Are real estate commissions fair?

By
Services for Real Estate Pros with Marte Cliff Copywriting

If the commission is split 50/50 is that fair?weighing the commissin

Or - does the listing agent or selling agent deserve a greater share?

Do you watch Bob Massi – the Property Man? I saw an episode in which he and a Scottsdale, Arizona agent were discussing real estate commissions.

They were promoting the idea of a flat fee listing commision, and they agreed with each other that the buyer’s agent deserved the lion’s share of the real estate commission. They said the buyer’s agent “does all the work.”

After watching that show I started thinking about who does what and who spends what. (I’m probably missing a task or two, so feel free to add to my lists.)

What the listing agent does to earn a real estate commission:

Before anything else, the listing agent has to connect with the homeowner. That might mean sending prospecting letters, network marketing, door knocking,  nurturing a past client list for referrals, or a host of other activities.

The listing agent, provided he or she is doing a good job, prepares a detailed market analysis to determine the current market value of a home. (Yes, I’ve known some who do no more than run a program similar to that on Zillow, but I’m not thinking about them.)

Once the listing is signed, the listing agent takes the time to gather information about the property that buyers and their agents want and need. They collect everything from HOA agreements, to zoning information, to permits, and on and on.

The listing agent does the marketing.

The listing agent spends time, money, or both on good photography. Today, more and more agents hire professional photographers for stills, video, and even drone photography. Before the photo shoot, some hire a stager or at least pay for an initial consultation. If nothing else, they take time to advise their sellers on how to prepare.

Then they write an enticing description for MLS and other venues. Some hire a professional real estate copywriter to write those descriptions. Some hire an expert to produce a floor plan.

Many post about their listings here on Active Rain, then link to a variety of social media accounts. Many send Just Listed cards to the neighborhood, then bring the listing to the attention of top buyer agents and perhaps to a list of their own buyers.

If it’s the local custom to hold open houses, the seller’s agent takes care of that.

The listing agent solves problems.

When there are problems with the title – isn’t it the seller’s agent who digs in to clear up issues? I recall spending days chasing down the right people to correct errors such as a paid-off loan that was never recorded.

The seller’s agent is also the one who gets the call if something goes wrong at the house.

If the listing expires off the market unsold and the homeowner decides to choose another agent, the listing agent gets zero real estate commission for the time and money expended.

The buyer’s agent does his or her share to earn a real estate commission.

The buyer’s agent may have to show a dozen or more homes before finding the right one for a buyer – and some buyers never do find that right home. In some cases, the buyer’s agent spends plenty of time and money and ends up with NO real estate commission.

A good (safety conscious) buyer’s agent also takes the time verify that the information provided by the seller is accurate.

In our small town, a huge lawsuit resulted from the fact that a listing agent blatantly presented a property as commercially zoned when it wasn’t. That information was splashed across a 4′ X 8′ sign posted on the property. The buyer’s agent relied on the listing agent’s information, and he lost the lawsuit, even though buyer’s agency didn’t exist in those days.

He learned the hard and expensive way that it is important to verify information.

Of course a buyer’s agent does more than that to earn his or her real estate commission.

Bob Massi and the agent noted that it was the buyer’s agent who attended inspections, appraisals, final walk-throughs, etc. In other words, they believed that it was the buyer’s agent who did all of the work between offer acceptance and closing.

I’ll admit that it’s been many years now since I was licensed, but I never found that to be the case.

Neither man mentioned the fact that:

  • Both agents are involved in the negotiations after an offer is made.
  • Both are involved if further negotiations are necessary after the inspections.
  • Depending upon the clients, both agents do a lot of explaining, reassuring, and generally staying in touch with the clients.
  • Both agents can spend time and money on a listing or transaction that fails, and thus earn zero real estate commission.

little brat thinks no fairThey also think real estate commissions are “No Fair.”

The men also discussed the fact that real estate commissions are based on the price of the home – and that “that isn’t fair.” They said it takes no more effort to sell a $600,000 home than a $300,000 home.

Do you find that to be true?

And do you believe that one side or the other deserves a greater share of the real estate commission?

 

Scales Image courtesy of renjith krishnan at FreeDigitalPhotos.net

No fair courtesy of Clare Bloomfield @ freedigitalphotos.net

Thie original version of this post appeared at https://copybymarte.com/who-deserves-the-greater-real-estate-commission/

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Rainmaker
1,932,221
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

The most work comes with the small properties that were not ever surveyed, did not go through a bank lending mortgage underwriting hurdle to remove the sharp edges. They are raw, real, low cost and the title behind them is often full of registry lint and liens, easements, undischarged property tax liens and open ended mortgages from many moons ago if there were any.

The properties traded for two pigs and a chicken with deed descriptions done by well intentioned buyers and sellers but lacking much for metes and bounds can be a time suck and low compensation. List what you sell and do it all yourself is the norm in small rural remote real estate markets.

Apr 08, 2019 03:52 AM #30
Rainmaker
1,267,212
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Here's my train of thought on the subject, as an agent who did both.  On any given pending transaction, the listing agent probably does more work.  However, the buyer agent has to be compensated in some way for all the time they spend with a set of buyers to find that right house.  It's not just about the sale of the house in contract. It is about getting to that point and through to closing.  With that said, I think a 50/50 split is fair. 

Apr 08, 2019 06:27 AM #31
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Andrew Mooers | 207.532.6573 I absolutely identify with what you're saying. Some of my most time-consuming transactions were over low priced rural properties.

In some cases, logging companies broke up large tracts and sold them on time. When they were paid off, no one recorded the deeds. It's really fun trying to find original people to sign off after a company has been dissolved for more than 20 years. I know, because I did it.

And oh those easements. "Over existing roads" caused a stand-off with guns drawn in one instance here.

Apr 08, 2019 07:41 AM #32
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Carol Williams I've always thought the real work - sometimes for the listing agent and sometimes for both agents - came after the purchase and sale agreement was signed around.

Apr 08, 2019 07:43 AM #33
Rainmaker
16,364
Krista Jenkins, REALTOR®
Egenbacher Real Estate - Lubbock, TX
Residential sales and retail & office leasing

Because every transaction is unique it is arguable as to who "does more". It is often more dependent on the personalities of the seller or buyer (or agents) than the real property that is being bought or sold. Some people create more work for themselves because of their sloppiness.

Apr 08, 2019 06:42 PM #34
Rainmaker
376,582
Matthew Klinowski, PA
Downing-Frye - Naples, FL
Golf Community Real Estate Specialist

Every transaction is different. Sometimes it is more work on the buyer's agent, sometimes it more work on the selling agent and sometimes it is about equal. I'd like to think in the long run it evens out.

Apr 08, 2019 06:50 PM #35
Rainmaker
580,775
Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

Marte-You got it on the nose when you said we do a lot of work with no guarantee of getting paid in the end. Buyers disappear in the ether, sellers sabotage their listings= no pay for the Realtor!

Apr 08, 2019 07:06 PM #36
Rainer
136,244
Jamie King
Hoty Enterprises, Inc. - Huron, OH
Sandusky, OH

In our Board area, commissions are split 60/40 with 60% to the listing agent for doing the majority of the work. It's been that way since before I was licensed (1995).
I've often thought what's truly unfair is working solely for the commission of a sale. If you go to your doctor, he examines you, makes recommendations for treatment, but doesn't cure or correct the problem, he still gets paid. We' don't. We've all experienced spending numerous hours searching for and showing buyers homes but they never purchase. Why do we continue to work for free???

Apr 09, 2019 04:50 AM #37
Rainmaker
325,151
Dana Basiliere
Rossi & Riina Real Estate - Williston, VT
Making deals "Happen"

Marte,

I do both listing and buyer sides.  I think the 50/50 split is fair. Sometimes a buyer agent can have a year of time working with a buyer and if they bring that buyer to your listing you should smile while handing them 50% at the closing table.  On the other side listings present costs and work that at times make us feel like we should get more than half... but let's say it averages out.

Apr 09, 2019 05:52 AM #38
Rainmaker
484,616
Terry McCarley
REMAX Realty Team - Cape Coral FL - Cape Coral, FL
REALTOR, SRES, CDPE - Cape Coral, FL

I work with both buyers and sellers and personally think splitting the commission 50/50 is fair.  

Apr 09, 2019 06:51 AM #39
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Krista Jenkins, REALTOR® I agree - in real estate and many other things, sloppiness leads to more work.

Matthew Klinowski, PA I think so too. Once in a while a transaction is easy. Other times a ton of work for one or both sides.

Apr 09, 2019 09:37 AM #40
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA I think you have to have a bit of a gambler's soul to survive in real estate.

Jamie King I know. I can't think of any other profession in which people do the work with no guarantee of a paycheck. As for why so many do it - that's a good question.

Apr 09, 2019 09:40 AM #41
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Dana Basiliere I do think it evens out - especially if agents on both sides of transactions are doing their share of the work.

Terry McCarley I think so too, especially now that agents spend so much on marketing listings.

Apr 09, 2019 09:43 AM #42
Rainmaker
493,559
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

Commission should be split equally. Sometimes one agent may do 'more work' than the other but that's really hard to prove and can be subjective.  I know one listing agent here who gives himself more commission than the buyer side. 

Apr 09, 2019 05:48 PM #43
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Mary Hutchison, SRES, ABR Your comment made me think: As long as one of the agents steps up to get the job done, all will be well. But if you get a lazy listing agent and a lazy buyer's agent - look out! That transaction is destined to fail.

Apr 09, 2019 07:46 PM #44
Rainmaker
2,726,650
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

You really have to make sure that everybody involved is on the same page with something as serious as real estate can be

Apr 09, 2019 10:09 PM #45
Ambassador
3,899,762
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Marte:

This was an interesting and thought-provoking read, as was the discussion it prompted. I like the notion of 50/50. Sometimes it may be more work on one side than the other, depending on the parties involved and the transaction and issues with the house, but it evens out in the long run.

I have been in a number of transactions in the last several years where the listing agent made a fair amount less than I on the buyer side.

Jeff

Apr 11, 2019 08:56 PM #46
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Yes you do, Laura Cerrano.

Jeff Dowler, CRS I haven't kept a tally, but think most here agree with you. 50-50 evens out over time, even if you work harder on one side or the other in some transactions.

 

Apr 11, 2019 09:03 PM #47
Rainmaker
1,453,200
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

This was interesting as I never realized the split was different in some markets.  I think the 50/50 split is fair since it averages out over time.

Apr 16, 2019 08:07 AM #48
Rainmaker
1,503,205
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Georgie Hunter R(S) 58089 Until I started writing for agents across the country, I had no idea that the rules and regulations are also different from place to place. It was an eye-opener!

Apr 16, 2019 08:17 AM #49
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