WHERE DOES THAT COMMISSION GO?

I know it's difficult for sellers to consider a 6% commission for selling their house. If there house sells for $500,000 that's a $30,000 commission - $15,000 for the Listing agent and $15,000 for the buyer's agent. It's important to consider a lot of things before you make your decision. To offer less than 3% to the buyer's agent might be selling yourself short. If the potential buyer has two or three properties they are seriously considering, it only makes sense that the buyer's agent is going to nudge them along to the property with the larger commission!

On the seller's side, you need to take a look at the marketing plan of the agent you are considering. Keep in mind that the Listing agent (as well as the buyer's agent) splits the commission with the broker. Agents have different commission splits depending on the company they work for and their production. Typically, a new agent splits the commission 50/50 with the broker - so that listing commission of $15,000 is down to $7,500 to the agent. An agent on a 50/50 commission split typically has the broker paying 50% of some of their costs as well such as newspaper ads, signs, postage. The agent pays the bulk of the cost of marketing, however, including virtual tours, listing fees, brochures, web postings, etc., etc., etc.

The more successful agent will have a much higher split - 75%-90% of the commission. If the agent is on a 90% split, that's $13,500 to the listing agent. But the costs go sky high as well. The agent who is successful and productive has developed systems and networks that have brought their success. They control multiple web sites to showcase your property, do constant marketing and mailing, know the market like the back of their hand when it comes to pricing and how to overcome potential downsides, have support teams in the office - often times including buyers agents on their team. Their network of other top producing agents as well as trades people, mortgage bankers, staging specialists, photographers and videographers, and pool of potential buyers, provides the best service and best chance of selling your home quickly and at a good price!

Where we are the listing agent on a property that sells for $500,000, our typical cost is between $4,500 and $5,500 in marketing, materials and support. Will we cut our commission? Yes, we will, but when a commission is cut, so are the expenses - makes sense!

So, what this boils down to - if you are considering selling your house - don't just hire on a friend, interview several top producing agents in your area. Ask lots of questions, get detailed marketing plans! Don't get excited about an agent that is free to hold your house open every weekend - less than 5% of sales come from open houses - you need the agent who can get to the other 95% of buyers.

We'll talk some other time about FSBO sales (For Sale By Owner), Discount Brokers, anything else you might fine useful. As always, hope this sheds some light. Please feel free to comment or ask questions, this is fun!

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