Cap on Commissions

Cap on Commissions

In the last two years several companies have received assistance from the government.

These huge bailouts mostly have been given to insurance companies, financial institutions, and automobile companies.

As a result of these companies being saved by taxpayer money, the government has determined that it also has the right to control some of the practices within these companies.

Most recently we have been hearing about limits to higher management's compensation. The top executives may have their pay cut by as much as 90%. Some of it may be made up for in stock options so there is at least an incentive to have the company perform well, but nonetheless, their pay will be significantly reduced.

Whether the bailouts should have taken place at all was a topic of debate, although very little debate, as this legislation was easily passed. Should the free market have adjusted itself or were the temporary consequences of no action too likely to create a catastrophic economic situation?

The results of the bailouts can be debated, but it is somewhat of a moot point since it has already been done.

In another part of the economy, the government also has extended help with the taxpayer's money. This has been in the form of the $8,000 tax credit to first time homebuyers. This program is likely to be extended past its original cutoff date of November 2009 and quite possibly will include more than just first time buyers.

This program like the bailout program can be debated as to its pros and cons.

For instance, one may wonder why there are not more buyers given the extremely low home prices and the very low interest rates. Would it be more cost effective to advertise the fact of these incredible buying conditions, rather than give away $8,000? Will this program encourage buyers, who were otherwise being conservative with their money, to purchase a home prior to the economy stabilizing, and then, possibly lose the home if they are caught in the unemployment lines?

If the program is extended, should their be some form of oversight on the people who are most likely to benefit? One group of individuals which would certainly benefit would be real estate agents.

Should there be a cap on commissions?

If an agent sells two houses per month at an average price of $300,000 and receives 1.5% commission after a split with their broker, then they would be making $108,000 per year. This is far above the average household income. Might it not be more appropriate to limit the commission to $3,000 per sale? This would yield with the same number of transactions a very respectable $72,000.

So many real estate agents are gungho about the tax credit that I thought I would talk about their pockets instead of the taxpayers pockets.

What do you think?