Let's face it; no one likes paying
thousands of dollars to real
estate agents, most of whom drive big flash cars. But, are
real estate commissions
really a rip-off, or do they simply reflect the value and importance
of the transaction that's taking place. I guess, to be fair, it
really depends on the final outcome and what each property finally
sells for. Anyway, it is a subject that seems to aggravate buyers
and sellers alike.
Read on, because here are some points to consider
before hiring an agent or deciding to sell your home yourself.
The fact is; real
estate commissions can vary from state to state and country
to country. The key thing to remember, however, is that commissions
are almost always negotiable. In some countries the seller (vendor),
pays a flat real
estate commission of 3% to 5% and then pays for all marketing
costs on top of that commission fee.
In the USA, real estate commissions vary between
4% to 10% depending on the type of property, current market conditions,
and the motivation of the seller. Around 6% seems to be the most
typical commission rate. But again, this is usually negotiable.
Many people wrongly assume the entire real
estate commission goes to one person. Typically in the US,
real estate commissions are
divided four ways: the listing agent, the listing agent's broker,
the buyer's agent and the buyer's agent's broker. Referral fees
and franchise fees can also influence the amount paid and the
actual dividing up of the commission.
Why then are real
estate commissions so expensive? Well, I'm not here to justify
what agent's and broker's charge, but to be fair they do have
overheads just like any other business. Their costs include: MLS
(Multi Listing Service) fees, insurance and membership dues which
can amount to thousands of dollars a year for each agent. Then
there is the big expense of running office equipment, computers,
cell phones and vehicles. And, you may have noticed that most
agents like to drive clients around in late model vehicles. Maybe
this is extravagant, or maybe it is just their way of saying "I'm
successful!" And, not forgetting the cost of signs and advertising
which together can amount to a considerable cost.
So, real estate is a business with many expenses
and without the luxury of a guaranteed weekly paycheck. It is
also an industry that has its ups and downs. Interest rates and
economic confidence are just a couple of factors that can have
a major impact on the real estate market. Most agents who have
been in the industry for some time will have experienced boom
times as well as lean periods.
Frankly; at the end of the day real estate agents
are out there to earn a living just like everyone else. They need
to be competitive in order to survive and prosper. That is why
real estate commissions
are almost always negotiable. The agent's want your business!
They want your real estate commission!
With that said, agent's also want "profitable
business." So, when an agent shows a property to a potential
buyer, one thing they generally look at is how much real estate
commission is being offered. Agents typically will show homes
offering 3% before the ones offering 2.5%.
Trouble is the real estate commission system
can work against sellers. If your home is offering only 2.5% to
the other agents, it may get fewer showings. Your property will
therefore be exposed to fewer potential buyers. As a result; you
will be helping other seller's get their homes sold first.
Whereas; if a listing agent were to offer 3%
to a buyer agent on a 5.5% or less listing contract, it could
produce a different outcome. This scenario would reduce costs
to you (the seller) along with good marketing incentives for other
So, let me summarize and review:
1) The real
estate commission is negotiable
2) The commission is usually split amongst several parties
3) The agents are entitled to earn a living
4) Know what the commission split is going to be and how it may
Finally, don't dismiss the possibility of selling
your home FSBO (for sale by owner). Selling your home yourself
could save you thousands in real estate commissions. Thousands
of others have successfully sold their own homes - why couldn't
© Noel Peebles, Market Leaders FSBO real
Noel Peebles is co-author of the best selling
FSBO real estate book
"Home Selling Secrets Revealed."
For details http://www.forsalebyownerguide.com