By: Jarrod Guy Randolph, CEO Vestre Partners
In the wake of the National Association of Realtors (NAR) recent settlement to slash commissions, the public is left wondering: are real estate agents overpaid, or are they the unsung heroes of the housing market? Jarrod Guy Randolph, a seasoned real estate developer with decades of experience, firmly believes that good agents are worth their weight in gold and that the focus should be on improving industry standards, not just cutting commissions.
The $418 million settlement, which aims to resolve claims that the NAR’s commission structure harms competition and leads to higher prices, has the potential to significantly impact the earnings of the 1.6 million real estate agents in the United States. With commissions possibly being reduced by up to 30%, the $100 billion annual commission pool could shrink by about one-third. While this may seem like a victory for homeowners, it’s essential to consider the value that good agents bring to the table.
Real estate agents play a vital role in the housing market, wearing many hats to ensure a smooth transaction. They act as marketers, advertisers, negotiators, service providers, housekeepers, and even therapists. In a typical transaction, agents juggle multiple parties with varying objectives, working tirelessly to align everyone’s interests. They are the glue that holds the entire process together, and their expertise and dedication are invaluable.
Good agents are paid in direct proportion to the need for the service they provide, their ability to do it, and the difficulty in replacing them. They are the circus masters when everyone else has one job and one objective, and they are not always aligned. The issue here isn’t the commission structure; it’s the influx of “joke agents” who enter the industry seeking easy money. These individuals often lack the passion, knowledge, and dedication required to provide exceptional service to their clients, muddying the waters for professional agents who have made real estate their true calling.
The glamorization of the industry through “fake reality” shows on television networks like Bravo has further perpetuated the misconception that real estate is all about glitz, glamor, and easy money. The commission calculations portrayed on these shows are often a complete fabrication, misleading the public about the true nature of the business. This has led to an increase in the number of people pursuing real estate as a third, fourth, or even fifth career, thinking it’s an easy way to make money. In reality, these agents often get in the way of professionals and give the industry a bad reputation.
To address these issues, industry leaders must focus on raising education standards and implementing stricter requirements for obtaining and maintaining a real estate license. Brokerage firms must also take responsibility for identifying and removing bad actors who tarnish the reputation of the profession. The fact that 20% of agents do 80% of the deals in nearly every firm is a clear indication that the problem lies not with the commission structure, but with the quality of agents.
Residential developers rely heavily on good agents to help them find the right properties, lease, and sell them. Their expertise and dedication are invaluable, and they deserve to be compensated fairly for their efforts. Agents can sell a home before it’s even built, while a builder can construct and stage a home, only to have it sit unsold without the help of a professional agent.
While some housing experts expect the NAR settlement to drive down home prices across the board, others, like residential brokerage analyst Steve Murray, are skeptical. Murray argues that sellers don’t set home prices based on their closing costs and that the market ultimately determines prices. LendingTree senior economist Jacob Channel also doesn’t expect the settlement to revive the housing market, as mortgage rates remain high and play a more significant role in home-buying decisions than agent commissions.
While the NAR settlement may lead to some savings for homeowners, it is not a panacea for the issues facing the real estate industry. The focus should be on improving the quality of agents through education and regulation rather than simply slashing commissions. Good agents are the unsung heroes of the housing market, and their vital role should not be underestimated. They deserve fair compensation for their hard work and dedication, and the industry must work to ensure that the profession attracts and retains talented, passionate individuals who put their client’s interests first.
Published by: Martin De Juan
