Benjamin Franklin famously said: Nothing in life is certain except death and taxes. When I read a recent article by Robert Bork Jr. saw claims that the affordability crisis is due to some kind of “Realtor® tax,” I paused. The only Realtor® tax I am aware of is the 15% self-employment tax that I am subject to as an independent contractor, on top of the taxes everyone else pays!
I’ve been in this industry long enough to know there’s a lot of misinformation out there, but calling our profession the reason for high home prices? That’s not just wrong. It’s lazy. And it’s time we clean the air.
Choice, no tax
This is the first thing we need to make clear: it is not mandatory to hire a Realtor®. Homeowners have always had the option of selling “For Sale by Owner” (FSBO). Furthermore, today buyers and sellers can choose from a wide range of business models, from lower-fee brokers, to flat-fee services, to full-service concierge representation… and spoiler alert: it always has.
When critics claim there is a “baked-in, guaranteed” benefit that artificially inflates housing costs, they are ignoring the reality. Consumers have choices. They have always had choices. That’s one of the things that makes our real estate system work and keeps us accountable. We are just a convenient scapegoat for other cost increasers.
Commission is earned, not owed
Let me remind you how Realtors® actually earn their wages. I don’t get paid, and neither do most professionals in this industry. I don’t get paid until the closing table of a customer’s successful transaction.
That means months of preparation, showings, marketing, negotiating, consulting and troubleshooting – all on me, no guarantee of compensation. If the deal doesn’t close, I don’t get paid. Period. In fact, I have no money of my own since much of what we do to help a client succeed requires me to come out of my own pocket up front.
Calling that compensation a “tax” is not only misleading, it is also insulting to the thousands of micro-entrepreneurs in this sector who wake up every day to go to work for their clients with nothing but the hope and prayer of eventually being compensated.
The real reason why house prices are high
If you want to understand what’s driving today’s housing costs, look at supply and demand, not Realtors®. We are facing a housing shortage caused by complex issues such as restrictive zoning, limited new construction and yes, immigration pressures that are increasing housing demand.
Add to that the inflationary environment caused by the Federal Reserve’s policies, and you get the current affordability crisis. Blaming Realtors® distracts from the real forces at play.
Beware of ‘price fixing’ arguments
When I hear someone as esteemed as Bork suggest that the Supreme Court should step in and determine which professionals are “allowed” to sue, I worry. Not just for Realtors®, but for every small business in America.
By telling entrepreneurs what they can and cannot earn, they enter dangerous territory. That is outright wage fixing by the government, and it is contrary to the principles of the free market. Ironically, many of the critics making these arguments come from organizations that typically defend capitalism and free choice.
Here’s the truth: commissions are negotiable, consumers have options, and professionals set their fees based on the value they provide. This is how the marketplace works. Everything else is Marxist talk, not common sense economics.
The cost of doing business
If you think Realtors® are overpaid, I encourage you to sit down with someone in your community and ask about the cost of doing business. You’ll hear about skyrocketing costs thanks to inflation, new marketing technology, fewer transactions due to tight inventories, and the constant need to reinvest in education, technology, and compliance.
Right now, Realtors® are also facing unprecedented lawsuits and regulatory changes that require constant adaptation. Despite these headwinds, most professionals I know are laser-focused on improving the customer experience, because excellence is the only way to thrive in today’s market.
The American Way: Choice and Value
The core of this issue is freedom of choice. Just as consumers can decide whether or not to hire me, I can also decide whether or not to hire them as a customer. Maybe we’re right for each other, maybe we’re not. That’s how a free market works.
When someone labels Realtor® compensation as a “tax,” what they are really saying is, “I don’t see the value.” And that’s okay. You don’t have to hire me. But just because you don’t hire me doesn’t mean I don’t have value to someone else.
If you’re a Realtor® reading this, here’s the message: don’t be passive about this story. Our profession is under scrutiny and the best way to combat misinformation is through education and action.
– Inform the public. Take the time to explain how commissions work, what clients get when they hire you, and why it’s important. Don’t assume people know. They don’t. Yes, you have new state forms and new rules. Explain it carefully and if you’re still not sure how best to do it, just ask!
– Show your value. Every interaction is an opportunity to demonstrate professionalism, market expertise and care for your customers and the general public. The more visible your value, the harder it is for critics to dismiss it.
– Participate in advocacy. Stay informed about regulatory and legislative updates. Be part of the solution in shaping the future of our industry, not just react to it.
– Taking excellence to the next level. In a market with fewer transactions, the brokers who do well will be the ones who provide a best-in-class experience every time.
Final thoughts
There is no Realtor® tax. There’s a challenging housing market, complex economic pressures, and a profession full of hard-working Americans doing their best to help people achieve the dream of homeownership.
To those who think Realtors® are the problem, I invite you to put yourself in our shoes. Spend a week navigating contracts, negotiations, inspections, financing, and the rollercoaster of human emotions that come with buying or selling a home, and do it all at the risk of making nothing if the deal falls through. We will see if you also fit into prospecting work, so that you have someone with whom you can carry out those tasks!
You’ll soon see: there are no taxes here. There’s just hard work, choice and value. And that, my friends, is the American way.
Leigh Brown is the broker/owner of One Community Real Estate.
This column does not necessarily reflect the opinion of HousingWire’s editorial staff and its owners. To contact the editor responsible for this piece: [email protected].
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