State of the Industry: Are Real Estate Agents Commodities?

Real estate agents have become a commodity and, quite frankly, they’re overpaid.

They all do the same thing – put a sign in the yard, put it in the multiple listing service (MLS), put it online, and PRAY.

Also known as the four P’s of real estate.

That’s all agents have to do and they get to make their own hours. It’s too easy and unfair they’ll make that much money on the sale of your home, right?


Many of us are familiar with Pareto’s 80/20 rule and real estate is no exception. 20% of the agents do 80% of the transactions and, if you end up hiring an agent in the 80% mindset (doing little to none of the business), you better get your praying knees ready.

The real estate industry can be a little bit of a joke – and that’s coming from a Realtor®.

You see it all the time, people who don’t know what career to get into figure they’ll get their real estate license. People decide they’ll give real estate a shot this year, cross their fingers, and see how it goes.

This is a problem, the cause?

Well, I’m not an economist but I suspect it’s because of the low barriers to entry.

Get this, in Washington State, it takes a 90 hour course and a three hour exam to get your real estate license.

You know how many clock hours esthetician/cosmetology school requires? A whopping 750 hours for the basic course and another 450 for the master class!

90 hours to sell your $500,000 home and 750 for a $60 haircut. Talk about a broken system.

What does this have to do with the state of the real estate industry?

Basic economic theory states that as the barriers to entry decrease, competition will increase, and this is exactly what we’re seeing with real estate agents today.

The result?

Homeowners and, more generally, society as a whole, view real estate agents as a commodity. Simply because there are so many of us.

Commodity: Usually sold by many different companies and is uniform in quality.

When choosing between commodities, the only differentiating quality is price. Which is fine if you’re actually shopping for a commodity, however, real estate agents are not commodities.

First off, you’re hiring someone to sell a multiple six figure (or more) asset, not choosing between Quaker or Kroger brand oatmeal.

You're hiring someone to sell a six figure asset, not choosing between Quaker or Kroger brand oatmeal.

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I’m constantly perplexed at the number of homeowners who go great lengths to save a few bucks in their daily lives. Then, when selling their home, they hire the cheapest agent and leave tens of thousands of dollars on the table in lost sales potential.

As we learned in the 4 Laws of Real Estate, they may pay less in transaction costs but will likely end up netting less money overall.

Second, real estate agents are fiduciaries, meaning they should be looking out for your best interest. Sadly, this isn’t the case with many agents today.

You need an agent who is going to tell you how it is, not how you want it to be. When you hire based on the cheapest commission or the agent who will list at your “pie-in-the-sky” price, you lose.

Real estate agents don't make the market, we can only bring the market.

Real estate agents don't make the market, we can only bring the market.

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Buying and selling real estate is just like the stock market. You can only sell at a price a buyer is willing and able to pay. No more. What’s worse, the longer your house sits on the market overpriced and under-marketed, the lower the perceived value becomes.

Perceived Value: The worth that a product or service has in the mind of the consumer.

When you hire a discount Realtor® who doesn’t know how to effectively sell a home, your buyers begin perceiving it to be worth less. So, when you do actually sell, you don’t get full market value – you get the now lower perceived value.

Instead of saving money, you lose money.

If you want to net the most money on the sale of your home look to hire a full time professional who is firm on their commission percentage.

Think about it like this – if your Realtor® is quick to cut you a discount they’re going to do the same with the buyers who submit offers on your home. Is this really who you want representing you in the transaction?

You end up getting lower offers because the property isn’t marketed correctly AND you’ll leave money on the table during negotiations since your Realtor® will easily give concessions in hopes of a quick close.

This doesn’t mean you have to hire the most experienced Realtor®, the new guys can get great results too. It just means you need to hire a professional who knows the business and not someone who’s just putting out signs and praying for a buyer - anyone can do that.

It's time we change the way we think about and hire Realtors®

It's time we change the way we think about and hire Realtors®

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Sellers need someone who can get them the best results which means getting multiple offers on their home. This puts them in a strong position to negotiate and get the best price and terms.

How’s it’s done?

By hiring a professional Realtor® who can aggressively price your home and use a Strategic Digital Marketing Plan to get it in front of the most qualified buyers.

When hiring a Realtor®, instead of trying to minimize the cost, look to increase the value you get for your money.

Instead of evaluating potential Realtors® on price, compare the value they bring - what will they actually do for you and how does it help sell your house?

Simply put, licensed Realtors® may have become commodities but professional Realtors® are in high demand.

Who are you going to hire?



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