With all the talk lately about discount commissions and full price commissions, it has got me thinking about a theory I have, let's call it, Broker Bryant's theory of relativity. I'm of the school that says, commissions are a part of the deal, whether they are being paid by the Buyer or the Seller or whether or not they are "average" or "discounted". First, let me say that commissions are 100% negotiable and there is no such thing as a standard commission. There is an average but not a standard. So now that I have Sherman out of the way, let me see if I can express my theory in a way that makes sense.
OK, let's assume that the average commission is 10%. And let's assume that this is what the majority of Realtors charge. Also, let's agree, that Sellers are only interested in their Net figure, after all expenses are paid. With this being the case, it also makes sense, that when an appraisal is done, the "comps" that are being used will contain this 10% average commission in the selling price.
Now, it makes sense to me, that if the majority of Realtors started charging less, let's say 5%, that over a period of time, property values would actually go down by the amount of the difference in the commissions being charged. In this case 5%. Are you with me so far?
So, if this is true, and I believe it is, when commissions came down and property values came down, the Seller's Net would remain the same. And, if this were true, then the only thing that would change is that Realtors would make less money and therefore have less money to spend on advertising and providing service to their customer/clients. We would have to make up the difference in income, by handling more transactions, and thereby lowering our level of service. In the end, the consumer would be the one that is paying, by getting less service, for the same Net.
So what do you think? Am I on to something here or do I have way to much time on my hands?
Broker Bryant's theory of relativity. Sense or senseless?