How to Save Half of a Realtors Commission

August 29, 2008

How do you hire a full-service realtor and only pay half a commission? It is always surprising when a homeowner is going to hire a realtor® to sell his property, especially when he next complains bitterly about paying 5% or 6% to someone who he believes does little or no work. Usually the seller marks up the property to cover the commission which over-prices the property and the result is it doesnt sell.

Usually, the commission paid to a realtor® is split equally between himself and his broker, who is the licensed agent in charge of a particular firm. If the commission on a sale is $20,000, the realtor® and the broker each get $10,000. Newer methods of payouts to agents include paying desk fees to the broker in exchange for higher payouts. For example, if the agent pays $135/month as a desk fee he may be entitled to a 95% commission while an agent paying $60/month may only entitled to a 70% payout.

If the agent doesnt sell the property he listed, but another agent does, the buying and selling brokers each get half of the commission and the 3% commissions are again split with the agent so he gets 1 1/2 % net. So for a $20,000 commission the split looks like - $5,000 each to the two brokers and $5,000 each to the two agents. This is a simplified summary of the process but illustrates the payout procedure. If the agents are on a higher payout because of their monthly desk fees, their portion of the commission is increased and their brokers portion is reduced proportionally. Industry statistics show that 95%+ of the time the listing agent does not sell the property! So the real money for a realtor is in getting the listing and having another realtor® sell it. The largest commission producers in the industry sell listings and not properties.

The way to save at least half of the realtors commission is to list with a flat-fee broker who will list the property on the MLS® (Multiple Listing Service) and Realtor.com® but who does not show the property. The buyer for your property will come from a buyers agent who brings a client to see your home and make an offer. He is interested in receiving his usual 50% of the full commission or 3% of the sales price. If you offer a 3% commission to the buyers agent, you have saved 3% by not having to pay the sellers agent (listing agent)! In the above example of a $20,000 commission, the agent who brings the buyer still gets $10,000 but you are saving $10,000.

What if you are unfamiliar with the sales and contracting process and you need help? For the $10,000 commission savings you can hire an attorney to review any contract and give you advice usually for less than $500 so you are still ahead $9,500. But better yet, the attorney can give legal advice that your realtor® can not, and you have recourse against your lawyer if something goes wrong.

So to save at least 50% of your commission, should you decide to have a realtor® sell your house, use a buyers agent only and offer him a 2.5% or 3% commission. Another unique benefit of only paying a buyers agent is that if desperation sets in and you need to sell quickly, you can increase your payout to the buyers agent and attract many more buyers than using a sellers agent. The highest commission seen in the past year is a 12% commission to buyers agents for condo units. In the depressed condo market these days, it is not uncommon to see 10% commissions to buyers agents. So if you have decided to sell your home on the MLS using a realtor®, you can save substantial money and sell your home faster by focusing on paying only a buyers agent to sell your home.

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