The 1-Bedroom “White Palace” Loft Returns: 411 W. Ontario in River North
This 1-bedroom duplex up in the Ontario Street Lofts at 411 W. Ontario in River North just came on the market.
If this loft looks familiar, that’s because we chattered about it in October 2015 when the listing called it a “White Palace” because the interiors were mostly completely white except for the timber ceilings and wood floors.
See our chatter here.
If you recall, this is a first floor street level loft with 12 foot ceilings that faces north (away from the highway on ramp.)
The kitchen has European style white cabinets with white counter tops and stainless steel appliances.
There’s a powder room and walk-in pantry on the first floor.
You ascend a white staircase to reach the second floor which has the master suite.
There’s a full bath with a Japanese soaking tub.
This loft has the features buyers look for including washer/dryer in the unit, central air and deeded parking.
Is the white motif still a selling point 3 years later?
Mirosanda Despotovic at Coldwell Banker has the listing. See the pictures here.
Unit #101: 1 bedroom, 1.5 baths, duplex up, no square footage listed
- Sold in June 1995 for $145,000
- Sold in June 1999 for $200,000
- Sold in December 2007 for $285,000
- Originally listed in April 2015 for $399,000
- Sold in November 2015 for $327,500
- Currently listed for $379,000 (parking included)
- Assessments are now $520 a month (they were $445 a month in 2015) (includes water, parking, doorman, cable)
- Taxes of $5317 (they were $4179 in 2015)
- Central Air
- Washer/Dryer in the unit
- Bedroom: 18×12 (second floor)
The stairs look straight out of Knots Landing, and the unit gives off an 80s vibe.The furniture does not help. The staircase should be metal and black or grey. The window from the master to the bedroom should be expanded— put an industrial casement window there. The sink in the powder room is ridiculously small.
I see very little upside to this unit. Little appreciation bc the ground floor location.
Man is this place filled with WTF
I can just imagine the romantic dinners eaten under the stairs.
LA FRIC. LA CHIC. LOLZ!!!!!
AW HELLZ NO!!!!!!!!!!!
GO CUBBIES!!!!
Friend of mine has a 1/1 loft around there that I really like. This one doesn’t appeal to me at all. Part of it is the all white thing, and the style, but I don’t think I like a loft with a second floor like that, as it takes away from one of the benefits of a loft — the high ceiling expansive feel.
You don’t see this much white at the Kentucky Durby
^^ Derby
Sabrina, gotta allow us to edit our comments, even if there is a time limit on it.
This place looks drab and starved of natural light. Like a semi-luxurious solitary confinement chamber. Why not open up the curtains and shoot during daylight hours?! The two person table underneath the stairs is just sad and makes me think of dying alone.
The horrendous photography doesn’t do it justice either, shooting from high angle pointing down makes the ceilings look incredibly short; which they may be, but not something an amateur photographer would realize. I’m quite surprised that Coldwell, one of the bigger names in real-estate, would allow such poor quality marketing. If I’m going to be paying them at least $11k post-sale commission, this is absolutely unacceptable. Redfin charges 1% and includes quality visual marketing.
” Why not open up the curtains and shoot during daylight hours?! ”
Someone walking by might be in frame, and that would make it take longer.
But seriously, at least open the upper blinds, and so long at the lowers are top down (as they really really should be) open those part way too.
I wonder whats behind those blinds… must be bad if they closed it off
upon further review it was that former god awful club who knows whats there now?
Redfin charges 1% and includes quality visual marketing.
well the seller’s agent charges 1%… your buyer’s agent still charges full price so you’re paying upwards of 4%…
https://www.redfin.com/why-redfin-how-you-save
thats still ludicrous IMO what a racket
There is a good reason that every window is completely covered. It’s because the view of the sidewalk and street is not nice. If it was nice, the photographer would have opened the window blinds.
What replaced Nouveau Tavern? Something better, I hope.
“well the seller’s agent charges 1%… your buyer’s agent still charges full price so you’re paying upwards of 4%…”
Who determines the buyer’s agents percentage? Can the sellers specify a lower fee than standard? In this day and age, if you set a 1% or 1.5% seller fee, is that really going to stop people from considering your place? (Of course you are weighing the savings of the additional 1.5-2% versus the impact of odds selling your place and/or getting a better price.)
“Who determines the buyer’s agents percentage? Can the sellers specify a lower fee than standard? In this day and age, if you set a 1% or 1.5% seller fee, is that really going to stop people from considering your place? (Of course you are weighing the savings of the additional 1.5-2% versus the impact of odds selling your place and/or getting a better price.)”
realtors won’t show places with low possible commission payouts right?
Honestly I don’t know, I do suppose its negotiable, but you’d want to show your place to as many prospects as possible right? Anyone here used redfin to sell a place?
There is something very lonely about this place. I think I would wither and die here.
“realtors won’t show places with low possible commission payouts right?”
what does that mean? if you ask to see a place your agent will say I can’t service it? are you then prohibited from seeing it yourself (or using another agent to see it)?
I realize they may well not push places with lower cooperating percentages, but are the automated listings they send you going to screen for that? you can do it yourself on Redfin of course.
“what does that mean? if you ask to see a place your agent will say I can’t service it? are you then prohibited from seeing it yourself (or using another agent to see it)?”
I don’t know man, perhaps a realtor like Gary can chime in on this subject… who sets the buyer agent’s fee with something like redfin and does that effect showings or not?
vb on April 19th, 2018 at 11:05 am
“There is a good reason that every window is completely covered. It’s because the view of the sidewalk and street is not nice. If it was nice, the photographer would have opened the window blinds.”
vb – you’re giving wayyyy too much credit to the “photographer”. Any professional real estate photographer would have used the natural daylight and supplemental flash to properly expose the living space. If the space outside were unattractive you simply expose for the inside and let the window highlights “blow-out” (be almost completely white, hiding specific exterior detail) vs showing what is actually out there.
What likely happened was that whoever cheaply photographed this space was only available at night, had no idea what they were doing with their newly purchased DSLR and thought they’d control the light by closing the blinds and letting their camera expose for interior. Or better yet, the blinds were closed when he/she arrived and they were too lazy to open them. Now that I think about it, my latter theory seems more plausible.
Still think that tub+shower thing is gonna be a challenge! And Jenny hit it on the nose with her “lonely & wither up and die comments”
Paint a few walls dark grey and they could have filmed Leaving Las Vegas in this space. Would have fit the films theme perfectly.
“what does that mean? if you ask to see a place your agent will say I can’t service it? are you then prohibited from seeing it yourself (or using another agent to see it)?”
When I was a broker in NYC (working entirely with prospective renters, with the exception of one buyer over the course of two years), we’d have people sign some sort of form indicating that we were their exclusive renter/buyer broker. I don’t know how enforceable those are – my sense is that they are mainly intended to “scare” folks into staying loyal to their broker. For example, a guy in my office had shown a prospective renter a few places (that we had exclusives on from the landlords), then that client happened to stroll into a high rise with a huge “APARTMENTS FOR RENT” sign on the side of it, was shown an apartment by the onsite person and proceeded to sign a lease, then stopped by our office to give my colleague a commission check (for 15% of one year’s rent, the going rate)! (Things are different in the commercial world, where a scorned broker might attempt to file a lien, hence the reps and indemnities in PSAs re: brokers.)
But yes, as far as incentives go, I’d say that most buyer broker’s are reluctant to “waste” a quality client who is ready, willing and able to buy on a sale that will get them anything less than the full going rate. We’re currently looking at a place that is FSBO, and the seller (retired lawyer) finds the concept of 6% broker commissions to be egregious. His initial asking price (announced via a post on a local social media app) was a bit high but not crazy. A few brokers (at least one of whom I know) went by the house, and my sense is that they’re telling their clients (in violation of whatever fiduciary duty brokers have) to not bother with the “difficult” guy and his overpriced house. Now, he’s reduced a bit, and has put it on Zillow, where he’s indicated that he’d be willing to pay a buyer broker a commission “to be negotiated”. Had he listed with a broker in the first place, my guess is that he’d already be under contract at very close to his initial price. Right or wrong, brokers absolutely control the market, even in super hot markets.
The commission percentage is determined between the seller and their broker. Of course it can be negotiated. The listing broker can then determine what % to offer to the cooperating broker. Generally speaking, the norm on unit under 1+ million is 5% with 2.5% to each broker.
The commission percentage is listed on the MLS so brokers can see it before taking clients to see a unit.
“But yes, as far as incentives go, I’d say that most buyer broker’s are reluctant to “waste” a quality client who is ready, willing and able to buy on a sale that will get them anything less than the full going rate.”
Okay, but if I see a listing that is offering less in the coop commission, is my broker going to refuse? Make a lot more sense to go with someone like Gary who will rebate a portion of the buyer’s commission.
Many of the real estate agents are hobbyists and do it part time. They jump at any commission coming their way regardless of commission.
I also find it funny that some sellers that are time pressed offer a buyers agent bounty. Aka bonus $3000 if contract that is closed by date xxxx. Wonder how often that actually works to get a property under contract?
“Make a lot more sense to go with someone like Gary who will rebate a portion of the buyer’s commission.”
If AirBnB could break the hotel/time-share model and Uber/Lyft could break the taxi model, perhaps some startup could break the Realtor model?
I know some tried during Dotcom 1.0 but the tech wasn’t there yet.
5%? so on a 700k house thats 35 grand… there is no way in hell even two people are doing 35 grand worth of work
RE commissions reflect the risk of not getting paid and the uncertainty of time invested (i.e., it may take 6 months to sell a place). They also reflect that consumers rather pay on a contingency basis instead of for work performed (or hourly). Also, keep in mind that RE commissions are typically split 4 ways as the agents split with the brokerage. Finally, agents are considered independent contracts (self-employed) so they are 1099’d so they have expenses.
That $35k is $17,500 on each side. Which then is then split again, so agent may get $8,750. Maybe 60 or 70% if they are a big producer. Or maybe they pay desk fees and keep more. Regardless, it isn’t as big of a number as it may seem.
This isn’t to say that all agents earn every dime, but I think people largely don’t really know what agents do and it looks like easy money from the outside, particularly with the low barriers to entry. The reality though is that like most sales fields, 20% of people do 80% of the business. I think the typical agent only closes about 12 transactions a year.
Tech will certainly continue to disintermediate real estate, but there is only so much that tech can do. Buying and selling can be extremely complicated and an emotional transaction and often times it is the agents i.e., humans that are keeping things together.
Your mobile phone app isn’t going to go to a foreclosed property to get the water turned on. Or maybe help your client paint a door with peeling paint as VA requires. Or keep a deal together because Mr & Mrs are divorcing and can’t stand to be in a room together. Or any of the other off the wall sh*t that seems to come up on most transactions. If only it were as easy HGTV portrays….
I say this as a mortgage guy and we generally hate agents. However, every time I’ve worked on deals where there isn’t an agent involved, it winds up being a colossal fustercluck because the FSBO or buyer has no clue what they are doing.
“Tech will certainly continue to disintermediate real estate, but there is only so much that tech can do. Buying and selling can be extremely complicated and an emotional transaction and often times it is the agents i.e., humans that are keeping things together.”
I agree agents still provide an important function, at least good ones do. (A lot of the value you point to is on the seller side though.) But when you think of how much easier it is to search for places now and what a pain I imagine that must have been in the past, you would think that’s a good chunk of value that should have gotten disintermediated. It’s pretty easy to figure out from a listing whether you’re interested or not.
“They also reflect that consumers rather pay on a contingency basis instead of for work performed (or hourly).”
I get that there is something to this, though we pay out of pocket for all kinds of stuff.
DZ, typical consumers would rather pay 2.5% of $700k and have it essentially financed into the price of the home only if the transaction closes versus having to pay say 1% or $75/hr or whatever a good agent would charge regardless if they wind up buying a house or not.
Agent A: 2.5% of whatever you buy / sell. Assume $700k price range, so $17,500. I will spend as much time with you as necessary. If you don’t buy/sell a home, you owe me nothing.
vs.
Agent B: I charge $75/hr. I will spend as much time with you as necessary. However, my minimum compensation is $3500 that is paid regardless.
Most are going with Agent A.
People focus on RE Commissions because the numbers seem big. Especially in cities like Chicago. Shows like Million Dollar Listing certainly don’t help either.
Tech has made somethings easier, but again, most of the work really has nothing to do with stuff that can be automated. If anything, I’d venture having everything online in some ways might make things harder as buyers may want to see more properties.
All I know is the buying and selling is far more complicated than it looks, it is most folks’ largest personal financial transaction, and probably should entail more effort/due diligence than one-clicking on Amazon Prime.
“Agent A: 2.5% of whatever you buy / sell. Assume $700k price range, so $17,500. I will spend as much time with you as necessary. If you don’t buy/sell a home, you owe me nothing.
vs.
Agent B: I charge $75/hr. I will spend as much time with you as necessary. However, my minimum compensation is $3500 that is paid regardless.”
I’d take option B anytime. Not saying most people would but I’d think there’d be many who would.
If you’re very sure you’re buying a house, that’s 233 hours at $75/hr to break even.
except its not 2.5% as a seller, its costing you 5% (if you dont negotiate) or $35,000 which is a lot of money for putting 25 pictures up on a website, entering some data, answering phone calls (optional) and showing up to the place at certain times of day and calling another agent to negotiate a price and maybe show up for closing and sign some paperwork… for the average duration of what, 60 days these days? You’d have to be working a lot for that to be a value add that large…
What about 400 East Ohio block’s recent sales-related news re 540 N Lake Shore board’s decision to sell as group-sale? Appears to be board-action in response to developer trying to buy a controlling interest of association units. This building has a stand-alone garage that could be a separate high-rise development site.
“What replaced Nouveau Tavern? Something better, I hope.”
That space is now a mortgage company (http://www.peopleshomeequity.com/) so no worries about a terrible club there any more.
However, Pranzi closed and was going to became another bar and the Reza’s space was becoming a country bar (https://chicago.eater.com/2017/1/24/14370440/country-q-chicago-q-rezas-restaurant-river-north-ontario-street)
We moved so I don’t know what the current status of either of those restaurant spaces is.
I like all white but this just doesn’t work. I would do something with color. Like one whole wall red and then the stairs black and white. Or something. And that stupid dollhouse sink. You have room for a beautiful vanity, wtf.
I moved too a few years ago and was wondering… I don’t make it down that stretch much anymore as Green Door usually sucks me in… that place is getting too crowded lately though for my tastes 🙁
I also liked Pranzi’s pizza, bummer!
“except its not 2.5% as a seller, its costing you 5%”
you could try 2.5% as seller, not offer a coop commission and see how that goes.
I agree agents still provide an important function, at least good ones do.
anecdotal but when Gary’s team sold my condo, they went above and beyond by meeting the people from People’s Gas to turn on the gas so the buyer could be satisfied that the gas fireplace worked.
Eric Rojas would have told me “don’t sell your condo if you cannot afford to take time off from your new job”.
Is it really that much more work to sell a $700k condo vs. a $200k condo? I feel like there should perhaps be a set fee based instead of a percentage based on price. Maybe instead of set fees an agent would evaluate your house and how long (s)he thinks it will take to sell at X price and set a price that way.
Also, at this point, why not cut out the middle man brokerages or else make agents salaried employees instead of contractors? What is the point of these huge brokerages except to siphon off money?
Tech will certainly continue to disintermediate real estate, but there is only so much that tech can do.
The best real world model I can think of is the Travel Agent. If you are going from Chicago to New York or Even London, you can probably figure this stuff out on Travelocity or whatever. If you are doing what I did a decade ago — fly into Prague, then take the Eurorail to Krakow and then Warsaw, then fly home, you could do it yourself but a Travel Agent can likely do it better.
““except its not 2.5% as a seller, its costing you 5%”
you could try 2.5% as seller, not offer a coop commission and see how that goes.”
I’m gonna try 3%… or 1.5% each… thats like 15k for each side to do not a whole lot… i’ll let ya know how what muh realtor says
well not that much, more like 12k but yeah…
“I’m gonna try 3%… or 1.5% each… thats like 15k for each side to do not a whole lot… i’ll let ya know how what muh realtor says”
I’m really curious if someone puts out a 1.0 or 1.5% coop commission what happens. And/or try Gary.
“The best real world model I can think of is the Travel Agent. If you are going from Chicago to New York or Even London, you can probably figure this stuff out on Travelocity or whatever. If you are doing what I did a decade ago — fly into Prague, then take the Eurorail to Krakow and then Warsaw, then fly home, you could do it yourself but a Travel Agent can likely do it better.”
Except these days you can prob figure out the more complicated trip by yourself pretty easily too.
Jenny, it depends. Every transaction is unique. There is probably some sweet spot in terms of commission amount relative to work performed. However, because each transaction varies, you get a situation where you have easy transactions paying for bad transactions with it all averaging out in the end. What we do on the mortgage side is cap out our commissions at a dollar amount… so when we do say a $3 million mortgage we aren’t getting an overly obscene check based on a flat percentage.
The reason salaries don’t work is that real estate is a sales job by in large. Being salaried would remove the upside which is what motivates the best performers. Top agents can make well into 7 figures and a not so small amount make in the upper six figures. They are compensated for bringing in business and the incomes are commensurate with it being a revenue producing role.
Keep in mind, even with the large incomes people see, far more agents fail than are successful. Unfortunately, the brokerage model encourages any housewife and laid off worker to give it a shot, thus hurting the overall perception and reputation of agents. Brokerages don’t care because they still will usually get one or two deals out of them with very little investment before they move on…
Salaries would also sink the brokerage model due to overhead. You don’t want a bunch of salaried agents sitting around at the water cooler who don’t bring in business. Also, if you have that type of model, the brokerage is going to bear a ton of advertising and other expense to get deals in the door since the salaried agents aren’t.
I sold my condo FSBO and it was a huge PITA. I paid 2.5% co-op to the buyer’s agent though. I paid $500 to list it on the MLS. Sold in two weeks. Looking back at it, I would have paid maybe 1% just to have someone deal with showings and other BS. Fortunately, my job is flexible so I could run up to the place in the middle of the week, etc.
One of the reasons FSBO often fail is that owners are too emotionally invested so they over price, don’t de-clutter, not up on current trends, etc. Buying and selling isn’t rocket science, but it also can have a lot of pitfalls and other issues if you aren’t familiar with the process and norms. I guess it is like representing yourself in court…
Except these days you can prob figure out the more complicated trip by yourself pretty easily too.
you could and if money is more critical than time, you absolutely should do the work. But if you aren’t gonna make a complicated trip like this more than once a decade, do you really want to learn Travel Agent 101?
Icarus, I used a travel agent to plan my honeymoon… 17 years ago. She basically did everything… consolidated and used my points between amex & airlines, got me 1st class tickets to Aruba, hotel room upgraded, and a bunch of other stuff down to getting limo to/from airport. It cost about $250. I probably could have done it myself, but I was so busy with work at the time, it was well worth the money imho.
“If you’re very sure you’re buying a house, that’s 233 hours at $75/hr to break even.”
This is why the commission structure is set up so that it’s the seller who pays the entire 5% commission. The buyer is therefore under the impression he is paying nothing, not thinking that the 5% the seller loses is built into the price.
If buyers were indeed charged by the agents $75 per hour for their time, very few would bother contacting agents. Now that all listings are available and easy viewed online, there is very little reason to rely on a realtor, other than free chauffeur service!
When I have bought or sold, the majority of work was done by my real estate attorney, not my realtor. Yet I pay my attorney $600 for him to spend hours doing all the work he needed to go to law school and pass the bar exam for to complete a purchase/sale.
My agent, meanwhile, who attended evening classes for 3 months to get his license, makes tens of thousands of dollars to show my place to a few potential buyers. Let me take that back – the tens of thousands of dollars I pay is not for the few people my agent brings to my condo. It is also for the hundreds of other showings that my agent spent on other potential clients or other properties that did not result in a sale.
In other words, when a seller successfully sells a place, he is paying his listing agent a hefty fee that is not just for the amount of time the agent spent on his property, but to subsidize all the other people and properties the agent spent time on for free, because it did not result in a purchase.
So why would any seller agree to do this? Because listing with an agent is still the only way to bring sufficient traffic of people to see his place. And why is that, since all listings are available to be viewed online without the assistant of an agent? Because buyers have little incentive to look for places on their own, being under the impression that the service of the agent is “free”!
If all properties were somehow “guaranteed” to cost thousands less if you bought without an agent, this situation would completely change. Buyers would not contact agents at all, and just source properties online on their own. As more and more buyers did this, sellers would realize that they don’t need to list their places with an agent to bring in traffic, and they could save a whole lot of money just by coordinating showings on their own.
One of the reasons this has not already happened is that, when a seller decides to try selling on his own, it is usually with the goal of saving the entire 5% he would have had to pay the listing agent. There is no thought in his mind that perhaps he should share the savings with the buyer. Since this is the case most of the time, buyers have little incentive to scout out FSBO properties, since there is no advantage to this over most other properties.
I have sold condos on my own in the past, with no agents involved, and also sold with just paying an agent who brought in a buyer 2.5%. Despite ominous warnings from real estate agents that I would make way less by not involving a realtor, this has not happened. How do I know this? Because in these cases, there was a sale of a very similar unit in the same building shortly before or after I sold, using the services of a realtor, and the selling prices were not greater than what I got. (As a matter of fact, they were lower than what I got, but I chalk that up to the fact that I’m great at staging a place, and the other identical units that sold for less showed very poorly.)
BTW, in every single case where I listed on my own, but agreed to pay the 2.5% commission to agents who brought in a buyer, the people actually noticed my listing online by themselves – but then contacted their agent to ask them to contact me!! Why didn’t they just contact me on their own? I could have been negotiated down to a lower selling price if they had done so, because my bottom line would have been the same not having to pay the 2.5%!! But this never seems to occur to people. In many cases, realtors who have spent a considerable amount of time with buyers already are successful at instilling a sense of obligation to them so that they feel bad going outside on their own. Again, if realtors felt the buyers owe them something for spending so much time with them, why don’t they charge them hourly fees? The answer is obvious – nobody would hire them in that case!
I feel that there is still a worthwhile service realtors can give clients that is worthy of paying money for. With their knowledge and experience about neighborhoods, quality construction and reputations of various buildings, knowledge of lifestyle needs, they could wisely counsel their clients on what to watch out for and steer them away from properties that will be problematic. But with the fee structure as it stands, it is not the agents who are the best at providing this kind of service who become successful in their professions. (The agents I have used in the past who gave me the most valuable advice actually made no money off of me!)
The abilities that make a successful agent, to my observation over many years, are the ones who are the shrewdest about first scoping out which potential buyer is going to waste their time or not, and focus in on the ones that has the highest possibility of resulting in a sale, and also being a good judge in knowing when to start pushing a particular property, because the buyer is clearly emotionally drawn to it, and never jeopardizing this kind of situation by pointing out negative aspects to the property.
Lastly, the successful realtors are the ones who are able to get sellers to give them their listings!! This is just great sales skills. Once they get the listing, 90% of the work has been done. The chances that they are going to make money on the deal skyrockets, and they can often just sit back and wait for buyers’ agents to contact them. (In many other states, listing agents don’t even show up for showings. They install locked boxes so buyers’ agents can just let themselves in. I sold a house in Michigan recently, and I was astounded by this. I asked the agent whether a big part of their job was not to “sell” the property to a prospective buyer by physically pointing out the qualities of it and steering them over to viewing the place in the most advantageous way possible, turning on certain lights, downplaying negative factors, etc etc. She looked at me like I was crazy when I asked her this, and I discovered that this, in fact, was the norm in Michigan!)
I do sense that the real estate selling structure is undergoing a change. Because of online access by buyers, the whole commission structure is under assault. But because of this, I notice agents in big agencies have gotten militant about sticking together and not being amenable to negotiating the commission. It will be interesting to see if anything has changed in the next 10 years or so.
Aren’t travel agents kind of trendy again? Like, it’s become something of a status symbol to use one? They’re branded as “travel concierges” or “travel designers” or somesuch and they create “unique experiences” and use buzzwords like “bespoke trip planning” and “curated vacations”.
Or did I dream that after spending too much time in a hipster cocktail bar?
Here is a new business model for real estate business.
“84 months realty”
The first goal would be to assist buyers to purchase the home condo townhome that is most likely to appreciate over the next seven years. Aimed at either first time buyers And people trying to purchase a hike with upside possibilities that are not looking for their forever home. Many people in the city buy and sell within 7 hence the name.
The buyer would put $1000 on retainer in exchange for dedicated support from a real estate agent with very specific training. Their background must be in the trades. Perhaps a former gc, rehabber, plumber, Ho,e inspector, etc. the buyers would tour homes that they had preselected together with the agent.
First meetings would be in an office to set a profile, goals, and budgets. That leads to online searches of appropriate protoerties to target. Each time a property is toured the agent can give real time ideas for improvement with ballpark costs associated. This hopefully leads to a better purchase.
When there is a closing some or all of the commissions earned by the the transaction are credited against that initial retainer. This allows the RE professional to be neutral and give a better advice. They are not pressured to force a transaction just to make that commission. The buyer gets better advice from a true professional. It’s a cross between several models aka “property brothers” meets Redfin meets some lawyers fee structures.
All told this could work for a small but important group of buyers. I frimely believe that there are many buyers who are quite serious and committed to purchase that would gladly commit $1000 upfront to gain insight, construction knowledge, and excellent unbiased advice on the properties that they are viewing.
Thoughts?
“The buyer would put $1000 on retainer in exchange for dedicated support from a real estate agent with very specific training”
Under this business model, how long of a service could this $1,000 go towards? I made realtors look like the shady ones in my last post, but I know a number of people who have spent years looking for a place to buy (or pretending to be serious about looking), and if they stuck with one realtor helping them look, it has taken up hundreds of hours of the poor agent’s time. In most cases, the agents “drop” them, and this is why I wrote that a key component of being a successful realtor is to smell this type of client coming from a mile away. But some agents are so desperate for a sale, all it takes is for the client to keep calling them to convince them there is a sale down the road. Because, in some cases, it DOES finally happen, and in these examples, I would be first to say the commission is heartedly deserved. But, in cases such as this, there is even less of an incentive for the agent to steer the buyer away from a potential purchase not in their interest.
And if, under your business model, an agent trained as you say has already spent 50 hours taking the potential buyers around, with no luck because the buyers are “difficult”, what is the incentive to continue other than the potential commission if a sale indeed does occur? And if this is the case, we are right back to the agent’s primary motivation being successfully pushing a property on the buyer – ANY property as long as he could get these people off his back! I suppose the contract could state that the $1,000 will go towards a maximum of a certain number of hours of an agent’s time, but all that means is that you are paying them for an hourly fee, other than that the agent gets a guaranteed minimum no matter if the the maximum time is spent and no purchase ensues, for some reason. And it t still does not incentivize the agent to do anything to discourage a purchase from occurring, as he stand to gain a lot more in commission than $1,000. If he dissuades a buyer from going through with a purchase, he has no idea if this will result in an actual sale down the road ever. Again, I know many people who have been seriously in the market to buy, and looked for a long time, but never ended up buying because they just could not find anything they liked in their price range, or had a change of plans about where to live, etc etc.
The only real way to have agents’ services truly reflect value to the client is to have them earn 100% of the money on an hourly fee basis, plus costs for advertising, or just a set fee for a successful sale or purchase, not dependent on the price of the property. (As someone already pointed out in this thread, there is not that much work difference between selling a $800,000 property versus a $400,000 one, and any difference in sophisticated advertisement needed for high-end properties can be paid as extra by the seller.)
The reason why this kind fo change in the industry will never happen is that there is nothing in it for the real estate industry. Minimum skill is needed for the kind of services an agent provides. (As I wrote before, I have sold and bought multiple homes without a real estate agent, and all technical knowledge required to complete the transactions were done by my lawyer who charged me $600, and the house inspector who charged $500.) Therefore, relatively few people would utilize the services of a realtor on an hourly fee bases. It would indeed turn into the kind of thing like the travel industry, where professionals are utilized only for complex situations, or in cases where people are really ignorant of even the most basic knowledge on how to find places to stay and ways to travel. Most people would choose to just make bookings on their own.
“and all technical knowledge required to complete the transactions were done by my lawyer”
First off wow on my typos in that post. I guess that is what happens when one of my kids is sitting in my lap while typing on an iPad keyboard. I’m going to proofread before posting eventually.
Your highlighted comment is right on the money. The difference is that this is not just another realtor. It is a highly trained specialist that is educating the potential buyer on actual building flaws, possible code issues, and what the true cost of possible upgrades would cost. This models actually allows the buyer to have a far better understanding on potential of said property to fit their needs and be likely to maintain or grow in value in the next 7 years aka 84 months.
The amount of time the buyers actually get with the specialist in this model would indeed need to be contractually capped. Not sure if it’s on number of house showings or time invested but at some point it transitions.
If they had not yet purchased at least the buyer would then be smarter and have a new level of understading from those showings and become a more educated buyer. The specialist would have some income from the showings on ALL clients. And they could tell if the client was “too picky” and not worth continuing or just unfortunate in not winning offers. From that point they could continue the contract at no additional cost, start a new contract, or essentially fire the client. Time is money and therefore time is valuable.
It will not work for most buyers but I’d bet taut that with good marketing 5% of buyers would prefer this model. It puts the agent into more of a fiduciary relationship with the client. And that is already a growing trend in other industries. Consider the financial services world and concierge physician marketplace as similar examples. Some said that would not work as well but both are thriving.
jp3, the problem is consumer behavior is not rational by in large. As I pointed out above, most consumers rather have a contingency model where they aren’t on the hook for anything even if it is more expensive. A consumer would feel paying the $1,000 or whatever upfront, but they don’t really feel a 2.5% commission financed into a mortgage hence they don’t scrutinize as much.
Consumers also have poor concept of valuing expertise and service. We see this on the mortgage side all the time where you can literally be a fiduciary, provide over the top service, available practically 24 hours, analyses, etc but still lose a deal over a few hundred dollars or .125% in rate to a competitor doing none the above.
Consumers talk a good game but often do the total opposite when it comes to actually opening their wallets.
“Aren’t travel agents kind of trendy again? Like, it’s become something of a status symbol to use one?”
They never went out of business. They simply became more specialized. And yes, a good travel agent is worth her weight in gold, just like a good realtor.
If you want to arrange a girlfriend getaway for 8, or a family reunion cruise for 20 people ranging in age from 2 to 80, or a family trip to Costa Rica, and you don’t want to rent a car, that’s when you call a travel agent. They are paid through a commission by Apple Vacations, the resort, the cruise line etc.
Travel & Leisure magazine still publishes its lists of top travel agents, by specialties and geographies every year. These agents have actually been on the cruise or to the resort. They’re not sitting in an office simply booking the plane tickets.
“But if you aren’t gonna make a complicated trip like this more than once a decade, do you really want to learn Travel Agent 101?”
Travel agents also can get you discounts that you can’t get yourself online.
“A consumer would feel paying the $1,000 or whatever upfront, but they don’t really feel a 2.5% commission financed into a mortgage hence they don’t scrutinize as much.”
I still think for a good portion (not close to majority) of people who are buying homes that are eg $1M, they would pay out of pocket. That said, we don’t observe that option in the marketplace, which perhaps says people don’t want it. Maybe it’s because once you price per hour, then you introduce more direct price competition.
“Travel agents also can get you discounts that you can’t get yourself online.”
Yeah, eg virtuoso or fspp (that’s for you jp3!) benefits are straightforward through a qualifying agent, pretty worthwhile, and harder/not possible to get otherwise. But I also think for a lot of stuff you can gthooi in a few minutes and save yourself the back and forth with a travel agent.
I also think commissions should be structured to provide more sensible incentives. Getting (at most) 2.5 percent of upside for a seller’s agent provides just about no incentive to get the seller the best price–they just want to close the deal. And the incentives are perverse on the buyer’s agent side–they make more when their client pays more. You could for the seller eg offer a higher commission rate but only applied to the portion of the sales price above eg 50% or 75% of the list price. (There’s zero sales effort needed to get someone to pay 50% of list, so why get rewarded for that.)
Sabrina , DZ, and Russ – each of you had great points.
This is for a small percentage of buyers that value professional unbiased opinions. Many many people bring an trusted uncle, friend, or contractor they have used prior to a showing after getting serious about a house. This is just one step further.
Last week we went back to a property that we are under contract on in so WI. There was a structural issue that came up in inspection and I hired a structural engineer to look at the issue.
It’s a home that needs work so since we had the house for an hour I also brought up my plumber, electrician, and a local carpenter. All were able to give great advice on the property. I’m quite knowledgeable on construction but each of them pointed out challenges that I had not budgeted into my purchase price.
They were not there to “scare me off” but rather to give professional assesments of what I wanted to spend on Reno and what other things to expect over first three or four years. It was money and time well spent.
The sellers may be in shock when we deliver the news and request a significant price rexuxtion. The deal is likely to fall apart, but clearly for the right reasons. This is the concept of 84months realty. You do not need this for a 2 bedroom condo in the GZ that is three years old but you will benefit from this perspective on older homes and ones needing significant work.
Look up Exclusive Resorts as a travel option for wealthy individuals that want exceptional service. They can set up a full trip top to bottom with two or three phone calls. My in laws belong and the properties and service levels are exceptional.
You arrive and the fridge is already stocked with your choices. There is an itenirary planned (or not) and they have already access to local place and events. It’s more than just condos with dinner reservations. It is high touch and very special.
So people that have that expectation on vacations are SURE TO COMMIT $1000 or more (mabye based on purchase budget) for professional advice on a real estate purchase!
“And the incentives are perverse on the buyer’s agent side–they make more when their client pays more.”
No agent cares about that… the extra amount they make is peanuts unless you are going from say a $200,000 purchase to like a $750k purchase which almost no one does.
Commissions are typically split 4 ways. To illustrate, let’s say someone is looking at a typical $500k condo. However, they find one at $550k. At $500k, each Agent is getting $12,500 which is then split again with brokerage. So 50% to brokerage and 50% to agent, so agent gross is $6250.
On the $550,000 place, the agent’s gross is $6875. So a whopping $625 increase in commission. No agent is pushing one place over another for that small of an increase in commissions. It doesn’t even register…
Yes but don’t forget that many realtors are living “closing to closing” and only getting 10-15 deals per year. For them $625 per closing may be a bigger deal. But like my examples above they are mostly invested in getting ANY deal to the closing table.
More established agents are far less likely to care about a $50k swing in price. But they too need to get you to the table to stay on pace to hit their goal of xxxx $$$$$ or xxxxx deals per year. Simply put, it’s a production based role. Nothing wrong with that and it does not need to change but that’s what it’s all about.
“On the $550,000 place, the agent’s gross is $6875. So a whopping $625 increase in commission. No agent is pushing one place over another for that small of an increase in commissions. It doesn’t even register…”
That’s totally fair. Was just a debating point, I suppose. But my bigger point is that by these numbers, the seller’s agent also has effectively no incentive to get the seller $550k rather than $500k.
I still don’t understand what purpose big brokerages serve except to simply rake in money. When it’s time for me to sell, I plan to go with a small firm.
Small firm big firm same scenario. The small ones likely take just as big of a cut. They serve a few roles. First they hire agents, often assist them in getting licensed, work with them to get the deal to the closing table, and market the properties collectively. There is more to the broker role than meets the eye.
Anyone ever thought about more incentives for the agent like 2% up to the estimate of f.e. $500,000. every dollar above the estimate gets shared 20/80%, agent/seller
“Anyone ever thought about more incentives for the agent like 2% up to the estimate of f.e. $500,000. every dollar above the estimate gets shared 20/80%, agent/seller”
There are studies (I dunno how reliable and could be other explanatory factors) that agents get better prices on their own places than for their clients. clearly the incentive is to close the deal.
This unit is Pending – FYI
closed $353K
Outside of the West Loop, it’s really hard to hold a property for only 3 years and expect to make any kind of profit (without doing any kind of renovation, that is.)