If the commission is split 50/50 is that fair?
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.
They 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/