Home Selling in Fremont>Question Details

bibinini10, Home Buyer in Dublin, CA

Commission Rate 6% is it too high?

Asked by bibinini10, Dublin, CA Wed May 7, 2014

We saw a house in other city which we know it's better to ask the listing agent or her partner to be our buyer agent so we get higher chance to get the house. But in order for us to get enough down pay for the new house, we need to sell our current house.

We ask the partner of the listing agent to be our house listing agent, she said she charges 6% for helping us sell our house. I checked redfin that selling fee is 4.5%. We have a broker friend that told us that he is willing to charge 3.5% if he helps us buy and sell the house. I just wonder is 6% normal and if it's 6% of service fee, what we should expect in the service? Does 6% include all the closing cost? And what kind of service we should suppose to get? Thank you.

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Your friend may be offering a discount as a courtesy of your friendship...in which case s/he would be an excellent choice if they are a good Realtor. If, however, they are offering the discount because they NEED business...they may not be a great choice. People who NEED business are often (but not always) in that position because they aren't very good agents. I would not consider the Redfin estimate...who knows where they drew their data from. I can tell you, though, that the best agents who have the widest range of buyers working with them, can often bring a higher price for your home, which can make them well worth a higher commission. Best of luck...
0 votes Thank Flag Link Wed Jul 23, 2014
I spent 100k on my MBA program at London School Of Economics, to learn a simple concept that in order to be successful it is important to understand what motivates people! Although, in the case studies it showed that money is not a strong motivator, however, this principle doesn't apply very well in our industry. Money is a very strong motivator for realtors! It not only motivates us but eliminates any room for cutting corners. To answer your questions precisely in the market your house is in. 6% seems to be a very normal and a going average rate in the market. Again, everything is up for negotiation and that applies here as well. As a well informed seller, living in this technologically advanced day and age, you should interview a few realtors and go with the best. Just note if someone is offering to list your house for 3% then don't expect a top level customer service and honesty. On a case by case basis, we all are up for negotiation but given there is a considerable investment that we have undertake to ensure the seller gets the highest top dollar in the short time span, sometimes it is not possible to match a ridiculously low commission rate. I have had sellers who interviewed me but ended up hiring agents who offered lower commission rate coming back to me and complaining about there terrible experience and no offers. When you're selling you should consider hiring a realtor who knows your market inside out, knows about all the floor plans and builders, works with a mix of both buyers and sellers..
0 votes Thank Flag Link Wed Jul 23, 2014
Just like any service in you pay for in life getting the best deal/value for your dollar is important. Check out sites like http://www.AgentsPresent.com to find an agent to help you sell your home at a competitive commission rate.

Everything is negotiable when purchasing goods and services that's the beauty of it!
0 votes Thank Flag Link Thu Jul 17, 2014
Gotta jump in here to the most debated topic in real estate. First THERE IS NO 'NORMAL' commission fee. To even suggest it is a possible anti trust lawsuit. Across the nation, 6% seems to have been an average for years. Lets explore why. We are in a FREE MARKET SYSTEM. If a provider of a thing or service cant make money---they close down. If a consumer can find something cheaper, they will take it. But, at a certain point the system stops working. You dont go into Safeway and offer them 59 cents for a $1.5 dollar loaf of bread. You dont need to. Their margins are small and they have to compete against Albertsons, Winco, Alpha Beta, etc. The market has taken their prices down to as low as they can go and still stay in business.

Real estate commissions: There are costs associated with oiling the real estate machine! Office, advertising, dues, fees, and many times multiple parties to share in the fee. A listing broker and agent, a selling broker and agent---that makes FOUR people to be paid. Why do you sometimes need four? Thats the system! It always as been. Generally, to keep the system oiled, to pay the bills and all those involved, on normally priced houses affordable to Joe and Jane Worker, its taken about 6% If it could have been done for less, it would be less. If it took MORE, the machine would fold so commissions would be higher.

This was especially true before we had the internet. Now here is where in incur the wrath of some other agents---

The main duty of a LISTING agent is to place the property into the public eye, or to advertise it. The majority of all properties are now found by the buyers through the internet! The last home I sold was to a buyer who found the home on a search site, called me for the contract work, and I felt like I didnt even earn the money. (Yes, yes there is a 'value' to our service even if it takes 30 minutes)

All the real estate offices advertise their sites to catch searchers, and then the searchers are linked through the real estate agents sites straight into the MLS! The searchers dont realize that, and if they have accessed it through the real estate agents site, the only contact info they have on any of the properties is through that real estate office.

Once into the MLS, all agents everywhere (who are members) have access and can show their buyers. This takes a lot less money than the old newspaper and magazine advertising. Costs are lower. Its the free market system rearing its head as offices can afford to go lower. Now in the MLS many properties are listed at 2.5 or even 2% to the buyers agent, and we dont know what the listing agent is charging til the end. It doesnt matter anyway.

I HATE hearing 'You get what you pay for'. Hate it, In all industries there is some truth to that but of course not in every case. I ran a mortgage company and we gave complete and full service but charged a tiny markup over cost. Didnt make a lot but did a lot of business and had hundreds of happy clients. We are a discount office, though not to the almost business suicidal degree of some, but we give the same service as if we were being paid 30% commission. As professionals, we do not determine our level of service by the fee. No one should but many do. Thats part of the flawed human condition.

Super discounters: I suppose one could argue that super discounters would be more likely to not be able to give the best service but again that would categorize them. I know of offices that charge tiny fees and cant afford to do much other than placing properties into the MLS. Some do this without any agency representation for the seller at all. Legal, but is it best for the seller? Its case by case.

So, "Ya get what ya pay for" seems to be a therme in this thread and I generally dispute it but its not without merit.

Here is what you keep in mind. EVERYTHING IS NEGOTIABLE. Is 3% a fair fee for a $100,000 home? Probably almost always. Its not a lot of pie to split up. How about a 750,000 home? Depends on how much work had to be done to market it, but probably not!

I agree with Sally below that some agents will not show homes listed with lower fees in the MLS. They are dirt beneath our feet as far as Im concerned. I love my profession and have NO patience for human beings who let money cloud their judgement.

To conlude, you can get way more than you paid for from a discounter. Conversely, you can get terrible service from a 10% er! Its the agent/company, not the fee.
And as many others pointed out, you need your own representation. Dual agency, in my opinion (and this is also not popular with my peers) should not be legal.

You know, buying a house isnt like a lawsuit or divorce. You shouldnt have adversarial sides. We should be facilitators to guild people through escrow. Except in certain stages of negotiating , there is no reason to have representation. At least there shouldnt be but its not a perfect world.
0 votes Thank Flag Link Wed Jul 16, 2014
Let me ask you a question...if you went to work and had the option to be paid less would you work the same amount?

I have worked with the agents who are so-called discount agents and you do get what you pay for. They are, very consistenly, not the best agents. Generally, they are agents who work real estate as a "hobby" or as a second "profession".

These agents are either inexperienced (why they are inexpensive) or so busy trying to make more money at the discounted rate, they are not effective.

A great agent will earn is worth their 6% (actually it is 3% as they are splitting it with the other agency). They know the market, have been in the business a good amount of time and are very professional.

Remember these agents do not keep 100% of their commission themselves. They have licensing fees, office fees, MLS fees, taxes, etc that need to be paid. They are self employed so they are paying their own medical expenses, etc.

Look at the Florida agent who answered below ....7% and upward!

If you want the best experience selling your home and best price...hire the most professional agent. And that agent wont budge from their salary point.
0 votes Thank Flag Link Mon Jul 14, 2014
The reality here is that "you get what you pay for." Regardless of whether the fee for professional services is 3.5 % or 7% there is a wide variety of services associated with marketing a property. The best thing you can do for yourself is to require the key players here to provide you with a written account of their comprehansive marketing plan they will be using to sell your home. This should include both their individual and corporate intiatives. Obviously, the extent of services should far exceed placng a sign in your front yard and placing your home on the local MLS.

This plan will provide you with a "blueprint" that you can follow to track what has and hasn't been done and it gives you a means of holding the agent accountable for their word.

This process should clearly identify for you that there are big differences between these plans and that it's entirely possible to encounter agents that haven't the "foggiest" idea of what a good plan is. Needless to say, whether friend or total stranger, you should pass on these individuals.

In short, protect your interests by focusing more on the company, agent, and services provided, and less on the fees because a good agent and company could very easily bring you a higher sale price and/or quicker sale.

Best wishes,

Bill
0 votes Thank Flag Link Sun Jul 13, 2014
Asking the "listing agent" to be your partner will not give you a better chance at getting the house. The listing agent has a contractual agreement to get the highest price for the property. They have no contract with you.
Get your "own" buyer agent who does not have a conflict of interest and who can truly represent you.
You are free to look at all possible commission charges, however, make sure the services they offer are what you are looking for.
Discount companies have to cut corners somewhere. I would never go with the "cheapest" in any field. Look for the best instead!
An Excellent Realtor will sell you home with the least stress and the highest possible price and terms.
0 votes Thank Flag Link Sun Jul 13, 2014
FREE PIZZA with every house sold!!
That sounds like a deal, right?
Of course not.

As Gordon pointed out, professional fees in a real estate transaction are negotiable. And there are many folks who want to save money. I can blame them. When ever I can I save money also.

A multi-dimensional real estate professional my offer to help you sell your home and charge you noting, nada, not a dime. That sounds like a deal, right?

When you find out the agent made 10% or more in the transaction, will you go ballistic?
As a home seller you have no less than 10 methods from which to choose to sell your home.
Most of those ten, promising to save you money, result in adding to the total cost of getting your home sold. Be acutely aware, this is a business, not a hobby. There are real expenses involved, real time spent, resources that must be engaged and the cost of all these are paid by the listing agent. The real estate professional you choose may be a no touch agent or a full service agent. You WILL get what you pay for. It just like your household budget, if the money is not there to eat out, you most certainly should stay home and hone your culinary skills. In the agent you choose does not have the compensation to get your home sold, they too will stay home.

Based on your situation and our REAL selling goal, you need to select the agent who delivers the results you need. You have heard many times, buy quality and you will never lose.

You are operating from a basis of faulty information. You owe it to yourself to pick up the phone and call a Fremont REALTOR and chat about your goals and situation. Trolling the internet for opinions will not serve you well.
0 votes Thank Flag Link Sun Jul 13, 2014
Just to let you know that commission is always negotiable. There are "discount" agents out there that will take your listing for a lower commission. Keep in mind, like with many other things....YOU GET WHAT YOU PAY FOR.....If an agent is not going to be making a normal commission on your home, they may focus on other buyers and sellers needs before yours. This may not be the right thing to, but it happens.

Also keep in mind to truly market your home it does cost money as well.....

Don't focus on the commission part of it........That will not get your home sold!
0 votes Thank Flag Link Fri Jul 11, 2014
Until you have been an Agent you will never know how many hours that Agent spends representing you and taking on the challenge to see you you get the top dollar for your property and can walk away knowing you have nothing to worry about.
They have expenses, where do you think all the information comes from you get on the internet and through MLS they pay for that through dues and License fees and continued education they work almost 24/7 .
When your day is done you can go home and relax or do family things. As a Realtor you are always on call or the client gets upset like, well every time I call my Agent they are busy. Do you get called or people drop in at 6am and say I knew you would be up or call you like 11:00 at night saying would you look up this property for me I found on the Internet. Their week ends are pent holding your house open or showing you property.
After doing the marketing and all the paperwork then you change your mind that Realtor walks away empty handed no one pays them a fee for all the time they spent . Plus the Realtor ends up working most of the time over a month before they see a dime for their efforts. Hope this answered your question . I think they are under paid it should be at least 7% been a Realtor for over 40 years L Faught
0 votes Thank Flag Link Fri Jul 11, 2014
Bibinini10:

You seem to be solely concentrating on the commission; perhaps, you might consider the following as well:

"Dual-Agency: look here before you go there!"
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…

-Steve
0 votes Thank Flag Link Mon Jun 2, 2014
Hi Mr/Ms Buyer and seller.

You have excellent questions about commission and should you work with seller's agent to increase your chances to get your offer accepted. First of all it's not always true that your offer will get higher chance of getting accepted if you work with seller's agent. Listing agents have fiduciary duty towards the sellers. Price and terms your of the contract plays the most important roll in getting your offer accepted, countered or rejected.

Secondly, commissions are not fixed by law. They are negotiable. Discount brokers charge less commissions and they may or may not able to get the most dollars for your home.

I would say don't look for who charges less; look for who can get the best net dollars in minimum possible time and hassle. Look for a closer who has track record of closings and have happy clients.

Let us know if you like to meet and interview at no obligation, I would be happy to discuss more in person.

Good luck to you,
0 votes Thank Flag Link Thu May 15, 2014
interesting discussion surrounding commissions. As a seller you get to negotiate a commission with the agent who lists your property. There is no set commission.

As a buyer, you should, in my opinion, have a Buyer Representative. This agent is typically compensated by the listing agency paying the agency of your Buyer Agent and his/her agency paying them.

The sales commission is between agencies and, as such, should not be a discussion during negotiations between buyer and seller.
0 votes Thank Flag Link Sat May 10, 2014
You've made a huge assumption here, and a common one, that it is better to have the listing agent be your buyer's agent. WRONG! It is a conflict of interest! Your best bet and best service will come from an independent buyer's agent.

As a buyer, I honestly don't know why you are talking about agent fees. You don't pay your agent when you buy a home - the seller does. My best advice is to get the best, most qualified agent for YOU and stop worrying about the commissions.
0 votes Thank Flag Link Wed May 7, 2014
No matter what you pay, your experience should be that you've received an excellent value for your dollars. The best value is often not the lowest price.

You really have to assess what's most important to you in an agent and what each agent has to offer. Do you want full service concierge type service, an agent who is proactive and engaged, an excellent negotiator who will always tell you the truth and not just what you want to hear? Do you want an agent who will market your property, provide you with feedback from agents who've seen the property and answer the phone?

I'm serious about the answering the phone part. Some agents don't answer the phone. It's bizarre and I don't understand it, but it's more common than you'd think. If someone calls your listing agent about your property, you want that call answered or returned quickly.

Determine what is important to you, compile a list of questions and start interviewing agents. Find out what each one has to offer, decide what level of service you want and list with whoever is the best fit.

A couple of side notes:

- I don't see the value of hiring the partner of the listing agent of the other house unless that agent has the qualities that are important to you in a listing agent.

- Closing costs are separate from commissions.
0 votes Thank Flag Link Wed May 7, 2014
There are those people who sell their own home, because they do not want to pay commission. Naturally, they do all the work and probably will not get the greatest exposure or the highest sales price. Some people choose to pay a discount broker.
As the old saying goes,” You get what you pay for”. Why not let a professional agent do all of the work? The agent works hard to get their client the best deal, and will be worth the commission in the long run.
Often, in circumstances such as for sale by owner’s, it the seller used an agent in the first place, the seller would have pocketed the same amount of money, and perhaps more if they signed an exclusive listing agreement without all of the hassle of handling all aspects of the sale. Agents also make certain that buyers are p
re-qualified, so that the seller does not waste any time on those who will not qualify.
Buyers are also protected, where as the real estate agent will send listings, and do all of the detective work to negotiate the best deal. A good agent is there to serve their client, and is also looking for repeat business along with referrals with a job well done.
0 votes Thank Flag Link Wed May 7, 2014
Wow... a lot of misinformation here... both in your question and in the comments.

I think you're saying that you believe it's better to have the agent who's listed the property you want to buy, to also represent you... and for some reason you think that will give you a higher chance to get the house. There's no reason to believe that. A good buyer's agent will represent you very well, and you will have just as good a chance to get the house, and might actually save some money, if they're a good negotiator.

There are plenty of agencies that will negotiate their fees, and yes, Redfin is among them. Make sure you're getting full-service from any agent/agency that offers you a reduced selling fee. You want to make sure you're getting all the services that you think you're paying for.

By the way... dual agency, in those states where it's legal, is categorically NOT unethical. I don't practice dual agency, because I believe it to be a conflict-of-interest, but as long as the buyer and seller agree to allow the dual agency, it can be conducted perfectly within ethical boundaries.
0 votes Thank Flag Link Wed May 7, 2014
Janet - I did say "in states where it's legal"... here in Illinois it's legal, and as in Georgia, requires signatures by both parties. But I disagree with your "easiest answer"... as we are not attorneys and don't behave as such in the process. A more apt analogy might be to consider using one "mediator" in a divorce... which is done frequently with much success.

Please don't misunderstand... I am not a proponent of dual agency, even when legal... but it is seriously overstating it to call it unethical.
Flag Thu May 8, 2014
Dual agency is not permitted in Georgia, unless there is legal document signed. The best and easiest way to answer this is, if two people were going through a divorce, would it be in the two parties interest to hire the same attorney? The answer is obvious!
Flag Wed May 7, 2014
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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The confusion here may lie in the 6% total commission which covers both the listing agent and buyer's agents commissions. It is customary for the seller to pay the commissions for both agents. Therefore, the listing agent would receive 3% and the buyer's agent would receive 3% commission on the transaction.

If the broker and their representing agent serves in dual agency, it would be their discretion to represent at a lower rate as with a regular transaction.

The closing costs are a separate expense from the commission expense. Plan to set aside approximately 3% of the sales price towards closing costs in addition to 1% for Earnest Money Deposit.
0 votes Thank Flag Link Wed May 7, 2014
P.S. The commission does NOT include your closing costs. I would ask the agent(s) to give you an estimate of "net proceeds" -- basically what you stand to make after you pay the commission, closing costs, payoff your mortgage, etc.

Your closing costs will likely include title insurance, title closing fees, county recording fees, a prorated amount for taxes, HOA fees, etc. Every state is different. AND...a buyer may ask YOU the seller to pay for a portion of their closing costs.
0 votes Thank Flag Link Wed May 7, 2014
Your first mistake is to have the listing agent also work for you as a buyers agent. Most states don't allow that anymore anyway -- it's called dual agency and is unethical. You aren't going to get a better deal by working with the listing agent. You want an agent that is going to work for YOU, not the seller.

Regarding the sale of your home -- Everything is negotiable. But you need more info to make an informed decision. Yes, there are agents and brokerage firms that offer discounted services...but then you often get what you pay for! What are those discounted firms willing to do? Ask for their marketing plan. How are showings handled? Are they going to negotiate on your behalf and represent you and your best interests throughout the entire transaction? Or will they just list the home in the MLS and that's it??

And keep in mind the agent doesn't keep the full 6%. Typically that 6% gets split and about 2.8 or 3% (co-op fee) goes to the Buyer's Agent. Then the agent's brokerage firm takes their cut. Sometimes it's 50/50, or maybe 80/20. Who knows?

If your friend is offering to do it for 3.5%, then what is he willing to offer the Buyer's Agent as a co-op fee? A full 3% and he keeps only .5%? Or is he going to S#$@ the Buyer's Agent and give them only 1-2%? Keep in mind that if a listing agent is offering less of a "co-op" fee, there are buyers agents out there who WILL steer clear of your home. Is it wrong? YES. But it happens.

I would talk to several agents and see their listing presentations. Then make an informed decision.

Good luck!
0 votes Thank Flag Link Wed May 7, 2014
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