Yesterday, I interviewed with a seller to list his home. This luxury home is in a neighborhood that many agents would like to list; at a price to exceed $1.5M. The home was beautiful--magazine quality.
It seems that no matter the price point, sellers are ultimately going to make their decision on price and commission. That's not the best way to choose an agent but I do understand their rationale. They are looking to get the most money. Rather than hire an agent who can do that through negotiating on their behalf and promoting their home to the right buyers, they look to accomplish that by hiring the agent who will work for the least amount of money.
First, I would like to say--COMMISSIONS ARE NEGOTIABLE! There is no set rate for real estate commissions. The government considers that price fixing which is against the law. It's not a subject that is often discussed in a public forum. With that in mind, I won't be talking about exact numbers. Secondly, the content of this piece is solely based upon my own experiences.
While at this appointment the question was asked if I would discount my commission. The seller went on to say that another agent had offered to take the listing for almost nothing and if an unrepresented buyer came in, they would take nothing because they would collect the commission meant for the buyer's agent.
Why would a real estate agent cut his commission?
There are two sides to a real estate transaction--the listing side and the buyer side. Most agents have chosen to primarily work with one side or the other--sellers vs. buyers. For those agents who are established listing agents, you rarely see them cutting their commission. They have built their recognition and reputation on being able to list and sell homes. Sellers pay these agents because they think they're worth it.
Then there are the agents who primarily work with buyers. Most of the time, these agents started out working with buyers because they found it easier to find business. Eventually, these agents recognize they need an injection of listings to continue in this business. Agents know that sellers are less time-consuming than buyers. Much of their work is done from their office, rather than from their car driving around buyers.
Sellers like to use agents who carry lots of listings. They feel more confident they'll be able to sell. They look at the other sellers as a testimonial to the listing agent's abilities. That's why listing agents want to carry lots of listings. It gives them a track record in the seller's eyes.
This makes it difficult to break into the listing side of the business. To do so, many agents will discount their commissions to win more listings. They recognize that the listing side is a numbers game. The more listings they have, the more opportunity they have to get more listings.
Listing agents know if the majority of their listings are priced right, they'll sell with very little effort on their part. They may take an overpriced listing just to get more listings. Even though they recognize that listing may not sell.
Eventually, they'll talk that over-priced seller into a more realistic price and be able to sell the house and earn their commission. In the meantime, they keep a tight reign on their marketing dollars and time. They won't spend a lot of either knowing the chances of selling at that price are slim.
When asked if I would cut my commission, I declined. Would I like this listing? Absolutely. However, I work very hard to get my listings sold. Listings are NOT a numbers game for me. As a matter of fact, I have a 100% success rate over the last three years selling my listings. I work to SELL homes, not just list them.
I know the marketing of this home will require lots of my time to get it sold. Homes at this price are taking almost 10 months to sell. The seller wants a 6-month listing agreement. I'd have to work very hard to make the sale happen, especially since the seller wants to price at the top of his range. I'm up to the challenge but it may require that I turn away additional business to make this sale happen. The only way I can do that is if I am fully compensated.
Why would a real estate agent cut his commission? To get more listings.
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