Real estate commissions have been debated for more years than I can remember and I can remember a long time. I have been watching this business for more than three decades.
The five most contentious suggestions and arguments I remember are:
- There should be a standard commission rate. A rate that is fixed at four, five or six per cent. Whatever it is, once the rate is set, it cannot be raised or cut, we must have one rate for all. When that is done everyone will understand it, especially the public. All efforts should be made to educate everyone, especially the public, as to why that rate is set firmly and why it is fair. Setting a standard commission rate will stop sales reps and brokers from in-fighting through discounting or setting higher rates for doing the same job other Realtors do by false advertising that their services are far superior. The entire industry is cheapened by in-fighting over commission rates.
- There should be no commission at all. We should have a flat rate for services. It is only fair to pay equally for the same job regardless of the property price.
- There shouldn’t be so many sales reps in the industry. There are too many salespeople scrambling for too few listings. It leads to bad business practices.
- There should be two kinds of Realtors. One for sellers and one for buyers. The selling Realtor sets the price, advises on strategies for marketing and helps to arrange the work needed to get the listing ready to show. The buying Realtor does the research and reviews real values and negotiates prices for their client to buy property. One Realtor cannot be allowed to do both kinds of jobs. Both share commissions equally.
- Commission rates should be set by the level of education and years of experience that a Realtor brings to the table. For example, a Realtor who presents an MBA certificate and industry course achievements can charge a higher rate of commission. A Realtor who has 20 years experience can charge a higher rate of commission. By the same token, a Realtor with no experience and no education beyond his or her licensing courses must charge a low rate of commission. A Realtor should serve a five-year apprenticeship before being allowed to charge full commission.
But real estate is not the only profession where people think pay packets are wrong. There are many areas of compensation that don’t seem right beyond the world of real estate.
For example, in teaching. We now know the most important years of a student’s academic life are the formidable years of kindergarten and primary grades. We also now know the teachers of these grades are the most important in our entire education system. Why are they paid less than those who teach high school and university level studies?
I read this from a magazine piece by Tushar Gandhi: Why is it that dishwashers are considered the lowest on the rung of restaurant staff? One of the first things a diner notices is the cutlery and the dishes on the table. If they are not squeaky clean, then no matter how good the food is or how high-class the restaurant is, its reputation is tarnished. Dishwashers are extremely valuable to restaurants. Yet they are all poorly paid and there are many restaurants in Canada where waiters don’t even share their tips with the cleaning staff.
Why is it that a hard-working woman at one factory makes minimum wage and yet another woman who works on the assembly line at General Motors makes four times that amount of money? They each have jobs that require the same skills.
Why does the person who does the hardest and worst job in any commercial establishment, cleaning the toilets, get the worst pay? They should get the most.
We are so thankful to trade unions for stopping child labour and providing safe work environments for workers, yet today, some people argue that unions have become so extreme and out of control that they are practically enemies to our economy. Why is that?
You think the real estate industry isn’t working well? Think again. At the end of the day, negotiating your commission rate may be the fairest and most democratic method of establishing your pay packet that there is. Can there be improvements? Absolutely! It just seems that now, real estate commissions are working better than a lot of other things out there.