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Real Estate News And Advice
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December 1, 2009
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Response To: |
Can A Union Help Fight Lowered Commissions?
(Blanche Evans - 07/03/2001)
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The "Problem" is Bigger than Just Unions
Posted By: Creative - 07/03/2001 08:14 AM
The idea of a labor union negotiating splits, etc, on behalf of real estate salespersons is intriguing. However, in the U.S. it may not fly for several reasons.
First off, the omnipresent fear of the term "price fixing" (legitimate or not) would scare off just about all brokers and most sales people. Secondly, the flexibility of charging just what commission is necessary for a particular property, or to a particular customer, would be seriously interferred with.
But I think there is another issue along these lines that is the overwhelming problem.
We have seen (especially in my area) an influx of Re/Max-type operations, where the commission is determined by the salesperson themselves, not the broker. This flexibility, in a hot and competitive market, does make the difference between getting a listing and getting A LOT OF LISTINGS. I have seen first-hand how a CMA presentation is interupted by the seller who askes (a) what's the bottom line for the sale price, and (b) what's my commission. The question about the sale price can be answered intelligently and to the point, whereas the commission rate usually is answered with, "I'd have to discuss this with my broker (if the seller wishes to negotiate it)?.
The industry has changed to the point now where some salespersons have very little to do with the broker or the office anymore. Each agent is on a very long leash as far as doing the job is concerned, but the leash is still there, in the form of determining just what commission that salesperson charges. Some states, at the requests of the brokers, have eliminated that leash, but making all licensed salespersons brokers with a stroke of a pen. This has eliminated the responsibility from the broker who held the licenses of the truly independent contractor salesperson in those particular states. Two good outcomes have resulted in this: a flexibility of the salesperson (now a broker) to set whatever commission he or she wishes to set on a case by case situation, and it has also trimed out the ranks of the large (and getting larger) pool of licensed salespersons, which has also become a big problem within my area (one independent company in this area has four offices with about 40 or so salespersons on EACH office's roster, all in competition with each other. This, in addition to numerous other offices with "brand names"' within the same small area).
So, while having a union negotiating a split may seem like a good idea, it looks like a step backwards in this business. By having to negotiate a split by way of a group covering a large area may very well force brokers to look at the commissions they must charge for each listing, and keep it at that price, much like a manufacturer who must keep his sale price for an article set to cover the costs of his union contract for his employees. The consumer today is not the same consumer of yesterdayyear (what I call the "Donna Reed" consumer---with the "pearls" around her neck and the white gloves on). They know what the value of their houses are, and they know what they are willing to pay a real estate agent to sell it.....IF they use a real estate agent at all----FSBOs----Another big-time change in the business!
In my opinion, the new look in real estate sales are the agents that have the freedom to set their commissions themselves, not the agent that has or will lock-in a split via a union representative, with a broker forced to charge the highest commission possible to cover the cost of the labor contract with the agents. This business is gearing up to become a truly independent contractor operation in the next few years.
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