sum would always be what the market will bear, or as we have seen recently, what a fraudulent mortgage lender and borrower will bear.

But that is not the point. When the FSBO buyer later becomes a FSBO seller, s/he would also have no sales expense of 6% and get ALL the money back.

There is no way that siphoning off 6% of each transaction will get either buyer or seller as good a deal as they otherwise would have.[/quote]

Correct.

There are social and economic benefits that would accrue from making housing more liquid, too. Without the RE industry’s monopoly rents, it would be far easier for people to go where they can find work, etc.

But it occurred to me that thinking of a percentage the headline price is misleading. If you put $100k down on a house, pay your 5% fixed loan for the industry average 7 years, then sell the dump for a 20% nominal profit, what does that 6% do to your bottom line?

Let’s see what it looks like in round numbers (and stipulating that the seller pays commissions to avoid another side argument):

$35k in tax savings
+ $100k profit
--------
$135k
- $6k loan origination, other purchase costs
- $36k commission
-------
$93k net before other transaction costs


The commission will lower capital gains if applicable, but most folks will be rolling over into a new house so we can ignore it here.

So what happened? It kind of looks like Uncle Sam is giving you a break so you can pay your agent, for one thing. 🙂

Coincidences aside, it appears the agent sucked up over a quarter of your gains. YOU took all the risk, performed all the maintenance, etc., but the RE industry wants to be a junior partner in the venture for 26% of the action.

This is a favorable scenario, too. If the house only went up 10% in the same period–quite likely–then You’ll be asked to hand over about two thirds of my profits. Who’s the junior partner now?

I’ve ignored maintenance, property taxes, inflation, etc. to counter any arguments along the line that “you have to live somewhere so you would have been spending the money on rent anyway”.

So, that 6% assumes a little bigger role than it appears. I’ve never seen it explained this way before, but I’m sure someone has done a more complete analysis. I’ll go look for one to see how I did.

[Author]

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