Q: I have no problem with people being well-compensated, but there has to be some relationship between effort and reward. Does a real-estate broker in San Francisco really work that much harder than a broker in a lower-priced market, such as Kansas City? Why should their compensation be directly related to the price of the goods sold?A: I have received many similar queries in recent weeks. There seems to be growing support in the Bay Area for a flat-fee commission structure in real estate.
This can be attributed largely to the recent bubble in home prices. There is considerable resentment toward agents who continued to skim off 6 percent of soaring sales prices even when houses were practically selling themselves.
My own approach has been to recommend a drastic reduction in the standard commission percentage -- from 6 percent to something like 1 percent. But a flat-fee structure seems to make good sense, for the reason the questioner points out, and could produce about the same outcome.
