The Real Estate Commission and Other Factors to Consider When Hiring a Realtor to Sell Your Home
The commission the seller pays is split between the Selling Agent (the person with the buyer) and the Listing Agent (the person with the seller). So if the commission is 6% then typically 3% will go to the Selling Agent and 3% will go to Listing Agent.
Increase The Chance Of Your Home Selling With The Mutiple Listing System (MLS)
The Multiple Listing System (MLS) is a Realtor database of properties for sale that the Listing Agent markets their seller's property in if they are going to pay a Selling Agent to bring their buyer. There are Listing Agents that want to keep the whole commission to themselves and do not put their listings in the MLS. However, they are doing their sellers a disservice because 84% of homes are sold through a Realtor. Homes that are not listed in the MLS only sell for about 16 per every 100 homes sold. Thus selling without a realtor is as if you were in Las Vegas and you put the value of your house down on a number on the roulette wheel that had 16:100 odds. Would you do it? Then why would you not put your home in the MLS?
But just putting the property in the MLS is not enough. Not every home in the MLS sells. It takes the marketing copy using facts, figures and other time tested wording to draw the buyer to your home. Then using various proven marketing platforms to get the word out. You want your home on youtube, facebook, twitter, blogs and more...
The Selling Agent (the person with the buyer) Sees the Commission and Bonus that They Will Be Paid
The commission paid to the Selling Agent (the person with the buyer) is listed in the Multiple Listing System (MLS) on the properties for the Selling Agent to see. The Selling Agent (the person with the buyer) reviews the properties for sale in the MLS that are appropriate for their buyer and sees what commission they will be paid on each property. They will also see if there are any bonuses offered to the sales agent.
Now put yourself in the Selling Agent's shoes. You can sell House A or could sell House B. But house A will pay you $1,000, $4,000, $7,000 or MORE! You have mortgage payment, bills, & children to support. Which house would you like to sell? So as a Seller you want to make sure your commission paid to the Selling Broker is at least in-line with the rest of the comparable houses on the market. If you are in a really tough market then you may consider offering a greater sales commission or a sales bonus. After all, you see builders doing it all the time. Your Realtor should be able to tell you what the other properties are offering as commission to Selling Agents.
The Listing Agent (the person with the seller) Who Pays For Their Own Advertising Has More Of An Incentive To Sell Your Home
Now let's look at the commission paid to the Listing Agent. Unlike other professionals, they are not paid per hour or cost plus. Yet, they take all the risk of putting their time & money into advertising the seller's property in order to get it sold. They might also have a staff or assistants plus other office cost they may pay for. The more advertising the listing agent does then the more money they have put into your property. Thus, the agent has incentive to sell your house as quickly as possible so as to keep the expenses down if they pay for own advertising. Each agent is different so you should check their marketing plan and find out if it self promoted by the Real Estate Agent or if it is the Office's marketing plan.
A Lower Cost Listing Agent Will Give Lower Cost Service
Some sellers might consider going with a broker that will list the home for less then market rate. But the logic follows in order for that person to do so then they do less advertising in order to pay less expenses. When someone is paying less out of their own pocket to sell your home then they obviously have lesser of an incentive to get your house sold. They usually have limited services and don't have a pool of waiting buyers. They also don't have the extra training and knowledge needed to get your home sold for the most money in the lease amount of time:
However, we can take it one step further. If you consider the fictional 3% as what the Listing Agent receives when a home closes, then you must realize that up to 50% of that goes to the Broker of the firm to cover hard cost of office expenses, staff, etc. So the listing agent is left with 1.5% percent. Typical advertising cost takes 1% so that the Listing Agent is left with .5% before taxes.
We have already seen one discount broker go out of business due to the turn in the market. Can you risk the sale of your home on someone who might not be in business 3 months from now?
What A Reduced Listing Commission Means
So when you are haggling with the Realtor to reduce their cost you have to understand that you are either reducing the amount the selling agent will be paid or the amount of advertising you will be getting (after all that Realtor is going to work hard and fast with the numbers to try to keep the .5% to cover their own bills). In lowering the commission to selling agent or doing less advertising it will ultimately effect how fast and how much your home will sells for. And you want a full service agent that will stay on top of everything that needs to be done to get your home sold:
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