The Ins and Outs of Real Estate Commission- Negotiating it, Paying it

jcon4586l

Is real estate commission negotiable?

Everything in life is negotiable! Real estate agents charge anywhere from 3% to 10% and beyond. Typically the amount of commission you are charged is related to the services provided and type/price point of property. For example, land listings, commercial listings and mobile homes are often charged a higher percentage than typical single family stick-built homes.

While commission can be negotiated between the seller and Agency, be wary of the agent who is quick to give up commission just to get the listing. How quickly will an agent negotiate away your money if he/she can’t even negotiate to keep their own?

What does commission pay for?
Not just the $900/month Mercedes payment your agent is stuck with. Agents use commission to fund their marketing and advertising. If your agent is sending out postcards announcing that your home is for sale- that runs a couple of hundred dollars. If your agent has a “featured listing” space on Realtor.com or Zillow.com, that carries a monthly fee. Most agents will provide refreshments at Open Houses, print out brochures and pamphlets listing all of your home’s special features. All of this is factored into commission.

Then there is the issue of paying a buyer’s agent. Your agent will take a portion of their commission and split it with the broker representing the buyer. Smart agents will “incentivize” buyer’s agents with a higher than traditional cut of the check. All of this to get your house sold!

copy_0_re74

For example, let’s say a dollar bill represents the commission your agent receives from you (nice job negotiating THAT, by the way). Your agent pays 50 cents to the buyer’s agent for their wonderful representation in the sale of your home. Your agent then takes the remaining 50 cents and gives it to his broker, who gives him back a quarter (this is in a traditional brokerage). Out of that 25 cents, all of the advertising is taken, taxes are paid, etc. Puts it into perspective, doesn’t it?

Here is a tiny representation of that breakdown. Can’t seem to find a great pie chart generator.

oZdrvexU (2)

4 thoughts on “The Ins and Outs of Real Estate Commission- Negotiating it, Paying it

  1. Good post Nichole. Overall, your discussion on real estate commissions was educational. For future discussion, it would be interesting to see the “advertising and expenses” broken down even more in the pie chart. Even better, seeing data on effectiveness and reach for each marketing process would be great to learn more about, especially for consumers. Also, if the brokers are apart of franchises, it would be great to see the percentage commission paid out to be a franchise brokerage.

    –Corey

  2. Pingback: 10 Points To Cover When Interviewing a Real Estate Agent To Sell Your Home | Nichole Fecteau

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s