Home Buying in Portland>Question Details

Kate Fulford, Home Buyer in Portland, OR

We live in California - where the seller pays all agent commissions. How does this work in Oregan?

Asked by Kate Fulford, Portland, OR Tue Feb 19, 2008

What is considered competitive in terms of real estate agent commissions/fees?

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17
The only place Elisha got it wrong is the fee - commissions are ALWAYS ALWAYS ALWAYS negotiable.

If you use 6% as the going rate on a $330k home, as Chris did, the listing agent commission would be $19,800. Where Chris is wrong is in assuming that the listing agent gets all of that - they don't.

2.7%, roughly, will go to the buyer's agent = $8910.00, leaving our listing agent $10,890.
Depending on where that agent works, they'll lose anywhere from 10%-50% of that to their franchise or brokerage. The model I'm currently on says I'll lose $100 per transaction and 30% to my broker - so, of that $10,890, I'll get to keep $7523. I'll probably have paid out around $500 in marketing that home - and that's cash, not time - (without expectation of return if it doesn't sell, of course!), and then I need to set aside money for taxes, so there goes some more...and I end up with about $4620 in my pocket for selling the home.

I know it's more than you asked, but I hate to allow the "Realtors pocket the full %" thing to stand unchallenged. *grin*
Web Reference: http://www.welcometopdx.com
1 vote Thank Flag Link Wed Feb 20, 2008
Both Kris and Elisha Joy are way off base. I am not sure how much experience they have based upon their statements.

First of all there is no set rate like 6% which they suggest. It is a rate some charge but we are in business here. No where in the country will you find the wide variety of agents and fees than in Portland. We have flat fee agencies; $1000-$4000 to list. We have Brokers charging 10%. I have been able to compete and save my clients money in many cases with full service as low as 4% and a variable fee that allows me to charge as low as 1.5% if I sell the home.

In fact in Oregon we have Buyers agency and it is not uncommon to have the buyer hire a buyer broker for a flat fee and represent the buyer. So do not let anyone kid you. You have choice and plenty of it. I have a good program for 4% and I know agents that charge as little as 3%. It is true that people, agents especially, are profit motivated and will show preference for a listing paying a higher fee.

But the bottom line that the buyers hold the cards and if they see a home on the MLS they are going to see it even if they agent is only being paid a small finders fee. I would say that a competitive fee is 5% not 6%.

A reasonable fee is 4.5% and anything below that is a bit on the lower end. I also can offer fee for service and so the more you need the more I charge you. If you do not need it you do not pay. Simple as that.

Hit me up Kate if you need. Oh by the way I was ranked again this year as the #1 Production Re\Max team and the #4 in the Pacific Northwest and that is out of thousands of teams.
We sold lots of homes last year and many were at 5-6% fee. Many were lower depending upon what was needed.

Hope that helps dis-spell some of this for you.

Much Success;

Dirk T Knudsen
Re\max Hall of Fame
#1 rated Re\Max team in the State of Oregon: 2007
503-799-8383
Web Reference: http://www.nwhomecenter.com
1 vote Thank Flag Link Tue Feb 19, 2008
In Oregon it is the same. When you look at properties with an agent as a Buyer you do not pay these fees it is pre-negotiated in the list contract with the listing agent and is shown in the multiple listings as part of the contract. As a buyer you should always find your own agent and have a someone who has your needs in their mind. We are a dual agency state -- so find an agent to represent you and it is no cost out of your pocket. I have enclosed my web page it allows you to look at the newest listings -- by neighborhood...a little easier than some of the web pages. If you need further help you can contact me via my web page. I am born and raise in Oregon and have a lot of neighborhood knowlege as well as 10 years in Real Estate.

ALIA MARIE HAZEN PC
RE/MAX EQUITY GROUP
NE & SW PORTLAND OFFICE
Web Reference: http://www.home-hazen.com
0 votes Thank Flag Link Wed Apr 23, 2008
Ernst,
Most of the time, though, when a seller merely adds the 6 or so percent, the home becomes overpriced. A home is not going to sell for 6% more because the commission is 6%. That is my point. FMV for a house is 799,000. Add another 48,000, and the home gets negotiated down because it's priced too high. If comps come in at around 799,000, and the seller goes FSBO, he knows what his house is worth. He isn't going to let it go for 750,000. He's going to want to NET the same 6% YOU want to save!
0 votes Thank Flag Link Wed Mar 12, 2008
J R , my point was to illustrate that the buyer always pays the commission, but the seller agrees to the % in the contract.
I have bought and sold properties before without assistance of an agent and when selling always discount the selling price by the commission to be competitive with the comps for a quick sale.
0 votes Thank Flag Link Wed Mar 12, 2008
Why do Realtors keep saying that the seller pays the commission.
My question is; who pays the sale's price?
Yep, the buyer and included is the commission.
In California that means the buyer is taxed EVERY year on that commission, because the Sales price determines the property tax.
If that commission was 6% of an $800,000 sale then the $48,000 is taxed EVERY year at a rate of over 1% or over 480 per year for the commission.
So, the buyer ends up paying more than the seller in the long run. What am I missing here?
~~~~~~~~~~~~~~
You're missing the fact that the seller most likely isn't going to sell you the house for 48,000 less if he didnt have an agent. You're also missing the fact that what the seller does with the proceed of their house is their business. If they want to pay someone else to market it and deal with all the looky loos and unqualified buyers, it's their business.
0 votes Thank Flag Link Wed Mar 12, 2008
Why do Realtors keep saying that the seller pays the commission.
My question is; who pays the sale's price?
Yep, the buyer and included is the commission.
In California that means the buyer is taxed EVERY year on that commission, because the Sales price determines the property tax.
If that commission was 6% of an $800,000 sale then the $48,000 is taxed EVERY year at a rate of over 1% or over 480 per year for the commission.
So, the buyer ends up paying more than the seller in the long run. What am I missing here?
0 votes Thank Flag Link Wed Mar 12, 2008
This is a repost of what I wrote on The Portland Real Estate Blog at http://www.PortlandRealEstateBlog.com last week. There are 22 comments over there. Kate, one of the biggest differences in CA v. OR commission models is that it is illegal for a Realtor to rebate any part of the earned commission to a non-lisenced person (the client).

Oregon Real Estate Commissions:

A couple of years ago, I looked down at the caller ID on my phone and saw a California area code. "This is Charles." "I am moving to Oregon and looking for an agent. I will expect a 2% rebate of your commission." "Commission rebates are legal in California but not in Oregon. I can't do that." "I'll find a Realtor that will." Click (he hung up on me). Unfortunately, he probably did find an unethical Oregon Realtor willing to do it.

Oregon Statute 696.290 (in part): Sharing compensation with or paying finder’s fee to unlicensed person prohibited; exceptions. (1) A real estate licensee shall not offer, promise, allow, give, pay or rebate, directly or indirectly, any part or share of the licensee’s compensation arising or accruing from any real estate transaction or pay a finder’s fee to any person who is not a real estate licensee licensed under ORS 696.022.
Thirteen states use some variation of this law. The Department of Justice sued Kentucky and I don't know where it stands in the judicial system.

I don't know if the model is flawed or not. I think it can be argued either way. It is clear that it isn't perfect and I think the model will change to where the listing agent is paid by the seller and the buyer's agent is paid by the buyer. Everyone can negotiate their rates and everyone will be under contract and you'll see less dual agency. It doesn't make sense that somebody I don't know, have never talked to and may never meet can determine what my services are worth. Without a buyer/broker (buyer service) agreement that is exactly how the current model works. The current model though has such an aversion to buyer broker agreements that it prevents a new model from gaining traction.
0 votes Thank Flag Link Tue Mar 11, 2008
The listing broker & home seller enter into a contract for an agreed rate of commission, and this can range from a flat fee rate to a % rate...for bare land I have seen 8-10% (remote areas), as well sometimes incentives are offered such as "buyer broker bonus of $3,000 if full price offer"....point I am making is that the listing broker is paying the buyer broker out of the proceeds agreed to be paid to the listing broker by the home seller.

So, as a listing broker I may enter into a listing agreement at 4.5% and then offer it in the mls at 2.5% - 2.7% and upon successful transaction with another broker I make the difference of 1.8% to 2%. If, as listing broker, I also command the buyer (the buyer drove by the sign and called me, the listing broker for a showing, consequently buying the property)....I may earn under terms of contract the entire 4.5%. Some buyers strategize that by having the listing broker represent them, they can save 3%...I have seen this...and this may be indirectly true....long story short...and likely confused at this point...IT"S NEGOTIABLE.

However, a listing broker will be offering compensation to a buyer broker out of their contract agreed rate. Some charge 4%, some 6%, some 5%, some 7%, some reduced, some flat fee....seller pays in the end. If the buyer broker has an agreement with their client to be paid a % or flat fee, that may also be included &/or credited against any other monies paid by a listing broker. In the case of FSBO (for sale by owner) where no compensation is being rewarded to a broker, the buyer broker earns what they can from the buyer...and if no buyer agreement is in place...that's more negotiation a buyer broker must handle. It's all about negotiation really....you don't walk into a department store and negotiate the sticker price on a new sweater or pair of jeans, or $2,000 piece of jewelry, but there is no standard in real estate commissions...although alot of consumers are used to hearing 6%...hence the niche players like HelpUSell and Assist2Sell that offer discount services to sellers...but if you want ultimate exposure, you pay to be in the MLS. Most buyers use brokers...but with the advent of online consumerism...that is also changing.... thanks for reading. Chris@HouseNow.com
Web Reference: http://www.HouseNow.com
0 votes Thank Flag Link Mon Feb 25, 2008
6% is the going rate, which is a scam. So the selling agent on a 330K house (approximately the median price in the Portland area) makes approximately 11K, or about what I make in 2.5 months. So to sell a house, do you really think a realtor spends the equivalent of 2.5 months of work? Of course not! I'm selling my house this spring and it bugs me like crazy that approximately 20K of my sweat equity has to go overpaid realtors to push some papers around and post things online (things that I can do, but won't go FSBO because realtors won't show my house - i.e. they have a monopoly).
~~~~~~~~~
CHris, why don't you tell us how you REALLY feel? :)
As Deb said, the listing agent does not make the entire, in your case, 6%. Most times they will make one quarter of that minus taxes. Since I assume YOU get paid every week, is it really so bad that the agent makes around $3000 in one check? They may only get paid once that month, you know. And that's before taxes etc.
0 votes Thank Flag Link Sun Feb 24, 2008
Let's make this one easy for you. Yes the buyer can elect to pay a buyers agent however It's one in a million. The seller still pays both sides. The seller’s agent does not represent the buyer or have any relationship except to compensate the buyer’s agent for bringing a buyer. Buyer agency is very much still a free service so to speak unless you elect to look at For Sale by Owners which in most cases even then the owner will pay the buyers agent as a predetermined amount.

Hope this is understandable. In general the answer is NO.


Farah de Verteuil
Real Estate Sales Specialist
John L Scott Market Center
503-758-6281
http://www.relocation-home.com
farav@relocation-home.com
FarahV
0 votes Thank Flag Link Sun Feb 24, 2008
Thank you for tolerating my tirade then - I appreciate that you get it! Like CA, in Oregon the buyer's side commission comes from the seller. There is a trend toward Buyer's Agency Agreements - where the the buyer agrees to make up the difference to get the buyer's agent to 3%, but it's not a universal thing.

I have heard of what you're talking about, and I actually think it's a great idea, with each side being paid by their prospective clients. I think they may be doing it in some places on the east coast, but it hasn't hit here yet.
Web Reference: http://www.welcometopdx.com
0 votes Thank Flag Link Wed Feb 20, 2008
thanks for all your feedback. i'm pretty familiar with how real estate compensation works - my family has been in real estate for years! however, i know that here in CA the seller pays the full commision (whatever that may be and however that may break down for each agent). i had heard that in OR - the buyer pays their share of the commission - just wanted to see if that is true or not?
0 votes Thank Flag Link Wed Feb 20, 2008
Same way here. The biggest difference is in the cost of selling. We don't have any of the add on transfer taxes that CA does, just typical escrow and title fees.
0 votes Thank Flag Link Wed Feb 20, 2008
Hi Kate,
I live in California, too, but this is all making my head hurt -- and I'm an agent! Just keep in mind that fees in real estate are negotiable; you want to be attractive with your negotiation, while not giving too much away. At the same time, you want to be aware of local and state taxes in addition to any commission fees, and how those are "traditionally" allocated to buyer or seller in the locale where you're shopping. Oregon is not that tough ... happy hunting!
0 votes Thank Flag Link Tue Feb 19, 2008
6% is the going rate, which is a scam. So the selling agent on a 330K house (approximately the median price in the Portland area) makes approximately 11K, or about what I make in 2.5 months. So to sell a house, do you really think a realtor spends the equivalent of 2.5 months of work? Of course not! I'm selling my house this spring and it bugs me like crazy that approximately 20K of my sweat equity has to go overpaid realtors to push some papers around and post things online (things that I can do, but won't go FSBO because realtors won't show my house - i.e. they have a monopoly).
0 votes Thank Flag Link Tue Feb 19, 2008
Hi Kate - same thing applies here. What happens is that the Seller enters into a listing contract for say 6% (the average listing rate). Then, as an incentive to bring a Buyer, the Listing agent lists the property and offers Buyer's agents a portion of contracted rate - typically 2.7%. Hence, listing agent typically makes 3.3% and the buyers agent makes 2.7% - but it is really the Seller that paid the full 6%. In my opinion there isn't really any competition in regards to these commission rates since, when weighed side by side, lower commissions/fees often signify that there is less service being offered for the discount.

Hope that helps!
0 votes Thank Flag Link Tue Feb 19, 2008
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