As Steven Levitt notes in his book, Freakonomics, the existing commission structure gives realtors somewhat different incentives from their clients. The difference between selling a house for $500,000 and $510,000, while significant to the seller, means only an additional $150 to the individual realtor.
The commission structure should be changed so that interests of the seller and the realtor are more aligned.
For instance, there is a range that most homes will sell for. For instance, a home owner who bought his house 5 years ago for $200,000 is almost certainly likely to get that if he sells it today (and he would probably get much more than that). In this case, the sales price range could be $225,000 to $260,000.
Why not structure a commission agreement whereby the realtor recieves 3% if the house sells for less than $235,000, 5% if the house sells for between $235,000 and $245,000 and 8% if the house sells aabove $245,000.
While this would not eliminate the problem noted by Levitt, it would significantly reduce it.
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The suggestion implies that the buyer of a Realtor's services is willing to pay substantially a substantially commission for a modest difference in the property's selling price. This is not the reality of the situation. If a home seller elected this as an option, then the home went under contract at asking price the first weekend it was on the market -- the seller might feel like the Realtor did not give him/her good advice on the asking price. Moreover, s/he would certainly be reluctant to pay a higher commission, since the Realtor had to do a lot less work, and spend a lot fewer advertising dollars to market the home.
corrected version of my post above
The suggestion implies that the buyer of a Realtor's services is willing to pay a substantially higher commission for a modest difference in the property's selling price. This is not the reality of the situation. If a home seller elected this as an option, then the home went under contract at asking price the first weekend it was on the market -- the seller might feel like the Realtor did not give him/her good advice on the asking price. Moreover, s/he would certainly be reluctant to pay a higher commission, since the Realtor had to do a lot less work, and spend a lot fewer advertising dollars to market the home.