Sunday, May 20, 2007

6% commission? Really? For what?

Mrs. Expat Teacher and I are seriously looking to buy a place here in DC and we've been to plenty of open houses and even viewed some new condo construction, but I've avoided getting a real estate agent since the MLS listings are now available via ReMax. I can just contact the seller directly. If I use a real estate agent, the seller pays a 6% commission on the sale, usually split 3% between the buyer and seller agent.

We are looking at homes for sale in the $400,000 range. That's a commission of $24,000. Tell me, what exactly does an agent do to deserve 1/2 of my annual salary on one sale? It seems to me that I could spend a thousand dollars on a good real estate attorney and bargain the remaining $23,000 out of the price of the home.

Also, considering that the buyer and the seller agent get paid a percentage of the final sale, why would the buyer agent push the price down? If the price comes down, they lose money. Who works harder for less money?

I just don't understand real estate in America. In the UK, where Mrs. Expat Teacher and I are selling our place, we pay one agent 1.5% for introducing the buyer to us and some of the marketing. Then we'll pay our real estate attorney .05% of the sale price to deal with the paperwork. And that's it. On the £250,000 place we are selling, we'll pay rough £5,000 in fees. If this was the US, we'd pay £15,000. 3 times the amount for the same service.

Any real estate agents or friends of real estate agents care to justify this 6% number?