I do not wish to bash R/E agents either but I have to concur with CN Tower on at least one thing. Prices have increased 100% in the past decade and Realtors commissions have stayed at the same percentage. I have to wonder if the current model will be as strongly defended if housing drops 30% or will the new norm be "we need 7% commission now".
The commission based model was designed to allow for the fact that if there was no sale, the person trying to sell would not be saddled with a fee.
However, the commission model has unduly enhanced realtors commissions at the expense of buyers and sellers.
We can argue what a reasonable salary would be for a realtor and we can certainly agree there are all sorts of inconsistencies in what people make. Eg. Stock brokers making commissions (but note now there are alternatives) whether they do things right or wrong, pro athletes making millions, stock options to former Nortel employees that made their salaries look irrelevant(as one of my manager neighbours told me though I have alot fo sympathy for those who did not exercise them and then were being asked to pay based on their deemed value), lawyers (some at $1000/hour) etc.
However, removing these "what I consider outlyers, then I would ask what I think is a reasonable question.
Doctors make on average about $150,000/year with no benefits working 55 hours/week. Takes them 8 to 12 years and more of university and a level of responsibility one would argue is higher than realtors. Lawyers while some charge inordinate amounts and have done very well in the past decade still make on average I believe $300/hour. No pension or other plan. I believe alot can't even pay their insurance and they have much more overhead to run a legal office than to run as a broker. Average wage in Ontario around $40,000. Family around $60,000.
My point is that if one looks at this, and please let's be fair when we say the average realtor sells 3 properties in Ontario my question would be how many agents have licences and "don't practice", how many are in it "part time" and what does the average full time realtor make.
Then my next question would be what is the level of expertise/knowledge required to do this job. Does it compare to a doctor, lawyer, C.A., engineer and with respect to those professions or others is it even fair to compare these professions with real estate agents as professionals? The level of education certainly and complexity and time to achieve these other degrees are hardly comparable.
As well, how many commission jobs are there that the commission stays constant. Often, when people are doing more volume, the % goes down. I would equate increased house prices with more volume. Yet the commission stays constant.
The reality in my view is that CREA so vigourously defended the MLS because it knows it was one of if not the single biggest factor in getting a house sold.
The bundled selling is unfair when phone/internet/cable companies do it and when they force you to take on more services. It is similar with real estate.
All the above said, I suspect on average real estate agents will make more money now. The 1/3 or so (my estimate may be way off) who do this part time and can no longer make "spending money" for simply listing a house or having a part time hobby will get out of the business.
I unfortunately believe that there will be a marked increase in the price to list on MLS and now the discounters will suddenly raise their MLS listing fee to say $1000 from say a $149 or whatever they are asking. I believe some agents will actually increase their prices for what they do so that full service may actually go up.
I am concerned there will be effective collusion between the big brokerages to set "guidelines for fees" which will mean the cost of everything will increase further.
Agents will continue to try and get the most for themselves (it is after all human nature) and have succeeded with this agreement in putting themselves if the initial reports are correct into transactions even if a buyer reads the MLS ad and the seller and buyer would agree on the price. The agent will have to be inserted into the process since the seller can't be contacted directly and the seller will have to agree to pay a commission "to be negotiated". Agents will argue that they want more and certainlymay make it difficult or discourage their client from the listing where the vendor refuses to give say more than 1 or 2% if the agent wants 3%. I hope my understanding is wrong but it sounds like this based on the preliminary reports.
One note to Grace: While I appreciate your "insight as to properties that sold for far more than the person would have got privately" one has to know the particulars. I have had the opposite experience where the agent on 2 occasions told me I overpriced the property. In the first instance, I was told I overpriced by 12%. I got a full ask within 30 days because the agent did not appreciate the uniqueness/value of the property.
In the second case, different location, different agent: I received in last years down market 2 lowball bids. In each case, the agent told me "that is market". The market was changing in March 2009 and the agent did not realize it. That morning I received a 3rd lowball bid. I am well capitalized was not under pressure to sell. I told the agent we would have 2 offers by the end of the weekend and open house. I was wrong. We had 4 bids and the house went for full with no conditions. I could have taken an offer for more but it was conditional. This happened the same day I was told to take the 3rd lowball offer. And we are talking about a difference of 17% that the agent wanted me to accept that morning vs. what I received that evening.
My point is that it works the other way around as well.
I acknowledge I am perhaps more experienced and knowledgeable than the average home buyer/seller. (I am afterall older and have been through the process numerous times). However, I have had good and bad experiences.
In the second case, I will acknowledge that the open housing in a hotter neighbourhood made the difference but the first case I pointed out was in fact just the MLS getting the person in the door and the buyer wanting the property.
One final note: Both agents were experienced. In fact, one was in the top percentile of agents for a major R/E brokerage and the other very well known in the neighbourhood in which the property was being sold.
My conclusion as for the commission model is that I like CN tower would rather agree to a fair market rate for the service and pay it whether or not the house is sold. You do the work as a realtor, I pay the rate. Furthermore, there should be differentials. Top agents should be charge more and the individual can decide if he wishes the $100/hour or the $50/hour agent. "You will get what you pay for in a good or bad fashion".