I agree. The real estate industry needs to consider an hourly fee structure similar to other professional service providers. This would foster a more professional image and enhance the industries overall reputation.

The real estate industry generally has resisted changes in fee structure. Under the current system as prices of homes increase real estate commission fees automatically increase.

It’s getting harder to justify percentage fees as prices continue to rise.Why should buyers and sellers pay more for the same service just because the price of the property increased?

Most real estate business models use self-employed independent sales associates. Some brokers give up to 95% of all commission income to their sales people In order to attract “top producers.” This leaves little profit for a brokerage business to invest in new business systems or technology.

This situation keeps the whole real estate industry stuck with old high cost inefficient operations and outdated business models. So far they have been able to pass on these high cost to their customers in the form of escalating fees.

The real estate industry is now facing new challenges from outsiders with new lower cost, technology driven, business models. It will be interesting to see how much longer the current commission fee system will survive.

Ted BailesPresident RealtyLabs.com

I think the writer should give an indication what service he would like to obtain from a real estate professional or Realtor.

Is it simple informationa about market data? Or does he wish to employ the Realtor to either buy or sell property? Is it resiential, rural or industrial commercial?

In which State or Province would he like to get the service? All Sates and Provinces (in Canada) have special laws under which a Realtor can operate. Under the competition laws there is no FIXED COMMISSION. In most jurisdictions the user of the service may negotiate the fee any which way.

Please provide some details. I am sure there could be a lot of informed comment.Gordon Max

I think any service a realtor provides should be hourly based, be it market data, buying, marketing a house, advertisements for selling a house, writing and reviewing contracts and even going to closing with the buyer or seller.

Yes, some services provided by agents can be reduced to an hourly consideration. Sitting through open houses could be paid on an hourly basis.

Most other services can be fixed fees. Writing up standard contracts, reviewing offers, doing competitive market analysis, etc. is roughly the same for most real properties (fees could be ramped up for exceptions).

Dollar-for-dollar compensation for placement on the multi-listing service and other advertising (newspaper, trade publications) -- the more advertising the client pays for the greater the benefit for the realtor, thus a realtor shouldn't be paid on top of this.

Commissions should be eliminated. An underpriced $750,000 home will sell fast and relatively easily compared to an overpriced $250,000 home. Yet the realtor gets three times the commission for the faster/easier sell. Is this value-for-value? No.

There should be a restructuring, but you the seller always want your realtor's compensation to be based on the price they get. In other words, the higher the price, the higher their comp. The problem comes when you introduce the idea of split commissions, so that the buyer's agent is actually incentivised to have their buyer pay a high price too. Buyer's realtors should be forbiden from taking any part of the seller's commission (which could then drop to only 3%), and instead the buyer should pay a fee that is based on how much above or below the asking price they got you the house for. Sure, the buyer would have to pay a fee when they are buying, but they would make it up when they sold the house and didn't have to pay both sides of the deal.

To the commentator 'jgalston' --in interesting discussion regarding motivating listing agents via commission can be found in that bestselling book "Freakonomics" --it appears that it is to the listing agent's advantage to unload (sell) the property, even at a deep discount, rather than waiting around to get the best price. So, in the majority of cases, the seller has just signed a contract with a realtor that (whether they admit it or not) has an ulterior motive for NOT giving the seller the best possible price that the market will allow. The book gives much more detail than I could give here...

I am really surprised we hadn't heard from realtors, or any R.E. agents, or other licensed professionals on this topic. Perhaps there really is no defense for the huge commissions divied on every property transaction.

Sad.

Is this another example where bureaucracy wins?

Good realtors put a lot more time into the sale of a house than most people realize. Given the price sensitivity of home sellers and buyers -- I note the initial poster's obvious frustration with his/her perception of the Realtor's value-add -- haggling over actual hours worked would become an issue. This would also add to the Realtor's workload by creating the need for mechanisms to track and report regularly how all hours were spent. I do not think we will see realty services billed on an hourly basis.

But the previous posters are correct that the structure of this industry is changing and will continue to do so. I believe the future is the bust-up of component services that are delivered today under a single commission payment. I believe we will see an a la carte model. Right now the industry offers either full-service brokerage on a commission basis, and listing only on a flat-fee basis. The natural progression will be to fill the gaps with the gamut of realty services on an individual fee basis.

They are not professionals. Also, they would never get anything done for you.