There is one pile of money to divide at closing. The buyer (& his bank) put the money there. So we know for sure the pile originated with the buyer. The pile goes to the seller because that's what the contract says. So now the seller legally owns the pile. At closing, everybody gets a piece of the pile, including the broker, and seller gets what's left. Did the buyer pay the commission because the money pile originated with him or did the seller pay it because the pile was passed over by the buyer? Why did the man keep driving around the block? His blinker was stuck.
Still blowing philosophical econ at you... Money is a store of value. It has no value of its own. The value of money lays in the perceptions and belief of its holders and its seekers that it can be used either now or in the future (and in the case of debt - in the past) to obtain goods and services that people think they need or want. Money would not exist if it were not for the beliefs of those who seek it and hold it.
A very high percentage of the six billion people on the planet share this belief. The percentage is so high that with the exception of a few cult members, essene purists, hermits and madmen, it is a nearly universal faith.
I put the idea out, now, that since I claim that money only exists because so many of us believe in it and have faith that it exists, that it is faith and belief that pay the commission.
I have a perspective of a couple other real estate markets - Spain and Mexico. There most properties are listed as a "net listing". The seller will take a certain amount for his property and the agents will advertise the property at a price higher than that in order to get their fee.
Those markets also do not have any MLS - because exclusive listings are abhorrent to most people. No MLS and therefore no comparable sales available to the general public or even to the real estate agents themselves.
The result of this is average commission rates much higher than what we average here. Also, buyers are very uninformed as to what true values are.
The commission paid in the US can definitely be attributed to the buyer theoretically - yet - the buyers benefit hugely from this imputed commission with a more fluid market and open information for all.
This is a very good real estate market - buyers and seller reap great rewards from this system. I've worked in both types of markets - the US is by far the best for everyone involved. Too bad we cannnot export real estate practices as we export Big Macs.
So... since the price is basically going to be the same (as far as the buyer is concerned) regardless of who pays the commission... the only person who's bottom line changes, due to commission is the seller. Leaving me to believe that the seller pays commission.
Or: The house sells for $X, and the seller pays the commission out of (hopefully) their profit.
IMO, the seller pays the commission. The house sells. The seller has the money. What the seller does with it is their business.
When approaches by an unrepresented buyer at an open house, we often hear requests for their buyer-side of the commission. In a similar fashion, the homeowner may make the same request for their seller-side if there is not another agent involved. With both sides seeing the chance to save their money, both feeling a right to it â€“ who needs an agentâ€¦ unless the two sides (gasp) might not come to an agreement on the money, right?
in most cases the commission agreed to is not a factor in the sales price. The market sets the price. Sellers often have the mistaken impression that they control the price. A good Realtor will educate the seller on the local market conditions so the seller is able to make a wise choice about the listing price. Listing price is a marketing tool, sales price is the answer providee by the market.
Most sellers do not want to listen to the market.
Real Estate Services are a "cost of sale" yet buyers and sellers are quick to try and dissect who's really paying commissions. In reality, it isnt any different than any other purchase you make....when was the last time you bought a car and asked "Just how much of your advertising salesman's commission am I paying out of the price of this car?"
Hi Angela, you must not have heard about the secret book about selling/buying a home that every buyer and seller seem to have read (because they all quote the identical phrases), but none of us real estate agents have heard about. :)
It sounds like Germany and Spain are very similar. The disclosure part is also very interesting. I asked my local agent in Barcelona about termite or property inspections. She thought I was from Mars. No inspections in that market. Even with properties that are dated in the centuries! We definitely have a great market here.