Variable Rate Commission - Is it a Good Thing?
by John Occhi, Hemet REALTOR
Often times a listing prospective client will ask the agent in front of them, "If you sell the home yourself, will you take less of a commission?"
On the surface, that is a very legitimate question and one that you would think that the agent would jump on, to get the listing. But, let me tell you, that this is a question you should never ask, nor do you want your agent put in that position.
Why, you ask? Because, you (the home seller) are doing yourself a disservice.
Let me explain. Let's assume you agreed to list your home at 6% commission with half going to your agent and half to the buyers agents. (If we could use words like ‘standard' commission, it would describe this situation. But because of allegations of price fixing, the Justice Department has determined that there cannot be a ‘standard' commission.)
Once the home is listed in the MLS, there is a simple yes or no question that must be answered, although some agents like to complicate it by adding a comment to call the office. The question asks if the seller will honor a dual variable rate commission. If the agent says yes, then they have agreed to accept less commission than any other agent, who may sell your home.
The reason this puts you at a disadvantage is because now I don't want to show your listing. I explain to my buyer clients about the commission structure and how it puts them at a disadvantage - even in today's buyers market.
If we were to write up and present a full price offer that would include 3% commission for my office, the sellers agent could turn around and present a offer for less but would net the seller more money, because they have reduced their commission.
Let me illustrate this for you. Your home is listed at $400,000 with a 6% commission - $24,000 will be paid in commission to both sides of the transaction. Unless, there is a dual variable rate and the sellers' agent will take 4% for doing both sides - now the seller only has to pay$16,000 in commission when the deal is done - a $8,000 window to manipulate the deal to their favor. So they could make an offer of $395,000 and against my $400,000 the seller will still net $3,000 more with the lower offer.
Perhaps now you can see how you disrupt a level playing field by asking an agent to accept less money for doing their job. Yes, you may save some if your agent does sell the home, but think of all of the other agents who will not show your home unless it is an absolute must see for their buyer clients.
I hope this helps shed some light on the subject and until next time have a Blessed Day,
John Occhi, Hemet REALTOR®
http://www.johnocchi.com/
Comments (6)Subscribe to CommentsComment