The truth about commissions: Why real estate companies keep them so high In days gone by (a couple of years ago), the real estate office was the hub of activity for sales agents and clients. Real estate companies provided their agents office space, desks, equipment, support staff, access to listing information, and market research materials. In order to attract really good agents, the companies also needed to open offices in convenient locations, often in high-rent retail space. The consequence has been high, fixed overhead costs for many companies. Recently, though, the real estate industry landscape has changed dramatically. First came the computerization of the Multiple Listing Service. Then came the Internet. Then came the MLS and lots of other real estate resources on the Internet. The results of these developments have been profound. Agents or "Free Agents?" Agents today are more independent. They can work remotely from home and no longer consider the company office their focal point. As a result, the benefits of one real estate firm over another have become less important than the commission splits paid, and agents have more bargaining power than ever before. In order to attract and retain good salespeople, companies have found themselves giving up a greater share of sales commissions to their agents while continuing to maintain high-cost office space and services for the "less active" agents who need it (It's a well-known fact in the real estate business that over 80% of the business is done by less than 20% of the agents.). Therefore, to keep up their profit margins, some real estate companies have maintained—and sometimes increased—commissions charged to sellers, or have begun tacking on a "transaction fee" of $100 to $200 over and above the commission. Also, in order to maintain their commission rates, some companies penalize their agents for lowering the commission rate they charge their clients. Consumers Go Online Concurrent with the changes described above, a wealth of real estate resources have become available through the World Wide Web. Savvy consumers know that much of the information they need to buy or sell a home can be theirs at the click of a mouse—if they know where to look. At any time of day or night, consumers can search the Multiple Listing Service, browse photo galleries of homes for sale, search for comparable sales, research local school and government information, and compare mortgage rates online, without than relying as heavily on sales agents for data. No longer do agents have to pre-screen all of the properties listed on the MLS, chauffeur purchasers to dozens of thumbs-down properties, or provide the same level of education about financing options. In essence, consumers (especially buyers) today place fewer time demands on real estate agents and companies, who continue to reap unnecessarily high commissions. What does all of this mean for you? If you're a real estate buyer, all of this means greater control and flexibility in finding and purchasing the home of your dreams. But if you're looking to sell a home, it means that you may end up paying the traditionally high commission for services that are no longer needed to sell your home. At EIEIO.com, we believe that it's time for a change. The real estate market is not what it used to be, and we believe it's time for a change—a big change that reflects today's reality. EIEIO.com has not amassed the huge fixed overhead that straps traditional real estate companies. Moreover, we do not spend money supporting agents who are . . . how can we say? . . . "less than active." EIEIO.com's aim is to provide the high level of personal service, negotiating advice, and experience it takes to buy or sell a home efficiently and cost-effectively. But at the same time . . . We've eliminated some of the fluff that's no longer needed to sell homes. . . . We've cut commissions in half, and . . . We've pledged to look out for your best interest, whether we represent you as the buyer or the seller. Copyright © 2002 EIEIO.com. All rights reserved.