I believe that a lot of people think that real estate agents must be rich because of how much they pay out in commissions when they sell their home. Here is a scenario to illustrate where the money might typically go.
Lets pretend a home sells at $100,000 @ 6% commission. Typically that $6,000 would be split four ways. First itâ€™s split between buying side and selling side and typically again between broker and agent. So after I split my side of the contract with my brokerâ€¦I have $1,500. Then I pay franchise fees and other expenses. So my actual paycheck out of the $6,000 is about $1,358.
Keep in mind I haven't paid taxes, MLS dues, Supra keys, E&O ins., Local, State, and National REALTORÂ® dues, marketing and advertising to get more business and much more.
Todayâ€™s gas price is $3.59 a gallon and thatâ€™s the cheap gas. Today I drove 40 minutes one-way to put a sign in the yard. Tomorrowâ€¦three more signs.
My company does not provide life, health, disability, vision or dentalâ€¦nothing.
All of those things that conventional jobs deduct from a two-week paycheck are not included in the job. Then what is left over can finally start being allocated to living expenses like the mortgage, groceries, utilities, etc.
Oh yeah, no paid vacations, no paid holidays, no paid personal days, no paid sick days, and no guaranteed paycheck. No sale, no moneyâ€¦no matter how many hours you work. With all that saidâ€¦I still love it.
If they are with a large company, corporate international will take a % off the top of the Realtor's earnings. Then the Broker takes a percentage.
Realtors are independent contractors and they have to pay their own health insurance, E & O Insurance, Board Fees, Car Expenses, Gas, Insurance, Pension funds, Life Insurance, FICA, Medicare, Social Security and anything else you would normally have deducted before you received your paycheck.
On top of that, Realtors then have to pay out the Fed Tax, State Tax and any other local taxes out of that check. Then there is the MARKETING costs! What the Realtor ends up with, is miniscule.
I suggest you consider this question: Is the commission rate more important than the dollar amount you net at closing?
It's the net amount.
So the question I would ask is this:
How can I make sure that I net the highest dollar amount possible when I sell my home?
That question opens up a lot of territory that will help you grasp the issues at hand.
OTOH, let's talk about reduced commission rates. Most markets are buyer's markets, so you are probably is. If the buyer that first sees the home they buy sees it with a Realtor, you probably want to offer at least "market rate" commission to the selling office.
So you could list with an MLS entry only broker, or a discount broker. In my MLS (and no offense intended to anyone...these are just the stats), they have three important characteristics
1. The list price versus sale price ratio is 2.6% - 4.5% LOWER than the average
2. Their listings FAIL TO SELL 50% more often than the average
3. Their listings take longer to sell, when they do sell
So unless you've got money to burn and time to kill, I would interview three Realtors. Ask them to prepare an Estimate of Seller's Net Proceeds. Know that homes that sell in the first 30 days sell at closest to asking price. So a home needs to receive at least ten showings or two offers in the first two weeks, or a price adjustment is in order. If the buyer is brought by a Realtor 90% of the time, Realtors know values, and buyers are looking for good values.
Assuming your market is average, price slightly below market. The market will not let your home sell under market value.
Once an agent closes the transaction it is a little different depending on the broker, the agent will receive about 70 % of the percentage paid to the broker. The expenses have to come out of this amount and then of course the taxes so most realtors bring home less than one percent of the sell amount.
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