There, I said it: Broker compensation is indefensible.
An independent broker who is a friend of mine and I were having — how to put it? — a robust discussion that centered on commissions the other day (without violating anti-trust laws, heaven knows).
I ventured an opinion that I hold strongly and have put on the record previously, that percentage commissions make no sense to me. So “Bill” asked me what was the origin of my “guilt,” adding that he had to support a family of six. (Nor should the choices he has made bear on his occupation and income.)
My rejoinder was that guilt had nothing to do with my position. Instead, said I, the amount of work required to shepherd a $500,000 sales was not much different from — sometimes even greater than — the burden of bringing home a $5 million sale. It’s true!
I maintained that the value we bring to a transaction is not so different at various price points, most requiring essentially the same amount of work and expertise .
Instead of a percentage fee, why shouldn’t we be paid, if not on a project basis, at a substantial rate per hour?
If that’s what you believe, Bill contended, just lower the percentage commission. I suppose he has a point, but seller and broker still are stuck with being able to offer enough compensation to buyers’ representatives to motivate them to show and sell a property.
He went on to contend that the value we bring to brokering the flow of assets between two entities — buyer and seller — can be exceptional and ought to be rewarded commensurately. I don’t know about that.
When I argued that a broker’s value in selling a property — say, $50,000-60,000 each for the broker on either side of just a $2 million transaction — could not compare with the virtues of a surgeon who doesn’t, as far as I know, earn even $100,000 for transplanting a heart, restoring vision or curing cancer in a patient.
That’s when Bill failed to win me over, by skating toward the total cost of surgery and hospitalization for many procedures.
I am not, by the way, suggesting that so-called “discount” brokerage is the point here. The appeal of discount brokerges is that they charge less money than other models because they don’t typically provide a full range of services. Often, they provide the option of selecting from a cafeteria array of services.
I believe those brokers who are overpaid should charge less for a soup-to-nuts way of doing business, a tasting menu for which no substitutions are allowed.
While I have been maintaining that brokers in many transactions earn way too much money, I confess that I’m not about to cut my own income by embarking on a lonely crusade.
I’m able and willing to adopt a more rational fee basis, but I won’t do that if I am virtually the only broker in Manhattan ready to do so. It would be nice, though unthinkable, if my crusade involved plenty of company.
Obviously, I’m not counting on it.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022