The incredible shrink proof commission.

Texas Instruments calculators. If you had one in 1988 you were on the cutting edge of real estate technology. If you could operate it for anything more than multiplying a number by 7.0% you were likely trying to pre-qualify people. Eventually, you turned them over to a mortgage lender who knew how to use the machine.

Thirty years ago we booked air travel, rental cars, and hotels through a travel agent. We got our messages on pink paper notes, folded lengthwise and inserted into a lazy Susan-type message holder with slots for everyone. There they would remain until we returned to the office…which we did most every day.

The travel agents are real estate agents now, and they get their messages in an instant without needing to set foot in an office. Do we book our trips ourselves because the agents left, or did the agents leave because we book ourselves? Either way, when we miss our connection we have no one to blame but ourselves.

The end of this first decade of the 21st Century is near. This black electronic apple on my desk is a calculator, computer, cordless phone, radio, and television. Oh, yes. It’s also a movie production studio. I pay $100 a month for this gadget. And with it, I can spend more money and every store in the world is open 24/7.

Real estate commissions are no bargain. Despite the fact that the typical buyer spends three to six months researching and discovering the market without intentionally contacting a realtor, according to Zillow, the typical broker commission is 6.0% of the purchase price. How is it that a travel agent, who’s service was required far more often, is out of business while real estate agents are everywhere and their fee has gone down 14% while the average house price grew 108%. If you have the TI-68 please tell me if 6% of $383,000 is more money today than 7% of $135,000 adjusted for inflation.

Real estate companies are fueled by real estate commissions. Those commissions are paid from other people’s money, specifically their home-equity. I haven’t seen an ad for a house for sale in any media forever. Online sure. I’m a REALTOR and when I search for real estate outside of the home I use Zillow.com. I like the Zestimate. Last time I looked, the cost of placing a property on Zillow and a thousand other websites is between zero and zero.

Where does the money go? Billions and billions of home equity dollars are paid as real estate commissions. Some of it is absolutely earned. Maybe someone could analyze the cash flow to see what is spent on essential service and what is misspent on the lifestyle enhancements of other people?

Essential real estate services are listed in Chapter 452 of the Wisconsin Statutes. Nothing in the law obligates the licensee to spend money on more than annual fees. Extravagant expenses are not required to be a highly-skilled, effective real estate agent.

Do you think a real estate company can be profitable and sustained by investing in delivering essential services and charging unselfish fees?

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