So Where Does All that Commission Go Anyway???

By
Real Estate Agent with Realty Executives Integrity R.E. Broker 55289-90

It's not uncommon to be asked by a potential seller if I will reduce my commission, especially in cases where this individual will also be using my services to purchase a new home. And oh, how I used to cringe when that question would arise. But having been in the business for a few years now and gaining a clear understanding of the time, effort, and manpower it takes to get a house sold, I've learned that saying "no" really isn't so hard after all.

So where does all that commission go?

commission dollars

OFFICE -- rent, electricity, phones, computers, copy machine, fax machine, secretary, sales director, paper, insurance, Closing staff, Accounting staff

SALES AGENT COMMISSION -- cell phone, errors and omissions insurance, tech fees, car expenses, association dues, license fee, personal web site, living expenses, self-employment taxes,

COMPANY PROFIT

CO-BROKE COMMISSION -- Incentive offered to other brokers to show and sell your house

MARKETING -- shorewest.com, billboards, radio, mailings, open house, Shorewest TV, yard sign, Shorewest hotline, smart phone apps, listing flyers

Charging less means spending less.

If the broker spends less on overhead, they wouldn't be able to do the work they need to do.

If the broker reduces the percentage paid to the sales agents, those agents will work elsewhere.

If the broker reduces their profit margin, they won't survive.

If the broker reduces the co-broke percentage, fewer agents are motivated to show their listings.

And if the broker reduces the marketing dollars, homes will not get the same level of exposure, which translates to fewer buyers, longer times on the market and lower sale prices.

I remember when I bought my first house I did the math. I thought the agent, who both listed and sold the house, was walking away with literally thousands of dollars in her pocket on a $100,000 house.

But I get it now.

Those thousands of dollars are covering several paychecks and paying several overhead bills.

I just have to remember that the general public isn't in the business so really have no way of understanding this, and it's therefore my job to explain it to them. And it's my job to prove to them my broker and I are worth every penny.

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Pat Tasker 01/30/2011 02:10 PM
Topic:
Home Selling
Groups:
RealtorsĀ®
Diary of a Realtor
Wisconsin Active Rainers
Shorewest Realtors
Tags:
commission
real estate commission
sales commission

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Rainer
120,219
Steve Ewing - Keller Williams Realty
Keller Williams - Stockton, CA

Peggy - Great explanation of where it all goes.  The other expense that is not know is when a lender takes part of the commission just because they can.  That really makes me mad when at the last minute they spring that trap.  Oh well, what can we do?  Thanks for the blog.

Jan 28, 2011 04:40 AM #1
Rainmaker
758,685
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Sellers see that X% and think it all goes to one person, and often dont understand how chopped up it gets, and they forget it cost money to list and sell a home!

In the mortgage world people think the same way, we actually have costs calculated out per unit so we truly know what it costs for each transaction, and once you discuss paying for rent, electric, postage, Processing etc they begin to "get" it!

Jan 28, 2011 04:44 AM #2
Rainmaker
202,710
Mary M. Kandell
Russell Real Estate Services - Sandusky, OH

When I am asked to drop my commission, I give them a confused look and ask them to repeat what they just said.  Sometimes they can't get up the nerve to ask twice.  If they persist and ask again, I smile sweetly and say, "No, but thanks for asking.  Now, do you have any other questions I can answer?"  It really does work a lot of the time :o)

Jan 28, 2011 04:57 AM #3
Rainmaker
207,960
Peggy Wester
Realty Executives Integrity - Grafton, WI
Real Estate Agent Ozaukee & Washington County

Steve -- I do really think it's a matter of educating our sellers. I don't know that I've ever experienced what you describe with a lender, although I'll certainly be more alert now!

Robert -- I agree -- if we take the time to explain, I think most people do "get it" and are more receptive to our fees.

Mary -- Your comment made me laugh. I like "I give them a confused look." I, too, tend to just say "no" and nothing more unless they ask for more info.

Jan 28, 2011 11:14 AM #4
Rainmaker
529,000
Gary Coles (International Referrals)
Venture Realty International - Las Vegas, NV
Latin America Real Estate

Peggy,  This is a perfect explanation -- just right to give to your clients.

Jan 28, 2011 05:02 PM #5
Rainmaker
498,223
Jim Patton
Aspire Home Real Estate 209-404-0816 - Modesto, CA
Realtor - Stanislaus ,Merced, San Joaquin Counties

Peggy -  I'm sure most people think that we make a ton of money on  every transaction. Most have no idea of where it all goes.   Thanks for the post.

Jan 28, 2011 07:34 PM #6
Rainmaker
522,122
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

This makes a good case for including in my listing presentations an explanation of why my business model is the most efficient and cost effective in the industry.  Once the foundation is laid, it's a lot easier to prevent or defend commission erosion attempts during the process.

Jan 30, 2011 02:31 AM #7
Rainmaker
207,250
Pat Tasker
Shorewest Realtors - Germantown, WI
Your Milwaukee Metro Area Agent (WI)

Peggy,  Many sellers ask if you could go down just 1%.  But what they don't realize is that if I go from 6% to 5% (just for example sake) that is a TWENTY PERCENT cut in pay....  thanks, I will probably reblog this one, thanks!

Jan 30, 2011 02:06 PM #8
Rainmaker
207,960
Peggy Wester
Realty Executives Integrity - Grafton, WI
Real Estate Agent Ozaukee & Washington County

Gary -- Thank you. I think I am going to just include it in all my listing packets.

Jim -- I agree. I think it's a matter of educating them.

Mike -- Excellent point. I agree having a clear understanding from the beginning can only benefit us.

Pat -- Thanks for reblogging! And I never did the math you explained above. Yikes!

Jan 31, 2011 03:05 AM #9
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Rainmaker
207,960

Peggy Wester

Real Estate Agent Ozaukee & Washington County
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