One of the most misunderstood aspects of buying or selling real estate is the commission and how it works and to whom it goes. Although there is currently no standard for where the commission goes, traditionally, the way it was set up was that, of the total commission offered, the listing broker gets half and the buyer's broker gets the other half. For instance, with the traditional 7% commission, the listing broker would get 3.5% to split with the listing agent according to their agreement, and the buyer's broker would receive 3.5% to split with the buyer's agent according to their agreement as well. What we have come across with many other real estate agents and companies is that they may, for example, list a property for 7%, but then they will only offer 2.5% to the buyer's broker and keep 4.5% for themselves.
What does this mean for you as a seller? Your money, that you are offering a listing agent to sell your home, is not being used to YOUR advantage, but for your real estate agent's advantage! If a buyer's agent is only offered 2% or 2.5% to sell your home, or 3% or 3.5% to sell other homes, which home do you think they will try to promote? Your commission money that is offered is also supposed to be there to entice the buyer's agent to sell your home as well-thus making your money work for YOU! In my opinion, it is very conceited of an individual to think they deserve a larger cut as the listing agent when, in our current market, the home WILL NOT BE SOLD without a buyer's agent! In a buyer's market especially, the buyer's agent should be compensated as much as the listing agent in order to sell your home. The temptation in a difficult market is for the agent, excited to get a listing, to get as much money as he or she can out of the listing to make up for the market conditions; but you need to make sure you are not taking the brunt of their circumstances! You need to sell your home, not pad the pockets of the listing agent!
I work with both listings and buyers; and as a listing agent myself, I explain this concept to my clients. How can I ask for a 6%, 7% or 8% commission if I am only willing to pay 2.5% to the buyer's agent? If I am only going to offer 2% or 2.5% how can I justify making you pay more than 4% or 5% to sell your home-I can't, because it is not fair! If it is not split equally, it is NOT to the seller's advantage, who is paying this money, to use that agent to sell their home! If you are currently under contract with another agent, you need to make sure that your money is going to benefit YOU, not your agent. Ask them what they are offering as a co-broker!!! Make sure they know that you will be sure to look at the HUD statement at closing to make sure they are being truthful to you! YOU HAVE A RIGHT TO KNOW HOW THEY ARE SPENDING YOUR MONEY!!!
There is a very large company here in our area that their standard is to offer 2.5% no matter how much commission they negotiate. Even if you specifically ask them to offer half, they say they CANNOT, and must walk away from the listing if you demand that half go to the buyer's agent! I personally know an agent from this company who had to walk away from a 7% listing because she couldn't offer 3.5% to the buyer's agent at their request! Be sure to find out the company policy on commission and co-broke offerings! Chances are that they will tell you that they offer less because that is what many other agents or offices do and it all comes out in the wash! Even if this is the reason, they are still not spending YOUR money wisely-just because they feel cheated!
As you are interviewing listing agents, BE SURE TO ASK what commission they are going to offer the buyer's agent. If they do not initially say that they will offer 1/2 to the buyer's agent-my suggestion is to move on to the next agent! If they are not fair in their everyday business dealings, what makes you think they will be fair while dealing with you? Be sure to let them know that you will check on the HUD (settlement statement given to you at closing- the top of Page 2 shows the commissions paid) to be sure they are being honest with you!
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