The cult of professional specialists

[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.

[sdrealtor]

[quote=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.[/quote]

Because organic sale has been the word traditionally used on the blogs. Personally I prefer the term equity seller.

[sdrealtor]

[quote=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.[/quote]

Because organic sale has been the word traditionally used on the blogs. Personally I prefer the term equity seller.

[sdrealtor]

[quote=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.[/quote]

Because organic sale has been the word traditionally used on the blogs. Personally I prefer the term equity seller.

[sdrealtor]

[quote=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.[/quote]

Because organic sale has been the word traditionally used on the blogs. Personally I prefer the term equity seller.

[sdrealtor]

[quote=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.[/quote]

Because organic sale has been the word traditionally used on the blogs. Personally I prefer the term equity seller.

[sdrealtor]

The reduced price models dont work because contrary to what many want to beleive, RE is not all that profitable a business. Very few brokerages make any money from RE sales alone and their profit depends upon ancillary service revenue (title, escrow, mortage etc.) as well as squeezing what they can out of agents who are already struggling to earn a living.

The thuggery issue is an analogy to what happened in the past when RE was traded between principals. Samrter, richer folks abused the middle and lower classes. The infamous Irvine Family amassed much of thier land holding by sending out thugs to beat and/or kill landowners. Admittedly it is an extreme example but that is the way things used to be done for those who wish a return to the past.

Hourly fees work for drs, lawyers and accountants because use them for a specific need. When you have a broken leg, marriage and/or tax return you need to get it fixed. RE on the other hand is something people investigate over a long time and more often than not dont act on their desires/dreams. Simply put, it is more of a want than a need.

As for a fair hourly fee I dont know. For me it would be at least $50/hour for basic time and more for more detailed tsks which require greater expertise. I guess the best way would be to come up with a fair annual salary and divide that by 52 weeks and 40 hours a week. It wont work because most people dont actually buy from the agents they work with. They would spend alot of money for nothing.

[sdrealtor]

The reduced price models dont work because contrary to what many want to beleive, RE is not all that profitable a business. Very few brokerages make any money from RE sales alone and their profit depends upon ancillary service revenue (title, escrow, mortage etc.) as well as squeezing what they can out of agents who are already struggling to earn a living.

The thuggery issue is an analogy to what happened in the past when RE was traded between principals. Samrter, richer folks abused the middle and lower classes. The infamous Irvine Family amassed much of thier land holding by sending out thugs to beat and/or kill landowners. Admittedly it is an extreme example but that is the way things used to be done for those who wish a return to the past.

Hourly fees work for drs, lawyers and accountants because use them for a specific need. When you have a broken leg, marriage and/or tax return you need to get it fixed. RE on the other hand is something people investigate over a long time and more often than not dont act on their desires/dreams. Simply put, it is more of a want than a need.

As for a fair hourly fee I dont know. For me it would be at least $50/hour for basic time and more for more detailed tsks which require greater expertise. I guess the best way would be to come up with a fair annual salary and divide that by 52 weeks and 40 hours a week. It wont work because most people dont actually buy from the agents they work with. They would spend alot of money for nothing.

[sdrealtor]

The reduced price models dont work because contrary to what many want to beleive, RE is not all that profitable a business. Very few brokerages make any money from RE sales alone and their profit depends upon ancillary service revenue (title, escrow, mortage etc.) as well as squeezing what they can out of agents who are already struggling to earn a living.

The thuggery issue is an analogy to what happened in the past when RE was traded between principals. Samrter, richer folks abused the middle and lower classes. The infamous Irvine Family amassed much of thier land holding by sending out thugs to beat and/or kill landowners. Admittedly it is an extreme example but that is the way things used to be done for those who wish a return to the past.

Hourly fees work for drs, lawyers and accountants because use them for a specific need. When you have a broken leg, marriage and/or tax return you need to get it fixed. RE on the other hand is something people investigate over a long time and more often than not dont act on their desires/dreams. Simply put, it is more of a want than a need.

As for a fair hourly fee I dont know. For me it would be at least $50/hour for basic time and more for more detailed tsks which require greater expertise. I guess the best way would be to come up with a fair annual salary and divide that by 52 weeks and 40 hours a week. It wont work because most people dont actually buy from the agents they work with. They would spend alot of money for nothing.

[sdrealtor]

The reduced price models dont work because contrary to what many want to beleive, RE is not all that profitable a business. Very few brokerages make any money from RE sales alone and their profit depends upon ancillary service revenue (title, escrow, mortage etc.) as well as squeezing what they can out of agents who are already struggling to earn a living.

The thuggery issue is an analogy to what happened in the past when RE was traded between principals. Samrter, richer folks abused the middle and lower classes. The infamous Irvine Family amassed much of thier land holding by sending out thugs to beat and/or kill landowners. Admittedly it is an extreme example but that is the way things used to be done for those who wish a return to the past.

Hourly fees work for drs, lawyers and accountants because use them for a specific need. When you have a broken leg, marriage and/or tax return you need to get it fixed. RE on the other hand is something people investigate over a long time and more often than not dont act on their desires/dreams. Simply put, it is more of a want than a need.

As for a fair hourly fee I dont know. For me it would be at least $50/hour for basic time and more for more detailed tsks which require greater expertise. I guess the best way would be to come up with a fair annual salary and divide that by 52 weeks and 40 hours a week. It wont work because most people dont actually buy from the agents they work with. They would spend alot of money for nothing.

[sdrealtor]

The reduced price models dont work because contrary to what many want to beleive, RE is not all that profitable a business. Very few brokerages make any money from RE sales alone and their profit depends upon ancillary service revenue (title, escrow, mortage etc.) as well as squeezing what they can out of agents who are already struggling to earn a living.

The thuggery issue is an analogy to what happened in the past when RE was traded between principals. Samrter, richer folks abused the middle and lower classes. The infamous Irvine Family amassed much of thier land holding by sending out thugs to beat and/or kill landowners. Admittedly it is an extreme example but that is the way things used to be done for those who wish a return to the past.

Hourly fees work for drs, lawyers and accountants because use them for a specific need. When you have a broken leg, marriage and/or tax return you need to get it fixed. RE on the other hand is something people investigate over a long time and more often than not dont act on their desires/dreams. Simply put, it is more of a want than a need.

As for a fair hourly fee I dont know. For me it would be at least $50/hour for basic time and more for more detailed tsks which require greater expertise. I guess the best way would be to come up with a fair annual salary and divide that by 52 weeks and 40 hours a week. It wont work because most people dont actually buy from the agents they work with. They would spend alot of money for nothing.

[bearishgurl]

[quote=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.[/quote]

sdr, I wasn’t attacking Russell here (or ANY Pigg for that matter). I seem to remember reading somewhere that he was licensed.

I forgot to add CAR membership fees to my list of expenses. At the time of last taking down my license about eight years ago, it was about $540 year IIRC. Don’t know what it is now.

Aside from the expensive high-speed scanner rental (which you can get Kinkos to do if you have the time to visit often), I really can’t see any way to run a RE sales business any cheaper. If you “run” all your own transactions, esp short sales (instead of “follow them”), as you pointed out, you could get very bogged down in paperwork until the wee hours (at the expense of pursuing more biz). That’s where a transaction coordinator or asst might come in handy. Finding a competent one though, might be challenging.

[bearishgurl]

[quote=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.[/quote]

sdr, I wasn’t attacking Russell here (or ANY Pigg for that matter). I seem to remember reading somewhere that he was licensed.

I forgot to add CAR membership fees to my list of expenses. At the time of last taking down my license about eight years ago, it was about $540 year IIRC. Don’t know what it is now.

Aside from the expensive high-speed scanner rental (which you can get Kinkos to do if you have the time to visit often), I really can’t see any way to run a RE sales business any cheaper. If you “run” all your own transactions, esp short sales (instead of “follow them”), as you pointed out, you could get very bogged down in paperwork until the wee hours (at the expense of pursuing more biz). That’s where a transaction coordinator or asst might come in handy. Finding a competent one though, might be challenging.

[bearishgurl]

[quote=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.[/quote]

sdr, I wasn’t attacking Russell here (or ANY Pigg for that matter). I seem to remember reading somewhere that he was licensed.

I forgot to add CAR membership fees to my list of expenses. At the time of last taking down my license about eight years ago, it was about $540 year IIRC. Don’t know what it is now.

Aside from the expensive high-speed scanner rental (which you can get Kinkos to do if you have the time to visit often), I really can’t see any way to run a RE sales business any cheaper. If you “run” all your own transactions, esp short sales (instead of “follow them”), as you pointed out, you could get very bogged down in paperwork until the wee hours (at the expense of pursuing more biz). That’s where a transaction coordinator or asst might come in handy. Finding a competent one though, might be challenging.

[bearishgurl]

[quote=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.[/quote]

sdr, I wasn’t attacking Russell here (or ANY Pigg for that matter). I seem to remember reading somewhere that he was licensed.

I forgot to add CAR membership fees to my list of expenses. At the time of last taking down my license about eight years ago, it was about $540 year IIRC. Don’t know what it is now.

Aside from the expensive high-speed scanner rental (which you can get Kinkos to do if you have the time to visit often), I really can’t see any way to run a RE sales business any cheaper. If you “run” all your own transactions, esp short sales (instead of “follow them”), as you pointed out, you could get very bogged down in paperwork until the wee hours (at the expense of pursuing more biz). That’s where a transaction coordinator or asst might come in handy. Finding a competent one though, might be challenging.

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