What Is A "Fair Commission" For A Real Estate Broker?

Commissions - that is how we make our living and pay our bills and it is the first thing that goes on the "chopping block" when monies need to be "saved" in a transaction.  Lawyers aren't asked to reduce their fees, and no one ever disputes any other fees it is the Broker who takes "the haircut" in order to "save the deal."  So what is a "Fair commission"?

Generally, land deals are a flat ten percent unless the price point is in the millions of dollars, then it will be reduced.  For commercial real estate sales I charge six percent; the marketing expenses can be higher, it takes longer to close a deal, and there is a different, more specialized skill set that for which I charge a premium.  The only time I will reduce that is when listing multiple properties from the same person/entity or repeat clients. For residential deals I have been listing properties at a five percent commission recently in response to current market forces.  However, for properties which require specialized marketing, custom web sites, etc, it is not unreasonable to charge six percent.

Beyond this, some other variables which factor into my commission calculation are the following: how anxious is the Seller? (a higher commission rate will motivate both Listing and Selling Agents;) Does the property have any "challenges" which would impact its marketability? (ie: is it a tough sell due to location, cosmetic/structural condition, or other property-specific issues.)

Generally, I try to guide my Sellers so they don't lose sight of their ultimate goal; to sell the property for the maximum amount the market will bear in the shortest time. Saving 1% on the commission but increasing the time it takes to sell the property, is not prudent.  Market values could decline and/or interest rates could increase - thereby reducing the number of qualified potential buyers.

What are your thoughts?

Until next time, be Healthy, Wealthy and Wise:)