I just read the very informative article “The Last Stand of the 6-Percenters?” on the New York Times website and felt compelled to thank you for shedding some light on the industry and its efforts to keep the status quo in place. This information can be very useful for home sellers, buyers and many real estate agents as well.

I’m a former practicing real estate agent in New York City. When I decided to become a real estate agent, I was given some of the best training by some of the best real estate trainers, read the best books on the subject and was ready to take on the world just like thousands of other agents each year.

The idea of “protecting the 6% commission” is one of the cornerstones of the training offered by the real estate companies, trainers, books and dominated a large part of the training I received. In the office, the broker further reinforced the need to protect the 6% commission and to only discuss a reduction as a last resort. In some cases, we were instructed to walk away from a potential deal rather than agree to accept less than a 6% commission.

In your article you state “Some economists wonder why agents fight so hard to maintain this pricing system when it is making so few of them rich.”

I think I might have a partial answer to this question. Without doubt, this pricing system benefits the top brokers/agents and the real estate companies to the detriment of new agents, buyers and sellers. Top agents who have better connections and established reputations are able to dominate everyone else and reap the majority of listings and sales in their markets. Real Estate companies will do just about anything to hold on to their “top producers” and the huge fees they bring in.

New agents are attracted to Real Estate by the potential of making a lot of money when they just get started and the 6% commission is a big lure. However, with top agents dominating their markets, only a small slice of the pie is left for all the other agents to fight over. Within a few weeks, most new agents realize how hard it is to get a chance of earning that 6% and just want to get paid…anything.

I have personally observed the incredibly high turnover rate among new real estate agents. I started in an established office with one of the top real estate companies in Manhattan as one of eleven new agents starting at the same time. Just prior to the group of us starting in the office, approximately half the agents in the office were let go. Virtually every week, at least one of the people to the right, left, in front of or behind me were replaced by a newly licensed agent. Within 6 months, less than half of the eleven new agents were still with the company or still working as real estate agents. All the others left to find jobs where they could get paid.

My view is that new agents would be open to new and more flexible pricing and compensation systems such as those offered by many of the new generation of real estate companies if they were available to them. New compensation systems could help to break the monopoly of the top agents/brokers and make the system a lot more equitable for new agents, home sellers and buyers. Unfortunately, new agents don’t wield any power in the current system as they are deemed to be disposable by the few who hold the reigns of power and influence in the industry.

That is an important reason why the current system still exists. New agents have no power and no influence. They are often hired right out of a real estate school where they are trained to pass the real estate licensing exam and given a few months in an office to make it work. Some receive training from the company they are associated with on how to actually be a real estate agent. Most receive no such training. When they are unable to build a reputation and become successful within a few months, they are simply dismissed.

Disillusioned, most of these agents leave the industry and move on to jobs elsewhere. The real estate company then brings in a new crop of agents to continue the cycle. Most new agents are not around long enough to have any meaningful impact on the industry leaving all the power and influence in the hands of well established agents and companies. It is not surprising that those who benefit the most along with top industry groups will do whatever they can to protect the system.

While the top people are making a lot of money and are doing everything they can to protect their positions, I believe the industry’s position is shortsighted and will eventually hurt those it’s trying to protect.

Technology and the Internet are making it easier for home owners and buyers to connect with each other. In the near future, real estate agents could very well become obsolete or the need for them severely diminished. The smart thing for the industry to do is to find creative ways to incorporate new technologies and adapting to the changing needs of their clients instead of trying to hold on to the old ways of doing things.

Most sellers don’t want to pay a 6% commission for what sometimes amounts to little or no effort on their behalf and no one entering a new industry wants to work for months (sometimes 6 months to a year) with little or no compensation.

Today seller resistance to a 6% commission is at an all time high, some agents collect large commissions for little effort while some agents actually lose money on deals because of the amount of work and expenses incurred in order to make the deal happen. At the same time, a huge number of agents are literally starved out of the industry. This system is obviously broken as it benefits a select few and hurts the majority of those involved. Yet this is the system that the real estate industry, the National Association of Realtors (NAR) and other industry groups are fighting to preserve.

The National Association of Realtors and other industry groups should spent more time trying to find innovative solutions that benefit buyers, sellers and the majority of real estate agents instead of trying to protect the status quo and stifle innovation. The future of the industry depends on it. If the industry spent more time on these needed innovations, buyers and sellers would be happier with real estate agents and real estate agents would be less stressed, more respected, more liked and more trusted by buyers, sellers and other real estate agents. Many more real estate agents would then be able become successful and remain in the industry long term.

Prior to my first day as a licensed real estate, I began thinking of innovative ways of enhancing the customer experience and making it easier and more efficient for buyers and sellers to be successful. While some of my ideas worked well within the system, I eventually came to the realization that my philosophies were incompatible with those of the industry. I continued working on a number of ideas for improving the experience for buyers and sellers and making it easier for everyone to connect with each other and save time and money.

The process led to the creation of fsboTimes Real Estate located at http://www.fsboTimes.com

fsboTimes Real Estate is a For Sale By Owner website which allows buying, selling and renting real estate online free of charge. fsboTimes offers posting of video tours, virtual tours and much more, lists real estate resources for buyers and sellers, and gives owners the option of enhancing their ads for display throughout fsboTimes.com. Our goal is to help make the home purchase process as quick, painless and profitable as possible for buyers and sellers and we’re always looking for new innovations to make that happen.

I strongly believe the Internet will help bring about systems which will be more beneficial to buyers, sellers and a wider range of agents…despite the efforts of the industry. As more people embrace the Internet as a resource for real estate information and transactions, sites such as Redfin, HelpUSell, Assist2Sell, fsboTimes Real Estate and others have a great chance of helping large numbers of buyers and sellers become successful with more ease and at a much lower cost than the traditional real estate industry currently offers. If the traditional agents and companies don’t innovate, adopt new pricing systems and become more flexible, they risk being left behind.

Read the article by Damon Darlin: The Last Stand of the 6-Percenters?

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