Are Real Estate Agents Overpaid and Overrated?

I recently had a really interesting conversation with a friend of mine who believes that real estate agents are overpaid, overrated, and are operating a monopoly. He sold a property in Manhattan, where his Realtor showed his property all of three times in 6 months, yet still collected a hefty sales commission (even after my friend negotiated it down significantly). He did qualify his statement by saying that not ALL agents were overpaid, just the ones who were doing higher-end transactions. (One of) his point(s) is that paying hundreds of thousands to sell your house is simply too much… when an attorney could basically accomplish the same goal at a fraction of the price.

Of course, Realtors hear this argument a lot.  And even though the truth is that the average Realtor earns $36,700 annually, I have to agree that a great majority of real estate agents representing high-end properties are absolutely overrated and overpaid. If I were selling a multi-million dollar home, I wouldn’t hire 99% of the several hundred real estate agents I know. But, my reasons are different. My reasons have more to do with the way the industry has changed in the last few years, and how quickly and dramatically its changing now… faster than real estate agents can keep up.

The ‘high-end’ agents will tell you that you’re paying for access to their network (which is in line with what my friend would call monopolistic); or that you’re paying for their “closing”  skills. Even though these things have value, are they worth hundreds of thousands of dollars? The answer is absolutely not. Let’s face it, folks, do we really believe that someone isn’t going to purchase a property that they love just because the uber-agent isn’t there to ‘sell’ it to them? With or without the network, that high-end buyer is going to find that property just like 80% of ALL buyers do: online.

I wrote an article a few months ago about how the internet has changed real estate. That article focused more on the impact technology has had on buyers and sellers. From inside the real estate industry looking out, it’s clear that buyers and sellers have integrated (if not driven) this change incredibly faster than real estate agents themselves.

Part of the resistance to change could be generational, since the average age of Realtors in the U.S. is 55. But that’s no excuse. Some of the resistance is also just plain denial, since the market was so “good” just a few years ago, and it was relatively easy for even a part time agent to make a decent living.

Our company was born out of the realization that real estate marketing has been completely transformed by the internet, and that transformation has been years in the making. The principals in our firm are professional marketers who represented a number of different (major) real estate franchisees and brokers for years. We constantly pushed for these firms to grow their online presence, and in general, the response we got was something along the lines of “we’re making money, we don’t need the internet”.

Fast forward to today, when most real estate markets have lost extraordinary amounts of sales volume in the past 2 years, and at an increasing rate. This lack of volume translates directly to a loss of revenue for agents and brokerages, which means smaller advertising budgets. Look at any real estate publication in your local town… it’s guaranteed to be half of the size it was just a few years ago, despite the fact that there’s twice as much inventory.

But money isn’t the only reason why marketing budgets are shrinking… the other big reason is that technology has radically altered the way the people buy and sell everything. And technology isn’t cheap. I know because I write the checks here at HawaiiLife.com.  We liken our marketing to fishing… if you’re going to catch a lot of fish, you have to know where they are, and you have to have the right equipment to get there and land them. Most real estate agents are using the equivalent of a homemade bamboo pole… and they’re fishing in a puddle behind their house, competing with a lot of their colleagues.

At Hawaii Life we LOVE to fish. Our pond is the world. Our boat is the internet, and we know how to land the big fish. The bait speaks for itself. No one has to ‘sell’ home ownership, or Hawaii.

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Keola Sheehan

June 12, 2009

Nice Matt, I often feel I’m fishing with a scoop net with big holes in it!

Winston Welborn

June 12, 2009

Solid post Matt. Seems like this industry shift is a good one for the “new breed” of real estate professionals.

Are real estate agents overpaid and overrated? - My Internet Marketing Blog

June 13, 2009

[…] original here:  Are real estate agents overpaid and overrated? Tags: article, going-it-alone, hefty-sales, his-statement, inter-, Internet Marketing, manhattan, […]


June 15, 2009

I would agree the vast majority of agents are overpaid, but not for the reasons you outlined. Agents are paid to sell real estate. Using the internet to expose properties, and getting leads online is only a very small step in the process. This business is about people, and your skill set dealing with those people. People do not, and never will, buy homes online. Sure they may find the home online and sign docs electrocially, but I mean the decision to purchase is done offline. Good agents are knowledgeable about neighborhoods, histories of areas, good negotiators, know local trends, and much more. They know how to communicate all these facts to buyers and sellers effectively.
Here is a perfect example. 90% of a sale is done when you set the listing price. It doesn’t matter how much internet marketing, and exposure the property gets, if it’s overpriced it is not going to sell. If an agent knows his business, and knows how to communicate to the sellers correct pricing strategies, what is that worth?
The bottom line is the vast majority of agents aren’t trained and don’t have the proper skill set. Therefore they are overpaid.

High Tech, High Touch adds value in Hawaii Real Estate « Hawaii Real Estate Blog

June 16, 2009

[…] Hawaii Life Principal Broker Matt Beall has written an excellent article about whether real estate agents provide value, especially given how technology has changed the […]


June 19, 2009

Ahhh…I am not too sure about Ryan’s response. I just do not agree with it. Sure, folks are not going to buy on line. Sure you do not need a ‘Rolls Royce Agent’ with Mega Connections to sell a property. What you do need is the right price, the right marketing plan, the right photos, the pefect Internet Posting that will give your client the maximum exposure…and of course, a visit to the property by the prospective buyers.

But, come on now, do you really think a buyer is going to buy a property because of the ‘presence of the real estate agent?’ I do not think so.

As real estate agents I think we all naturally have sizeable egos and righfully so. We need them in this business! But to think of ourselves as the ‘deal maker?’ I think we have a tendency to get a little ‘full of oursevles.’



July 8, 2009

Matt here’s my take on your HR article.

No, real estate agents are not over paid if they would do their job-make money for the client.

I have had the following problems with agents:
a. I had one who never showed up to a pre arranged meeting on time, he was even 1/2 hour late to his own closing.
b. They always say when you ask what they can get for a property “I can get what the last unit sold for”. Why hire them and not the last real estate agent who sold?
c. I can’t go to the bidder with your counteroffer, they won’t accept it and we will lost the sale. I made that agent go with my counter, the bidder accepted and I made an additional $6,000.
d. When I was buying rental property the agent had no idea how to compare price to income (1%).
e. A local agent sold a home without open houses to a buyer they all ready knew would buy but at a cheap price because the owner was distressed because his wife was in a nursing home.
No, I would pay twice the commission if I had a competent agent who acted professionally and had my financial interests in mind instead of their quick sale.

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