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What's Your Commission? On Hiring a Realtor Based on their Fee

What's Your Commission? On Hiring a Realtor Based on their Fee...

I always say (oh well maybe somebody did say it before me) - if the Realtor cannot negotiate their own Commission then how are they going to negotiate the best price possible for your home? Negotiation skills. I would think, given a choice - you would want an aggressive negotiator, not someone that either doesn't believe in their own ability or the value of your home!

The question that begs to be asked is....Why do some Real Estate Agents offer Discounted Fees? Is it because they're the Good Guy? They just want to see more money in your pocket then theirs?

Well there could be a number of reasons:

- they feel that's the only way they can compete

- they have poor negotiation skills

- they have trouble justifying their own worth

- they're hoping to make up for it in volume

- the agent is desperate - any commission is better then no commission

- qualifications/experience of the Realtor

- you're willing to do the marketing instead

- they feel sorry for you

- they believe in pro bono

- having a sign on your lawn is more important then the commission

So let's do a little review.

Did you know that 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. Sometimes we Realtors assume that you know that! However I'm pretty sure that some of you think we get the whole kit and caboodle!

Do you know that there are Real Estate Companies out there that Do Not put your home on The Mutiple Listing System (MLS)? They have this 'exclusivity' thing happening. They think that their paycheque might be a lot bigger if they do not have to co-operate and share their commission if they get to to List AND Sell your home. Be sure to ask them what portion of the commission you are paying will be going to the Selling Broker. How much longer do you think it will take to sell your home if it's only YOUR AGENT that's trying to sell it? I think I read somewhere that it's like 16:100 odds.

When looking at an MLS Listing - the Selling Agent can see the commission they will be paid. It may not show up on the Public Version - but that information is disclosed in the Realtor's version. Note: It's the Selling Agent that reviews the properties for sale in the MLS and most often choose those they deem appropriate for their buyer. Guess what? Herein lies the conundrum.

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?

Did you know that unlike Doctors, Lawyers and Government Employees - Realtors are not paid per hour. But we do take all the risk by putting our time & money into advertising YOUR property in order to get it sold. Chances are we also have an OFFICE cost, MLS Fees, Board Fees and more! Do you know that we only get paid if the Seller sells and the Buyer buys? If they don't our costs are not recovered.

So no - commission is not regulated - there is no set rate if you're selling your home - but it IS a good idea that the commission you're paying the Selling Realtor is in-line with the rest of the comparable houses on the market. Market slow? Well in that case you might even consider offering a greater sales commission or a sales bonus. You say WHAT??? But look at it this way. For every week/month your home doesn't sell - how much will THAT cost you? You get to choose!

Still think you'd like to go with a Discount Broker?

*Please note - this is not meant to suggest that the Commission fee charged is the only criteria - there are many, many different aspects to hiring the right Realtor. Please check out these posts:

How Do I Find a Good Realtor?

Is It Wrong to Work With More Then One Realtor?

Speaking of Statistics...What's the Difference Between Median Price and Average Price?

Don't Have a Site Survey - Title Insurance - Should You Get It?

If you or someone you know is thinking of Buying or Selling property in Cultus Lake, Chilliwack, Hope, Abbotsford, Langley or anywhere in the Fraser Valley Area of B.C. - or if you would like more information please give Liz Moras of Landmark Realty Chilliwack a call at- 604-799-0459 or e-mail at lizmoras@gmail.com.

Copyright © 2009 By Liz Moras, All Rights Reserved. All photos by Liz Moras ( except the one's I'm in!). All information provided by this author is only an opinion, it is not guaranteed, may be based on information collected from several sources, and may be time sensitive. It is not necessarily representative of the opinions of Landmark Realty Chwk. Ltd..

Posted by Liz Moras ~ Chilliwack Realtor, Garrison Crossing,Chilliwack, Abbotsford on 11/14/2009 08:23 PM

Comments (28)

Commission in the Home Selling Channel

realtor commission, discount commission

Originally posted at: Liz Moras' Real Estate Blog: What's Your Commission? On Hiring a Realtor Based on their Fee

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28 Comments on What's Your Commission? On Hiring a Realtor Based on their Fee

NOV

2009

This is a fantastic series. Such good points you make. Nice graphs too.

Excellent points Liz. Sellers need to know the reality of discount brokerage. They just compete on price as if that was the most important thing. The most important thing is having someone who will represent your interest well instead just trying to persuade the vendor into accepting an offer so they can put another sale on the board like a notch on the barrel of their gun. I have seen too many agents treat vendors like the enemy. Their objective is make the sale. What about the professional actually representing the vendor's interest?

You get what you pay for. There is no way anyone who discounts a commission will do the same amount of marketing that a full commission agent will.

Excellent post Liz. We don't turn down any listings - except the ones that want us to lower our commissions. You get what you pay for, and our services and representation are well worth our commission. So your right... when looking on the MLS, herein lies the conundrum.

Liz, I knew some of this but not all of it. We have the "exclusive" thing going on here and it amazes me they are still doing that in this market. I have to wonder if those people are serious about selling. I did just find out they have a "public" and "private" version on the MLS.....but didn't know how they split the commissions. Thank you, I learned a lot from reading this (and bet many others did as well).

I've heard all of this, and I believe there are soe agents who reduce their commission because they genuinely want to help their clients (I've done it for friends), but most of the time, they're simply not strong enough to stand up for their own worth... or lack thereof as the case may be. I could write an entire blog as a comment to this. But I'm tired. LOL Good night ;-)

Hi Liz!
I guess I have more of an idealistic approach to my commission. I don't expect anyone to base their decision on who they have represent them by the commission that Realtor charges. I also, for one, never (and I really do mean NEVER) look to see what the commission is that is being paid, much less base what I am showing a buyer on that number. I find it difficult to believe that a buyers agent can actually purposefully sell their buyer the house that has the higher commission (buyers just aren't that easily swayed).

I have often heard agents that charge a higher commission use the quote of "if they can't negotiate their own commission, how can they negotiate a contract for their client". To be honest, I have never understood that quote. It seems like it is comparing apples to oranges. I am not a discount Realtor, but I also have never had to defend the commission I am charging. When I am negotiating for my client, I am not defending anything...I am just trying to create a win-win result.

Paula all good points! I believe most realtors have had to negotiate their commission at some point. You may be dealing with clients knew to the area who don't know you or your reputation. I also know that many realtors do check the commission payable when choosing homes to show. Whether that is reputable - NOT - and I don't recommend that approach - nevertheless we'd be remiss if we didn't tell our clients that this is what many Realtors do. Our job is to inform, educate and then let them decide - and then in turn we can decide! :-)-

Lisa - when it's friends and family - its not so much that we're negotiating - it's a gift we choose to give - at least that's how I feel :-)

Carole - yes I would expect Realtors to know this - but it's the public and non-Realtors we need educate and I'm glad some of this information was helpful! :-)

Lee and Carole - we all get to choose - and thats the good thing :-)

Pam I do think that usually we get what we paid for :-)

Greg - I think we haven't always done a good job explaining to the public and/or our clients what it is we actually do for them........sometimes all the behind the scenes work is a secret....I wonder why?

Tammy - thanks - a series like this has been on my mind for a while now :-)

NOV

2009

Liz - you rock, of course! Dare I reblog you again? I would hate to be banned form that with you! LOL very nice:) Good points and well stated!

Of course Courtney I love it - re-blog away! :-)

Liz, If I could do 3 times the business I do now, I could do it for 1/3 the price, but why would I? When a buyer asks us for 1% or 2% of our commission, they really mean 1/3 or 2/3's. I'm tempted to agree to one of these arrangements and at escrow give them 2% of my commission. Let see, that would be 2% of $8,000.00, that would be $160.00 I'd do that, wouldn't you?

I wrote a blog a while back about the success of limited service companies, or the lack thereof.

Liz, your words are always so eloquent. My favorite part of this post is the "Why" realtors (or agents) might give a seller a discounted price.

Liz

I have actually heard from a few agents that they feel 'guilty' earning that much on one transaction! Yet, in 4-7 months I never hear of them again and I find out they are out of the business. I wonder why?

Wow, you didn't get the same "feedback" I got. Go check out my reblog. I think this is such a great post for agents who need the tools to be able to justify their pay - no matter what that is:)

Liz,

Most of the time, it's the only way they can compete. Then again, a lot of the discounters if they do advertise their discount, generate a following.

Brian

Liz --- very good post --- when I was listing and selling, I would tell my potential sellers who tried to reduce my commissions :"Do you ask your doctor to reduce his fee? Of course not, I am a professional just like your doctor -- I earn my fees." It worked 99% of the time.
BTW -- I like your new photo.

Hi Liz...Consumers should also ask who is paying for the Marketing..a discount Broker has little to no money to advertise and market a property for very long...

When Consumers ask me to lower my commission ...I ask them "what part of my marketing would they like me to not do"...

As for some Realtors charging more than others... You get what you pay for...having said that Some Realtors should charge less :O)

Interesting Post. I give home Buyers Choices too... they can pay me or I can find a Sellers Broker that will pay me my commission when I sell them a home.

We all have choices that's the Best think about living where we do.

Hi Fred - good points - and the 'marketing aspect' is a key - lol - true that some 'should charge less'....And we are lucky we can 'choose'!

Liz - thanks about the photo! :-) I do think that one of the reasons people sometimes don't see us as professionals is because WE don't see ourselves as'professionals'!

I think we downplay our worth by lowering the fee. This is an extremely hard business, the stress being enormous, so I have learned to stick to my guns. I will however offer a carrot. If I bring the buyer (we are allowed to here) then I will give them a slight break.

Liz - you have some very good points .

Here are some more things that are part of an agents cost of doing business that the avergae person does not think about

web site / sites - including set up / updating / hosting
promotional flyer's for listings and their business
photos and video for listings
computer / cell phone / pager
auto and related expenses
accounting fees
board fees
membership fees
licensing fees
advertising costs
constant training and upgrading courses

All that and your on call 24/7 with someone always looking for you on the eighth day or the 25th hour

Jane - I think you're right - we have to believe in what we do -and remember all that it is that we actually do!

Brian - it's true sometimes they d0 - some markets attracting that following more then others :-)

Courtney - yeah I saw that - pretty funny I think :-) You got No. 1 in Google and you go the S(*&

Ty - me too - and I can even understand that - for a minute - the minute I forgot - the behind the scenes work it takes!

Awhh Marie - maybe it's 20years of yakking! :-)(some would say its been longer!

Dan thanks for sharing that link - that post was really good!

Barrie perfect! Thanks for adding that - there is so much more!

NOV

2009

Hi Liz! When I'm asked to reduce my commission, I ask them, "You've seen my presentation--what part of this would you like me to omit for that __%?" If that doesn't work--I ask them if they discount their fees at their medical or whatever office! If that doesn't get the point across--I ask them if they were going to have major surgery, would they select their surgeon based upon his skills or his pricing?

If none of that changes their direction, I'm outta there!! The general public has no clue how much in fees and marketing and advertising, brokerage and licensing fees we DO pay and cutting my commission would mean cutting something out of those business expenses. Well, I'm not cutting licensing, MLS, or brokerage fees so, that leaves THEIR marketing and advertising! You GET what you PAY for!

GREAT post!

Happy, happy Thanksgiving!

DEC

2009

Some people keep using the same old line

"you get what you pay for". Very boring and sometimes not true.

I am the president of Team 3000 Realty a "hybrid commission" structured company. We offer full service at a discount. Lets compare the service given by some so called full service people and what I offer. I can tell you my service is often better.

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Liz Moras ~ Chilliwack Realtor, Garrison Crossing,Chilliwack, Abbotsford

Chilliwack, BC

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Harrison Hot Springs, Cultus Lake

Address: Chilliwack, B.C.

Office Phone: (604) 799-0459

Cell Phone: (604) 799-0459

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I look forward to this opportunity to share with both my fellow Realtors and my local community...some local anecdotes, tidbits of info - community profiles, real estate savy......interspersed with humor and inspiration!

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