Real Estate Agent:
Commission or Salary?

The debate continues whether real estate professionals should receive a salary instead of a commission which, some believe, is already too high in housing transactions

Commission or salary? This is the question that many consumers are asking their agents in regards to their form of compensation at the moment of buying or selling real estate. The main implication for the user of real estate services is considerable savings, since companies with salaried agents tend to charge a lower commission.

“In 75% of our transactions, the commission is 1.5%,” says Paul Yalnezian, president of Right Home, a real estate service firm in Glendale. Compared to the usual 6% commission (although it may vary, since it is negotiable), this would mean savings of $18,000 on a $400,000 home, since 6% of 400,000 is 24,000, and the 1.5% is $6,000.

Yalnezian explains that in the other 25 percent of cases, the commission can increase 2.5% or 3% if the buyer brings in an agent external to the company, as this is the percentage that the other agent charges.

Naturally, many traditional real estate professionals oppose the idea, arguing that not only does it harm their interest but also that of the consumer.

“When the agent receives a salary, he is not motivated,” says Richard C. Davis, owner of Trademark Properties in South Carolina. “It goes against human nature to work the same amount when one receives less, and in the end, this translates into a poor customer service.”

Davis states that he has tried both payment systems with his agents, and that the evidence demonstrates that the most effective agents are those who work for commission.

However, Yalnezian indicates that he motivates his employees with bonuses that are added to the salary, and that are based on a survey handed in by clients once the transaction is completed. The expert states that his professionals are totally committed to providing the best service, and many of his clients also confirm this.

“Tired of having my house up for sale for eight months with a known real estate agency, I decided to try Right Home,” says Lisa Naila, referring to the first home she sold through this firm, and who later used their services once again for the sale of a second home in La Crescenta. “Not only did they sell it in four days but the commission was only 1.5%, because they found the buyer themselves.”

Anet Pehleberg, also a Right Home client, indicates that a positive aspect of salaried professionals is that they are not under the pressure of having to complete an operation to get paid.

“Yalnezian’s team always had time to answer my questions and, without charging me extra over the low commission, provided me with many other services, like those of the firm’s lawyer,” says Pehleberg, whose case was a complicated one, involving the sale of a property in Sunland after a non-friendly divorce which had many unresolved legal aspects.

Both options are good

Mark Bolender, a Re/Max agent in Valencia, considers it good that both options exist in the market (salaried and commissioned agents) and does not believe that the former are a menace to the latter.

“There are clients for both types, but I personally believe that those who work for a commission generally do a better job,” says Bolender.

Silva Mirzoian, of Mirzo International Inc. in Beverly Hills, states that 78% of the new real estate agents abandon the profession in the first 18 months. “If they were salaried, it would be very costly to the agencies. Mirzoian adds that as an intermediate solution, some agents in her firm charge a flat fee instead of a commission.

Yalnezian asserts that his standing is not too popular in the industry to which he belongs. “Let’s just say that I’m not the favorite guest of the real estate parties,” he says ironically; nevertheless, he participated in the annual convention of the California Realtors Association (CAR), held Wednesday and Thursday of this week.

June Barlow, CAR’s general counselor, indicates that neither this organization nor the existing legal norms in the profession have the power to regulate the payment method for agents.

“It is something negotiable and subject to each company’s criteria,” says Barlow, who emphasizes that in this sense the “market commands,” and that it is the client who determines that in most of the cases the services are paid through commission.

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