Hiring a RE agent by the hour
Has anyone hired/used a RE agent to sell their house and paid them by the hour? Can you share your experience and how you found your agent and set the rate? My understanding is that there are more RE agents than houses for sale and many agents spend the majority of their time marketing themselves, not selling homes. It seems like getting paid an hourly wage to sell a house would be preferable to spending time and money prospecting for clients.
Apr 1, 2022
Parent Replies
You could potentially negotiate something other than a percentage-based commission fee for the selling agent (hourly, lower percentage, or flat fee), but remember that a lot of the cost of selling your home is the percentage that goes to the buyer's agent and various taxes and fees, which you won't be able to negotiate. Whether you'd really come out ahead by paying a selling agent hourly vs. paying the standard selling agent's commission is questionable--depending on how quickly your house sells, for how much, and what's involved in preparing it for sale, you could easily wind up paying more--and probably not worth limiting your options to the realtors willing to do it. If the goal is to save money on the sale, I'd look at one of the reduced commission agencies. Realty Advocates in Berkeley also does flat fee sales if you do not need a full service agent (though it doesn't sound like this is what you're looking for).
Rather, you may want to negotiate the commission percentage instead if cost is an issue for you. I have recently sold two homes, in different counties using different agents, and without question they worked tirelessly, at any hour and day, to meet my needs and get the houses sold at the best price possible. They earned every penny of their commissions. At least in my case, great service and attention was worth paying for; I never felt that their personal marketing was detracting from working for me.
It's probably not what you want to hear, but I think you will have a very hard time finding any quality experienced RE agent to do this. Many of them work through brokers and I don't think they even have the ability to negotiate this type of arrangement if they wanted to. You might find someone new and smart with their own brokerage license who is looking to get business and has the ability to use an alternate fee structure.
I think you would be better off either (1) finding a good real estate agent who will market the house and not themselves; or (2) using a service where you are kind of selling by owner but an agent posts in in MLS for a flat fee (used to be less than $1000). Look at https://www.hauseit.com/hausit/ to see how this model works, sometimes they do have agents available to answer some questions on an hourly rate. I'm not sure whether there is a similar service in the Bay Area.
Note that it is a ton of work to sell your own place and that the Easy Bay market has some weird real estate practices that make it extra complicated. (E.g. under listing everything, ordering inspection reports and providing to buyers rather than having them order their own). On the other hand, you would save a lot on the RE fee if you managed to effectively market the house on your own.
I don’t know any agents who charges by the hour. In the standard CA listing agreement, there are two ways to pay your agent, commission by percentage or a fixed amount. Think about this way, if you’re paying by the hour what would motivate the agent to sell your house for the highest price possible? They get pay the same amount whether it sells for $500k or $1M. There is no motivation for them to do the best job possible to net you the highest price possible. What if the house doesn’t sell, you will have to pay them out of pocket.
You may get a lot of responses to your very logical question - why aren't real estate agents paid by the hour?
This warrants exploring the entire business model of real estate, and the premises on which it is based.
Under California law, there are two levels of Realtors: brokers and salespeople. The former - at least the managing broker of an agency - supervise the latter. While some people are able to take the broker exam cold-turkey and pass, most new brokers worked for a few years as salespersons, gaining experience.
The creation myth is that the Realtor is an independent contractor running their own business. Beginners, or those who sell fewer than one property per month, must split about half of their commission earnings with their managing broker. The broker provides the office and some infrastructure and branding. An alternative model (ReMax) has the agent paying a "desk fee" to the broker and keeping a larger percentage of the commissions they earn.
In the beginning, realtors could hoard information about properties for sale. With the Internet, of course, market information is much more openly available - although DIY buyers soon discover that most of which the public can access online is outdated. In the Bay Area and other hot markets, properties sell fast, but the webpages linger like zombies in the aether. Licensed agents who join their local CAR affiliate and pay big money for an MLS subscription have instantaneous access to fresh, accurate information. For this reason - and the fact that non-corporate real estate buyers and sellers are typically emotional about the transaction - has meant that low-contact, Internet-based representation has not really caught on.
individual initiative is a crucial ingredient in agent success. Agents must "prospect" for clients every day. We are taught to calculate our results according to a formula:
How many contacts must you make in order to get an appointment with a prospect?
How many appointments must you attend in order to get a contract?
How many contracts result in a sale?
Therefore, how many contacts must you make in order to close a sale? For me, it was about one thousand contacts per closing. And you don;t get paid or recoup expenses until close of escrow.
It was exhausting to be constantly hustling everyone I encountered for potential business. I stuck it out for 10 years, and have never regretted quitting the business.
That said, making a living in real estate comes more easily to some people than others. Being very physically attractive and personable is an indicator for success. But neither intelligence nor honesty are indicators for success, in my experience. The rule-of-thumb is that 80% of licensees quit the business within two years.
The managing broker want the agents to "always be closing" deals. Some agents are more productive than others.
Therefore, it would not make economic sense for the managing broker to pay agents by the hour. There is wide variation in productivity. And people earning a flat salary per hour are not incentivized to hustle.
While there may be some public agencies or corporations that pay licensed brokers a salary, this is the exception to general market practices.
When we were first-time home buyers years ago, the real estate industry seemed very mysterious and threatening. It remains exploitative in many respects, but no viable form of disruption has yet been devised.