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Real Estate Commission...Sellers, It's Not Always What You Think

I walked into a small real estate office in rural Ireland while I was vacationing recently. After some discussion about the real estate market in the area, I asked, "How much do you receive for a real estate commission here, if you don't mind my asking?" "We get 1 and a half percent." I was floored, mouth dropped. "That's ALL?"

Then she started to explain that she gets 1 and a half percent as the seller's agent; the buyer's agent gets 1 and a half percent, and the broker gets 2 percent for advertising and administration costs.

A light bulb went on. I had never heard an agent come out and say what his/her portion was, only the total commission. And I wondered if most home sellers in New Hampshire understood that their agent often has to share the total real estate commission.

As a home staging business owner in New Hampshire, why do I care if home sellers understand the structure of a commission ?

Because home sellers ask me, "Why shouldn't my realtor pay for home staging? Why should I pay for marketing the house? I'm paying XX thousands to him for that!!"

No, that whole commission doesn't always go to the one listing agent. And Realtors can't be expected to pay for home staging.

Staged First Impressions would like homeowners to understand the process of selling their property so that they feel as comfortable and informed as possible.

*the exact breakdown of real estate costs varies...ask your Realtor if you have questions.

Posted by Sue Argue - NH Home Stager on 05/20/2007 05:43 PM

Comments (26)

home staging, nh, new hampshire, staged first impressions, realtor

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26 Comments on Real Estate Commission...Sellers, It's Not Always What You Think

MAY

2007

Good post. I really think that many people feel that the listing agent gets the full commission charged. It wouldn't hurt to point out that they don't when handling commission objections.

In many ways, the real estate profession is a mystery to most people. When you consider that, for the average person, their home is their single biggest investment vehicle, it is truly amazing that many of them know more about their Christmas Club Saving program than their real estate. This is just one of the big misconceptions about real estate. I am sure our Realtor friends appreciate you informing the public on your website.

James, thank you for stopping by here.

I think it's easy to assume; we forget to step back and begin at the beginning.

Anne-Marie, I agree.

A seller might not want to sit and listen to the agent explain all of the details of the real estate transaction, but they just might be the same client that complains about "the big commission".

Sue, This is a great idea. Helping clients understand makes such a difference in their ability to "cope" with the process. Just today, I was on time for an appointment and found that I was being kept waiting. I was not happy about that. Then, one of the people in the business where I was waiting explained to me what was delaying the process. Instantly my attitude changed. I was willing to wait because I knew I wasn't being neglected, there was a true problem which was being dealt with. After that everything went smoothly and I was satisfied with the outcome.

Yvonne, it only takes a minute to explain sometimes, and makes a world of difference to the consumer.

MAY

2007

Sue,

A breakdown of"who gets what" should always be part of a thorough Listing Presentation...if it isn't an Agent is doing hi/herself a disservice!

It certainly helps explain value!

Sue I really enjoyed your post - it ties into a theme I've been exploring in my posts about communicating the value - most people don't know what goes into it and a lot of that is OUR fault. thanks for the thought provoking post.

Joan, I agree with you there.

Cyndee, I think it's easy to assume what the average consumer knows. At the listing presentation, it's hard for a seller to digest all of the information at once.

It's always tough because agents don't understand the messages they communicate to the public with their advertising. For example, many, many agents proudly tout that they are a multi-million dollar producer. Does this mean that they make millions each year? If so, maybe they can afford to pay for the staging, etc. to get a home sold.

However, we in the business all know what multi-million means. Now, if only agents would communicate it better to the public you might not be faced with this situation as much.

Very informative post Sue and how cool is it that you stopped in at a real estate office in Ireland to have the light bulb go on! I don't understand why the topic of money and commissions is so touchy for all involved, it is a necessary part of the business and the general public doesn't always understand the breakdown. This can put to rest the perception that Realtors make the total 6% commission. Again, it is through education that everyone can benefit and understand why they are "investing" in the sale of their home.

Keep in mind a lot of this thought process by the consumer is the result of the way real estate agents project themselves to the public. Our public sees all real estate agents as rich and in the money.

Steven, wow, you're exactly right! And perhaps if you are a million dollar producer you are too busy to sell my little nest? Good comment.

Karen, my 83 yr old mum was with me and she needed some breaks...so I wandered off on my own a bit.

Well, I think people get protective of disclosing their salary, no matter what profession they're in. It's a private matter. But agents should let the seller know that they don't receive ALL of that commission money.

Talking about money can be awkward, yes?

Gene, it's a challenge, isn't it? You would think that having the cool expensive car and drop-dead clothes, McMansion etc would foster an image of success and confidence, but sometimes it backfires. People do get resentful of all that money!

George Tallabas here at AR wrote a blog about "changing his attire", essentially dressing down, with a sharp increase in customers. That blog has had over a thousand readers! I suspect you are right, Gene. People perceive the high salary, and they steer away from it with disgust.

A balancing act for realtors.

Yes money talk is awkward, but knowing the breakdown of the commission is what I was after here - that helps the general public get a better understanding of what is really being made and by who. There truly is a perception that the listing realtor makes all or most of the commission.

Joan Mirantz said it best,
"A breakdown of"who gets what" should always be part of a thorough Listing Presentation...if it isn't an Agent is doing hi/herself a disservice!" This was something I learned today through Joan's comment on your blog. Education, education, education- gotta love it!

MAY

2007

I like disclosing the commission breakdown.

Very clever way of presenting the commission. I've been tempted in the past to break it down for the seller, but have not elected to disclose my own % for fear it would create a new problem.

Rebecca in Creedmoor , NC

Thanks for commenting, it's great to hear input to see what other folks are doing.

Hello Jeff from Lancaster, Penn.

I think people like to know the inside scoop when doing business; they feel that you are being up front and honest.

MAY

2007

I like to remind people, "you know how I get paid, right?" I might start adding, "and it gets split 4 ways, before taxes, health insurance and both ends of FICA/Medicare."

Rick,

Sometimes people honestly don't know the breakdown, no one has ever spelled it out before. Older folks may not have sold a home for decades, and everything is new.

Portland, ME, we are practically neighbors!

AUG

2007

Hi Sue,

Great post!

I recently changed my Seller's Net Proceeds Form, where I break down all of the seller's expenses when we receive an offer. Instead of having just one line for real estate commission, I added a listing company line and a selling company line.

That way the seller has a better understanding that all of the money isn't going to one place...me!

Dan,

I think it's important that sellers understand the commission. There are wonderful marketing tools out there called home staging and staged photography. Realtors cannot be expected to pay for all of the marketing out of their 2% or whatever it is.

If it's a well-priced million dollar home with a one year listing contract, that's one thing...

SEP

2008

Great post, we are looking into adding this to our listing presentation as well. We are so used to doing so many behind the scenes things that the seller doesn't know about to make the home sell smoothly, that we think with a breakdown they can see why they made the right choise and used a Realtor.

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