Commission questions for your enjoyment

By
Industry Observer

Over the years of representing clients in the purchase or sale of real estate, I have been asked a few questions that I have had difficulty answering.  It isn't that I couldn't come up with a seemingly credible answer, just that I'm not sure I was 100% correct.

Here's one big one, "Who pays the commission?"   Well, we generally give the answer that the seller will pay the commission from the proceeds of the sale.  What the heck does that mean?  The buyer will give the seller some money, and the seller will take the seller's money, keep some of it, and pay some bills with the rest, including the commission.  So, the seller will pay the commission with the buyer's money. 

I know that the commission is simply part of the cost of the transaction, and that it doesn't really matter who claims to have paid it, or does it?  The negotiated price of the real estate includes the seller's calculation of the cost of the sale, and the accepted price includes consideration for the amount that the seller will "pay" as commission.  So, the negotiated price includes the amount that the seller has agreed that the buyer's price will include.  Shouldn't the buyer and the buyer's representative be interested in negotiating a possible amendment to the total commission charged?  I think so.

 

Second question, "If you, Mr. Buyer Agent, are paid based on a percentage of the final negotiated price of the real estate, why on earth would you want to negotiate a lower price on my behalf?"    Now comes the ethics answer and how agents and brokers have a fiduciary duty to earn as little as possible.  Buyers who asked to believe that real estate professionals are such great negotiators that they will earn less for each step in the negotiating process have to be scratching their heads about their overall business sense.  Although the difference between the asking price commission and the selling price commission is typically very small, it doesn't make much sense to some folks.  I think that either a flat amount charged for service or a commission percent based on the asking price makes more sense and should be considered by buyer representatives.  Either alternative would improve the professional image of a buyer representative and also the industry.

 

 

 

 

Posted by

 Mike Carlier  Lakeville, MN

 

612-916-3033

 

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Rainmaker
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William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I love the last question and get this one often...Most everyone is good with my answer

Oct 24, 2015 09:57 AM #1
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Rainmaker
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Mike Carlier

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