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How to Save Half of a
Realtor's Commission
How do you hire a full-service
realtor and only pay half a commission? It is always
surprising when a homeowner is going to hire a Realtor®
to sell his property, especially when he next
complains bitterly about paying 5% or 6% to someone
who he believes does little or no work. Usually the
seller marks up the property to cover the commission
which over-prices the property and the result is it
doesn't sell.
Usually, the commission paid to a Realtor® is split
equally between himself and his "broker",
who is the licensed agent in charge of a particular
firm. If the commission on a sale is $20,000, the
realtor® and the broker each get $10,000. Newer
methods of payouts to agents include paying "desk
fees" to the broker in exchange for higher
payouts. For example, if the agent pays $135/month as
a "desk fee" he may be entitled to a 95%
commission while an agent paying $60/month may only
entitled to a 70% payout.
If the agent doesn't sell the property he listed, but
another agent does, the buying and selling brokers
each get half of the commission and the 3% commissions
are again split with the agent so he gets 1 1/2 % net.
So for a $20,000 commission the split looks like -
$5,000 each to the two brokers and $5,000 each to the
two agents. This is a simplified summary of the
process but illustrates the payout procedure. If the
agents are on a higher payout because of their monthly
desk fees, their portion of the commission is
increased and their broker's portion is reduced
proportionally. Industry statistics show that 95%+ of
the time the listing agent does not sell the property!
So the real money for a realtor is in getting the
listing and having another realtor® sell it. The
largest commission producers in the industry sell
listings and not properties.
The way to save at least half of the realtor's
commission is to list with a flat-fee broker who will
list the property on the MLS® (Multiple Listing
Service) and Realtor.com® but who does not show the
property. The buyer for your property will come from a
"buyer's agent" who brings a client to see
your home and make an offer. He is interested in
receiving his usual 50% of the full commission or 3%
of the sales price. If you offer a 3% commission to
the buyer's agent, you have saved 3% by not having to
pay the seller's agent (listing agent)! In the above
example of a $20,000 commission, the agent who brings
the buyer still gets $10,000 but you are saving
$10,000.
What if you are unfamiliar with the sales and
contracting process and you need help? For the $10,000
commission savings you can hire an attorney to review
any contract and give you advice usually for less than
$500 so you are still ahead $9,500. But better yet,
the attorney can give legal advice that your Realtor®
can not, and you have recourse against your lawyer if
something goes wrong.
So to save at least 50% of your commission, should you
decide to have a Realtor® sell your house, use a
buyer's agent only and offer him a 2.5% or 3%
commission. Another unique benefit of only paying a
buyer's agent is that if desperation sets in and you
need to sell quickly, you can increase your payout to
the buyer's agent and attract many more buyers than
using a seller's agent. The highest commission seen in
the past year is a 12% commission to buyer's agents
for condo units. In the depressed condo market these
days, it is not uncommon to see 10% commissions to
buyer's agents. So if you have decided to sell your
home on the MLS using a Realtor®, you can save
substantial money and sell your home faster by
focusing on paying only a buyer's agent to sell your
home.
~by Dave Dinkel (www.fsbotlc.com).
Article courtesy of Article Rich.