I know, I know. I still owe you Mysteries of Marketing Part II. I got very busy during the holidays with clients and sales; mostly with buyers getting year-end specials from motivated sellers. So I'll get back to you on the Marketing topic later.

But first, I'd like to address some common questions regarding commissions which have recently come up from first-time sellers.

(BTW: I don't know who made up the rule that sellers pay commissions, but that's the way it is! "Usually" anyway. Once in a while, you get a buyer who wants to make an offer on something where the seller is selling For Sale By Owner, in which case the seller might represent themselves and pay the Buyer's Agent commission OR the buyer agrees to pay for Buyer's Agent representation.)

I'm telling you how it is, coming from a former teacher (I taught middle school ESL for 6 years prior to getting my real estate license). Believe me, teachers make more than some real estate agents, but the general public seems to think that all agents are 1) already rich and making too much money, & 2) greedy for daring to want to make more money.

I'll address the main questions: Why are commissions so much? Why do some agents charge 5% and others up to 7%? What's the difference?

The difference is in what YOU want to get out of it when selling your home.

Do you want an agent who puts a sign, lockbox, flyers, list you on the MLS, hold a couple of Open Houses?

Or...

Do you want an agent to do all of that and more? For example, list and market your home on their own personal websites, office website, create a slideshow/virtual tour, floor plans drawn by a professional company, offer staging advice and provide resources, market within their own sphere, campaign for agents at their office to show it to their buyers, has an assistant or transaction coordinator to handle details, etc. and once offers come in and an offer is accepted (here's an important part!): make sure the buyer(s) are well-qualified PRIOR to accepting an offer, making sure that the lender, appraiser, title, escrow, inspectors, etc. are all staying on schedule. You'd also want an agent who will take your calls and answer questions even after the transaction has closed.

Agents should be able to articulate why they charge 6% vs. a 5% or 5.5% fee. If they can articulate the difference, you should be able to see for yourself and know which model you prefer. Sometimes you want Starbucks coffee, other times McDonald's will do.

The difference also comes in follow up and pro-activity. There are so many things that can potentially go wrong; you'll want to know the agent's plan to avoid problems up front. Of course, there are things that are unforeseen, but a good listing agent will be organized and not digging around for your file or papers associated with it! They should show you checklists, systems, etc. as well as the Marketing Plan to get your home sold. In addition to each agent's individual efforts, larger firms usually have extensive marketing capabilities that extend beyond the local market.

For example, at my brokerage requires that agent post a minimum of 6 photos on the MLS (from the buyer's standpoint, it's frustrating when there are limited or no photos and they may completely disregard those listings with no photos). We also have a program called "LeadRouter" where listing agents will get a call from the system within 30-60 seconds with a buyer's contact information once they click "Send me more information" from our listings they find on our www.californiamoves.com, http://www.realtor.org, and other internet sites. If the listing agent can't or doesn't respond to the initial LeadRouter system notification within 15 minutes, the system will call the next agent in the queue until a live agent responds to the system and gets in touch with that buyer.

Not to mention our brokerage has exclusive partnerships with Google, Yahoo!, http://www.trulia.com/, http://www.realtor.com/, etc. and is one of the leading companies with a presence on these sites to get more world-wide as well as local exposure for our listings, even beyond our local MLS. We have stats pages of how many hits our websites get each month, which is very useful for sellers to know! 

The commission amount is a lot, so let me explain where it goes. 

First of all, I believe most people have the impression that all of the money goes directly to the listing agent's pocket (at least I had this notion when I was a teacher). Nope! 

Using 6% as an example, that is usually split in half 3% to the listing brokerage, and 3% to the buyer's agent (selling agent) brokerage. A portion of that commission goes to the brokerage (anywhere from 20% to 50%, depending on the structure of the firm and the individual agent's production level. Some offices pay the full amount to their agents, but then the agents pay a "desk fee" and other fees each monthly). On top of these splits and fees, each agent pays taxes on their  commission checks (roughly 33%). You can see the net amount dwindling down.

Most agents are self-employed, meaning we don't have a salary or "draw" from the office to help make ends meet. So we had better be covering our costs and creating profits for our businesses! Our budgets must make sense and make sure we are covering our costs to help us survive in this business. All of our personal marketing services (see Marketing 101!), assistants, professional coaching, paperclips, envelopes, advertising, etc. are all paid by us. We are on our own as far as all/most of the extras (again, depending on the brokerage), and each agent must set their business and home budget and charge fees according to the services he/she provides.

Two good things about being the seller 1) you don't pay anything until the job is done! 2) when you bought your house, you didn't pay commissions at all.

The bottom line for sellers: commissions are negotiable. Each agent determines their own budget and fees. If they can't lower their fee to meet their budget, then it's up to you to decide if you want to hire them at that price or find a less expensive model. Sometimes you want the basic car, and sometimes you want the options and upgrades at a higher price. You just have to know what you are paying for.

Oh, & if you live in the South Bay and would like a complimentary copy of my Marketing Plan and Listing Checklist, please e-mail me with your mailing address. Please allow 3-4 business days to ship.

Thanks for reading, & have a blessed day!