Commissions charged by Real estate agents, is it worth it?

I am sure all of us have had the experience of searching for a rented flat or for buying a house. One of the major costs incurred in the process is the brokerage charged by real estate agents which is a month rent for a rented flat or a 2-3% in case of a flat purchase. There is no denying the fact that this cost hurts more than anything. Middle men have never been accepted well in the society and it is an endeavor of all companies to do away the middle men who unnecessary increase costs for consumers.

Moreover, we know that according to a simple concept of demand and supply, whenever there is a good supply in the number of brokers, the competition should increase and brokerage charged should decline. But we don’t see that happening even though we find increasing number of brokers in every gully of our city. I think the reason is that these brokers are very dependent on each other and the brokerage charged has to be shared between the brokers involved while renting out a flat or making a sale.

If a flat is sold for 50 lakhs, the broker charges 2% from the buyer as well as the seller. Do you think this income of 2 lakhs is justified in a country where per capita yearly income is just about INR 70,000. And for what?? For handling few legal papers!! Instead it makes sense for both buyers and sellers to get in touch directly so that both of them can benefit in the process.   

Can we as customers do away with this brokerage?                                                 

https://www.facebook.com/groups/flatsandflatmates/ is a good initiative wherein people who want rented flats can directly contact those who is looking for them. No brokerage involved. More such initiatives are needed so that we can do away with the unnecessary costs involved.

Moreover I feel that the disadvantages of hiring a broker are far more than the advantages of hiring them. Brokers do have knowledge of the locality which is not visible to naked eye. Also, they can tell you about the options which you may not find online (that’s rare though now-a-days). But 2-3% commission seems a lot for the service they offer. As the commission depends on the transaction value, the broker can inflate the selling price of the house/rent rather than providing you a discount. More often than not he may conceal certain information like some defects in the house or some hidden costs until you are intelligent enough to ask all the questions.

Weighing the pros and cons of hiring a broker, it seems well in our favor not to hire one. Today one can checkout realty portals and approach sellers directly. This way both sellers and buyers save money on the brokerage.