Home Selling in 10023>Question Details

Story Huff-m…, Home Buyer in New York, NY

Do ultra-high-end sales justify the same percentage realtor commission?

Asked by Story Huff-miller, New York, NY Wed Jul 16, 2014

I understand the whole "you get what you pay for" argument for real estate commission percentages as they relate to lower- and higher-priced homes. But what happens when the price point is in the tens of millions? My company is looking to expand from high-end construction in Manhattan into development of luxury properties. One of the costs that get factored into a particular property's profitability is the real estate commission. If you were to sell a home for $200,000, the realtors would typically split a 5% commission, which would be $5,000 each. (I understand that most of this goes to the broker, let's just skip this part for now, though). If you were to sell a home for $750,000, the realtors would get $18,750 each. Obviously more effort and risk went into selling the higher-priced home, and I'm fine with this. But what happens when you want to sell a home for $25,000,000? The realtors would each get $625,000! Call me crazy, but I can't see how one could justify that kind of

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Hello Story Huff-miller,

As others said, commissions are negotiable. Usually, a developer/seller would interview a few realtors and sign up with one that seems to be the best for the job and who offers the best terms. True, realtors can be making higher commissions on more expensive sales, however- developers are also making more money there. So they are working as a team and it should be structured in such a way that it is beneficial to both of them.
Good luck,
Krystyna Rachtan, Licensed Real Estate Broker
Phone (212) 991-8072
kr@nyhome.com
NEW YORK HOME REAL ESTATE SERVICES, INC.
295 Madison Avenue, 12fl, New York, NY 10017
0 votes Thank Flag Link Thu Oct 16, 2014
Commission when you are selling your property is negotiable. You just need to discuss this with the agent of your choice. Bare in mind, though, that selling luxury properties take longer than regular properties and it takes unique and innovative marketing technique to market the properties effectively.

Just make sure when you hire an agent both you and the agent have a clear understanding of what the goal and process of selling these properties are, what is expected from each other, and that you both feel comfortable with the commission. The least that you want is someone who is unhappy with their pay working for you.

Good luck!
0 votes Thank Flag Link Sun Sep 28, 2014
Also - REAs are responsible for paying their own income tax, social security, health insurance. Part of the commission received after the broker takes their percentage goes for these expenses as well as office expenses, car expenses.

A $25m home property would be located in an area where most expenses would also be higher such as office rent; vice versa with a $200k property

$25m even at 1% commission would be chump change for most agents but it would be a couple years worth of commission where I am.
0 votes Thank Flag Link Sun Sep 28, 2014
The commissions are always negotiable, normally around 5% to 6% and that pays both sides of the deal, yet if you are th agent selling a home for $25,000,000, and getting a commission of 625,000.

Please remember they are paying for pictures of the home video, advertising costs and so much more.... we have to pay ad costs each month our homes are for sale on the market, along all the running of clients to the home, open houses., and we split that % with the selling agents.... it adds up and if an agent is good at what they do, they will get the home sold for you and earn that paycheck! If they aren't then the home won't always sell and it will sit... high end properties take more to sell then lower end ones do.
0 votes Thank Flag Link Sun Sep 28, 2014
Yes, percentages are negotiable. They normally are no more than 6%. Also depending whether it is a residential, or commercial sale. Commercial in most cases is a lower commission because the sale dollar amount is normally larger. Please do not hesitate to ask any other questions.
0 votes Thank Flag Link Thu Aug 21, 2014
An just how many $25,000,000 homes do you think you or the Realtors involved are likely to see in a year; One? None?

You need to be realistic Realtors have a significantly better chance of selling 50 $500,000 homes in a year than 1- $25,000,000 home. In addition the listing agent is going to be working for a very demanding seller (you) and as I've already pointed out may go a year or more between sales.

Let me ask you do you want buyers and Realtors hammering on you regarding your profit margins? Do you lower them when you build in this range or do you raise them to account for the development and sales time that you anticipate? Don't be penny wise and dollar foolish, and recognize that if you want a good long term productive relationship with the Realtor community, then stop worrying about their commission. You may also want to remember that the commission get's split between the Realtor and their company and that Realtors are self employed we pay all our own marketing fees, cover all our own overhead, pay all our own taxes, are solely responsible for our retirement accounts, (no 401K's in this industry) etc etc. The truth is over half of your estimated $625,000 will disappear leaving the broker with a net closer to $250,000 which to me isn't much if I were living in Manhattan where you say you're looking to build.

I sincerely believe you're focus open the amount of the commission on a single sale is somewhat myopic and isn't serving you well.
0 votes Thank Flag Link Fri Jul 25, 2014
You got it just right! High end homes takes a different marketing strategy and sit in the market much longer then average homes. So percentage is what you have figured, unless otherwise agreed on.
0 votes Thank Flag Link Thu Jul 24, 2014
Absolutely.

High-end properties:

--Take longer to sell
--Need more advertising
--Are more difficult to sell because of a smaller buyer pool.

And you think commissions are not justified?

Just because you can't envision it in your own mind does not mean they are not deserving.

If you're selling to a high-end clientele. I recommend reading Dan Kennedy's No BS Marketing to the Affluent. I know it changed my entire philosophy on marketing and it might just change yours too.
0 votes Thank Flag Link Thu Jul 17, 2014
In NYC they get those numbers. I know it's hard to justify those numbers when some of these properties sell the first day ion the market. Typically the numbers are justified by the amount of money and time an agent must invest to sell high end properties. Talk with your agent about marketing plans and know exactly what they plan to do. Everything in life is negotiable, so have this conversation up front with your agent and hopefully you will come to an agreement that makes all involved happy.

Christopher Pagli
Accredited Buyer Representative
William Raveis Legends Realty group
914.406.9023

chris@legendsrealtygroup.net
mrwestchester.blogspot.com
0 votes Thank Flag Link Thu Jul 17, 2014
You seem to be well informed.
Then take the other part that you know and make it work for you.
That other part is, "All real estate professional fees are negotiable."

Pick up the phone, call the nearest Remax REALTOR and negotiate.
The outcome just might surprise you.

Will anyone tell you in a public forum?
Of course not. And you know that.
0 votes Thank Flag Link Wed Jul 16, 2014
Be aware, the real estate environment in New York City is unlike any other place in the USA. You exist in a nearly "no hold barred' environment. That means you and those you hire must have the capacity to think outside the box.
You would be committing a fatal error to consider a conventionally understood flat fee solution.
"Have these alternative payment methods being employed successfully?"
The reality is. at this price point, ALL of these compensation arrangements will be considered alternative.

You really need to meet up with seveal professionals. There will be one multi-dimensional professional who will show you why they are the solution to your challenge.

Of course you will pay more than you want. and the professional will receive less than they want. And the world continues to turn.
Flag Fri Jul 25, 2014
Do you have any knowledge of these alternative payment methods being employed successfully? I have Googled flat fee MLS services, but it's hard to know what I'm actually getting. And there are a lot of articles online about lawsuits being filed regarding reduced percentage and/or flat-fee commissions.
Flag Wed Jul 16, 2014
It cut off my question!

Here is the rest:

I can't see how one could justify that kind of a payout, regardless of the amount of time and effort spend in marketing and selling the property.
Are there any realtors out there willing to break out of the mold, and accept either a reduced percentage commission, an hourly fee, or a flat-rate payment?
0 votes Thank Flag Link Wed Jul 16, 2014
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