Home Selling in Dallas>Question Details

Dpaee, Home Seller in Dallas, TX

Why is it the seller's responsibility to pay both seller's agent and buyer's agent commissions?

Asked by Dpaee, Dallas, TX Sun Mar 27, 2011

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Think about it this way instead of the way you are looking at it. You accept the lowest price you are willing to accept, and the commissions get added on top of that. Let's say you want $100,000. Each agent gets anout $3,000. The selling price is $106,000. The reason you do that is that when the buyer takes out a mortgage, the financing percentage goes off the total. If you make an agreement with your listing agent, then they will should be splitting that with the buyer's agent if another agent brings the buyer. If you listing agent sells the house themselves, then they get the full commission. It really doesn't cost you any more.
0 votes Thank Flag Link Sun Mar 27, 2011
I always enjoy hearing another perspective:
"The buyer pays all costs unless the seller brings money to the deal. Indisputable fact." says Dan.

However, if we're going to get technical about who pays what to whom. The bank puts the mortgage loan money on the table, the buyer probably puts the down payment and did put the earnest money forward on the table, a family member or a charitable organization may put money on the table, and the lender might or might not put money on the table (in effect) as a credit. All the money on the table is split up by the escrow agent to the various parties making claims to it, including the listing agent, the buyer's agent, the title company, who in turn pays the tax certificating people, the survey people, the inspection people if any, taxes to the local government bodies if needed, and so on.

Since the bank puts the biggest chunk on the table usually, isn't it more correct to say they pay the commissions? I think Dan is splitting hairs. The buyer causes the majority of money to appear at the closing table - that's true. But the seller receives only what's left over after his mortgage loan balance is paid off plus his costs, such as a home "warranty", liens to be cleared up, and so on. The seller is considered to have paid the commissions, by custom. Commissions are attributed to his cost basis when subtractions are made from the sale price. You might ask yourself if the leftover amount after all deductions is actually what he sold it for, if you're going to say the buyer paid for everything, because the buyer did pay off his mortgage balance and all the other costs besides the commissions in your view of things, Dan.

It's a lot like saying the price of something at Wal-Mart is actually the price marked plus the sales tax, because the purchaser pays that. Or, that the price of a car is not the amount on the invoice, because the dealer may receive a rebate or have to pay an inventory tax outside of the transaction. And what about the amount you paid to have a mechanic look at it before buying or the salaries of the receptionist and so on and so forth?

I dispute your claimed fact, Dan.
You're just muddying the water for the Seller Dpaee and trying to stir up trouble.
3 votes Thank Flag Link Sun Aug 14, 2011
For the same reason that you did not pay a commission when you bought the house!
3 votes Thank Flag Link Sun Aug 14, 2011
What a breath of fresh air Joan. I nearly puke every time I hear the same old tired "seminar' taught responses to this question.

The low entry threshold to this industry, both educationally and financially, only impresses those inside the field as the general public does not see us as being on par with true professionals like doctors, lawyers, CPA's, etc., and for good reason.

Merely beating a drum doesn't make one a member of the band.
Web Reference: http://www.phgbrokers.com
3 votes Thank Flag Link Sun Mar 27, 2011
Alright, I'm sorry but sometimes I just can't keep my mouth shut and I am going to temporarily hijack this thread to set some things straight:
Kim, I am sure you are a wonderful agent and an asset to all who hire you so please understand that I am taking issue with what you say, not with you personally.

Your first paragraph I agree with for the most part.
The second one is making me chomp at the bit.

In NJ we require 70 hours of education and to pass a test that isn't particularly difficult, a high school diploma, to be 18 and not a convicted felon. I would not call that impressive. The amount of education required is minimal and by no means are all agents created equal. Being called a Realtor® means having to pay dues in order to do business. In NJ in order to use the mls, you have to be a Realtor. No broker will hire you unless you are a Realtor. It doesn't make one more ethical just because we have to sign a code of ethics. We all know there are plenty of unethical realtors out there. Even the exalted tax benefit really isn't all that impressive- for most people it makes little financial difference.

The NAR is the most powerful lobby organization in the US which says a lot since there are a lot of well-monied lobby organizations which all contribute to the buying of our politicians for self-serving agendas.
This is nothing to be proud of as far as I'm concerned and I believe the NAR has done more of a disservice to our already tarnished profession than helped.

Regarding whether or not agents are worth the money: many, maybe even most are, but obviously plenty aren't and I think to paint a broad brush in response to a question posted by a seller who is one of many these days that are finding themselves in a financially difficult situation is not right. We should be constantly striving to improve this profession, not perpetuate some of the sometimes justifiable stereotypes.

I apologize for my blathering. I know many will disagree and that's fine but I just felt the need to say what I said.
3 votes Thank Flag Link Sun Mar 27, 2011
Dpaee,

You can always ask your agent to reduce the commission, but he's under no obligation to do it, and if he operates under a broker other than himself, it's doubtful that the broker will allow it. You made an agreement to pay the commission, and without knowing all the details, it's difficult to say whether or not your agent earned his pay. Let's assume he did - when the buyer comes back after the deal is agreed to, the option period is over and it's time to move ahead to closing, what will be your response when he says "Oh, I feel a little pinched by the price, I really need to renegotiate the price with you"? Negotiating a less than 6% commission when the property is listed is one thing, afterward is another thing completely.

I am sorry that you feel like selling real property is a bit like selling cars - I can assure you the two are nothing alike. Professionals that take the real estate industry seriously are nothing like car dealers, the amount of knowledge we must possess and the education we must continue to possess it are significant, the ethics we maintain are considerable, and the lobby we bring to real estate issues nationwide are substantial. When you continue to be able to deduct your mortgage interest from your annual income tax, thank a Realtor. When you sell a property without a state transfer tax, thank a Texas Realtor. When you pay a 6% to get your home sold by a professional with the skill and knowledge to help you sell at the best price the market will bear, in the shortest amount of time possible, thank a Metrotex Association of Realtors Realtor. We are worth the money.
3 votes Thank Flag Link Sun Mar 27, 2011
You are only paying your agent's broker to list and market your property. The broker of the listing agent is offering a part of the commission earned to any agent who brings a buyer to the transaction.
Web Reference: http://www.321property.com
3 votes Thank Flag Link Sun Mar 27, 2011
The more I thought about this question - the more I realized that it's all a matter of perspective really.
Basically you (the Seller) are hiring the Listing Agent to sell your home for say 6% commission.
That's it. Now that Listing Agent then goes out and "hires" Buyers' Agents by offering them 1/2 of the commission circa 3% to bring a Buyer to the property. So you can think of it this way -
You are hiring a Professional to sell your home. That professional then sub-contracts with other Professionals in the marketplace to match a Seller and Buyer together.
The system works remarkably well when you think about it. And I read another response which said
"You aren't complaining when you ARE the Buyer and not paying a Commission up front." -
So it really all comes out in the wash so to speak. You pay a little more when you go to sell -
but when you turn around and buy - you aren't paying anything !
But ultimately it comes down to "value" - according to Nat'l Assn. of Realtors which does EXTENSIVE
market analysis - both locally and nationwide -
Homes sold with the help of a real estate professional sold on average for 12 to 32 percent more than FSBO sales. The median FSBO selling price in 2006 was $187,200, compared with $247,000 for agent-assisted transactions. That's a substantial difference.

So even AFTER paying a Commission of 6% - the Seller is still coming out ahead
on average vs. trying to go the For Sale by Owner route.

JAY NAREY ABR, ALHS
Keller Williams - Preston Rd.
972.468.5462
jaynarey@kw.com
Web Reference: http://www.jaynarey.com
2 votes Thank Flag Link Tue Mar 29, 2011
PETER: Please do tell what "reliable" sources of sales data you use outside the MLS. If your statement were true then why does our state association fight so vigoroously to keep Texas from becoming a disclosure state. I ask this rhetorically as I already know the answer.
Web Reference: http://www.phgbrokers.com
2 votes Thank Flag Link Sun Mar 27, 2011
Guy, when I bought my first house in 1988, everything was public and you could get any question answered with a phone call, if an agent hadn't already given you a week-old copy of the MLS book. I don't mind proving your point, but if the point is that information is King, that theory has been tested and it fails.

Knowledge is Queen.
2 votes Thank Flag Link Sun Mar 27, 2011
MACK: Thanks for proving my point Mack. Texas is a nondisclosure state (and Dallas is located within the boundaries of Texas) which means we keep more than just a phone number. We are the only reliable source for sales data. When that changes, Texas agents better watch out. If someone gives me a piece of gum or a flyer surely can't be even remotely compared to giving away valuable information. Well, at least not in my neck of the woods.

KIM: Remember, even those who has never sold a single house also believe they're worth the same commission you earn! Hmmmm.........
Web Reference: http://www.phgbrokers.com
2 votes Thank Flag Link Sun Mar 27, 2011
You forgot one major factor in why people "use" us Mack. We are the keepers of the information. If they don't use us, they don't get the information. But years ago when someone wanted information, they went to a library. Now they surf the net and get information from libraries across the nation with a few clicks of a mouse. Things change and our industry has failed to keep up. Thankfully, the lobbyists have greased enough palms to make sure small matters such as this don't matter. I'm not naive...I understand that is how our government works. And education is more than just reading books. It's studying an industry at every level. I certainly may in the financial industry that are now broke, so generalizations such as yours don't hold water.

I don't fault those of you who perpetuate the myth that most agents are worth what they're paid...after all, it's human nature. And we can all continue to beat our chests and yell at the top of our lungs about how professional, knowledgeable, skilled, ethical, etc. we are, but I simply can't find real evidence to support the stance that the majority in our industry fits that mold. If I lie to myself, it becomes far too easy to lie to others.

But again, I don't fault those who have a different viewpoint. For many, it's the only way they can go forward each day.
Web Reference: http://www.phgbrokers.com
2 votes Thank Flag Link Sun Mar 27, 2011
Phil (your first answer) has it the simplest and cleanest.

Your listing agent negotiates a commission with you, the seller, to sell your home. Period.

Then from that fee, your listing agency determines how much they will pay the buyer's agent if and when they bring a ready, willing and able buyer. In some cases, the listing agent brings the buyer too, and then NO buyer's agent gets paid.
2 votes Thank Flag Link Sun Mar 27, 2011
Alan May, Real Estate Pro in 60201
MVP'08
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- We should be constantly striving to improve this profession, not perpetuate some of the sometimes justifiable stereotypes.

And you accomplished that, how?

Let's talk about ethics. The thing about having an established Code of Ethics is that everyone can see what is expected. Having a personal COE is nice, but it isn't worth the paper it's printed on unless people can hold you to the contents.

As far as the "used-car" analogy goes, it's even weaker than real estate agents comparing themselves to attorneys and doctors. Regardless of how low the bar may be, the fact remains that we are State-licensed, and meet the qualifications for selling real estate.

As far as "The NAR is the most powerful lobby organization in the US," according to OpenSecrets.org, "real estate" is #5, behind "Lawyers/Law Firms," "Retired," "Health Professionals," and "Securities/Investments" - something to note when your financial planner or a writer in the Wall Street Journal rips real estate.

- Regarding whether or not agents are worth the money:

One fact of life - if the agent doesn't produce, they don't get paid.

This isn't an abstract concept, by the way. It's not enough to market a home, hold open houses every week, buy advertising, hire stagers and photographers and advise on home prep and line up contractors and movers and all of the ancillary things real estate agents do in a transaction - if there is no deal, the agent does not get paid. If there is a deal, then - and only then - does the agent get paid.

Yes, times are tough. What's really tough is to get homes sold. Brokers in every field need to have ready, willing, and able buyers on one hand; they need to have quality, well-priced merchandise on the other. Most real estate brokers I know aren't especially eager to take on listings that aren't of good quality and well-priced, and I'm really surprised that they don't demand higher fees to take these listings on, as selling many of them would be quite an accomplishment.

- There is an argument that the buyer truly pays the commission instead of the seller.

Cash is the glue that holds a deal together, and whoever brings the cash pays the bills. The buyer pays off the Seller's mortgage, they pay the transfer taxes, they pay the title and escrow fees and all of that - from one point of view.

The same point of view holds that you, the consumer, pay packaging and advertising and delivery costs for the supermarket. C'est la vie, non?
2 votes Thank Flag Link Sun Mar 27, 2011
To Joan B., Agent, Morris County, NJ., et al

Since this was obviously a Texas question, I too am surprised at the other State agent/brokers who suggested answers. However, I did read most of the answers in a quest to gain more knowledge about how we real estate people think. However, the "answer" session digressed into agents sharp shooting each other; especially interstate. Don't Mess With Texas.

"The requirements for a real estate salesperson license in New Jersey include being at least 18 years of age and having a high school diploma or GED.Salesperson applicants need to successfully complete at least 75 hours of approved real estate courses, and at least three of these hours need to be about ethics and ethical conduct. All salesperson applicants need to successfully pass the real estate exams before applying for their license."

Joan: Are you proud of the 75 hr requirement in NJ vs 210 in TX? You will not be happy if you think you'll get a salesperson license in TX with your education/experience.
1 vote Thank Flag Link Wed Sep 21, 2011
Dpaee,
I hope you can make some sense of the numerous comments here. You original question of the why has been answered (that it is to attract buyers through other brokers than the one you hired and to get paid from the commission you promised that broker).

Of course all sales situations resemble each other, including used car sales, but your Realtor should be bringing more than just sales tactics but also sales strategy and a wealth of knowledge that most ordinary people don't have. That's the reason for offering a commission in the first place: to get those.

I am not sure what brought on all the sniping. It needs to be taken off-line. MLS data are proprietary to the member brokers - it's not public data, Mack and Peter. Texas, being a non-disclosure state, does not have a repository for public disclosure of sales data. I love Trulia. Zillow and other webplaces attempt to provide their estimate of value, but if a process uses faulty data on the input side, only faulty data can come out.
However, sales data method is only 1 of 3 accepted methods for determining value: depreciated reconstruction cost and income being the other 2 methods. But the income method would again require non-public data to establish a value, while reconstruction cost would require cooperation with builders and insurance folks.

Given the long-term trend of real estate to rise in price, a seller can expect to sell at any price he chooses so long as he is willing to wait long enough. Which brings us to shorter term considerations. At any moment in time buyers are present (just like in the stock brokerage arena) who are willing to pay a certain price. But they come and go. Some will be higher than the listed price, and these days many will be lower.
Statistically they form a distribution curve around the "value" of the property. We can't see the cuve easily because it is formed over a long period, sometimes more than a year. Sellers don't want to wait that long to discover what the curve looks like. They have to deal with the shorter term vagaries, usually selecting the highest offer available at the point in time. Realtors can estimate the curve going into the listing to help the seller understand what might happen.

For sellers and buyers to get sales data from the MLS is a logical reason for using a Realtor. It's all the other things that a Realtor can offer that differentiate one Realtor from another.

Joan, it's not about pride. Please see my blog http://www.trulia.com/blog/t_e_sumner/2011/03/is_450_hours_e…
Not to put too fine a point on it, but the 1,200 hours is required for a cosmetologist-hair stylist, not just a barber (someone to cut/style your hair). Besies, as highly trained as they are I sincerely doubt if any of those licensees know the difference between listing and lis pendens.
Web Reference: http://www.SumnerRealty.com
1 vote Thank Flag Link Tue Mar 29, 2011
Very cute "cable Guy" reference Peter. But please don't quit your day job.

My question remains Peter. Please provide at least 3 of the many sources you use (outside the MLS) that provide accurate sales data. You can't. You use the MLS...period. And by the way, that "battle" you mention has been fought and lost. We are a non-disclosure state for a reason. But I guess snide remarks are more your forte than research.

I don't know Mack from Peter, but I am sensible enough to know that I don't make determinations about one's competence, skills, knowledge, etc. based on a post. Apparently Peter has a sixth sense that allows for this. Perhaps that is where his marginal attempt at humor comes from.

Since this original question was posted in Texas, not Washington, France etc., I won't pursue issues that have no bearing outside of Texas. And while I would love to banter back and forth with those who are comfortable consuming vast amounts of the "all agents are professionals" Kool-Aid, forgive me for bowing out as none of us will change our points of view. For many, facts and truth can be bent to accomodate one's comfort zone. For others, we see it for what is is and try make positive changes even when it means confronting an ugly reality.

Remember Peter...one will never find that which he does not seek.
1 vote Thank Flag Link Mon Mar 28, 2011
Mack, yes here in North Texas we report the CDOM. It is an interesting fact but not the lynchpin by any means. It's the pricing that truly makes a difference. If the property is priced appropriately it will sell. This battle about who "owns" the information is one that has raged for years. The lawyers and courts will decide that one. There are so many alternate websites to get this info anyway, so BIG deal on that issue.

I have this sense that you do a terrific job for your clients because you have a good grasp of the realities involved in getting deals done. We should be good advocates for our clients as well as for our profession. It is obvious you care about your profession and what we do for our clients. You know in the UK they have estate agents. But then you as a buyer make all the arrangements with the sellers to see their properties and have to listen to them give you their pitch on why you should buy their house. The people I have worked with from the UK and from France love our system!

To my experience the majority of agents are good hard working people with integrity who really do a good job being advocates for their clients. 20% to 25% are not the caliber I would hope to deal with, but that can be true in any profession. Mortgage officers, Title Services, Inspectors, AND the Cable GUY!

Take care and stay on course Mack!
1 vote Thank Flag Link Mon Mar 28, 2011
Sorry, meant to say the NAR is one of the most powerful lobby organizations in the US. Who cares if its #1 or #10, its still an organization that has enforced membership for the most part and has a lot of money at its disposal to throw at politicians.

T.E., TREC requires 210 hours. Great. In NJ, the requirement to be a hair stylist is 1200 hours, manicurist, 300 and skin care 600. Still feel proud of the 210 hour requirement?

Look, contrary to what Mack thinks, I love real estate and I know there are a lot of good/great agents out there. I happen to work with a lot of them and I know how hard good agents work and the value they bring. But just pretending as if our industry is fine and dandy just the way it is and there are no problems that need to be addressed isn't doing anyone, the public or our industry any favors.

REAs need to realize that things are changing and changing quickly and we better keep up with the times. We also better have more awareness of what the NAR is doing with our money because I can guarantee you the public's perception of things is often very different than our own.

Dpaee, I am truly sorry for taking things off track. I will agree with this: you can't change a contract after the fact. You agreed to pay a certain amount, signed on the dotted line and you are obligated to do that. To reiterate, the seller pays the commission out of the proceeds the buyer brings to the table. YOU agreed to pay a certain amount but it comes out of the money the buyer hands over. I know that 5% hurts but as others have mentioned, you had other options and you chose to hire an agent and pay a certain amount and you are now obligated to honor your contract.
1 vote Thank Flag Link Sun Mar 27, 2011
Interesting debate, Dpaee certainly got a hornets nest stirred up here. Guy and Mack, take it easy on each other, perhaps you can duke it out over a deal sometime. Kim you are a really good agent and you make me proud to be in this Profession.

I rest my case guys, going to go watch a movie with my family!
1 vote Thank Flag Link Sun Mar 27, 2011
Guy, The statistical data is available in many different websites, it's the agent who can properly appraise the value who is worth the small commission that is being paid here customarily. Auctioneers make between 10% and 15%, and for what they do it can be money well spent. This system has worked very well over a long period of time, if there were a better way it surely would have become the normal mode of business by now.
1 vote Thank Flag Link Sun Mar 27, 2011
- We are the keepers of the information. If they don't use us, they don't get the information.

Hardly. There's more information out there than can be digested. We do have knowledge and experience, but as far as information, we haven't had any real secrets besides the owner's phone number since the invention of co-brokerage.

C'mon, Guy, we've been desperately trying to give away information for decades! Yard signs, flyers, open houses - then, thank G-d, the Internet! Now, eighteen still photographs, virtual tours with music and narration, everything at fingertips!

They don't use us because we have a secret store of data, they use us because of what we know.
1 vote Thank Flag Link Sun Mar 27, 2011
"The second one is making me chomp at the bit" - I can buy in to that Joan. I will be the first to agree that it does not take a great deal of education to get into this business - but to succeed at it? Perhaps I should have said that "some of us are worth the money" - I know that I am. And yes, I do get somewhat annoyed when asked to "work on" the commission late in the game. Again, being asked to negotiate the commission agreement upfront doesn't bother me at all - and I do negotiate. But please Mr. Seller, don't ask me to do it when you agreed to pay x and I've done what I was asked to do in a professional, personally ethical manner and have produced a sale for you. Don't ask me to do it when I've kept you from making several deal-killing mistakes throughout the process. While the end-run commission reduction question has happened to me a couple of times, I am pretty thorough with the process and agreement explanation at list time that a couple of times have been the only times.

Mack - I hold myself to the NAR established COE and my personal COE, plus a few more local ones. I like to sleep at night - doing business any other way simply isn't worth it. No, I don't have the paid hours of education required by doctors and attorneys, but I know many of them and feel very confident stating as fact that I am as equally professional in my business as they are in theirs - education or not, my attorney and physician clients trust me with real estate, just like I trust them with the jobs I hire them to do.

Guy, I am not beating a drum in order to be a member of the band, nor have I attended any seminar to form what are my own opinions. I don't have to justify my work by quoting NAR dogma to the consumer, but the statements I made are true. Like it or not, those lobbies have been part and parcel to those protections being kept for the consumer. Is the NAR a perfect organization? No. Are all of their positions ones that I would choose? No. Are they right on a lot of stuff in spite of that? Yes.

It's possible that I popped off too soon, having lately become quite annoyed at consumers that assume that all agents are the same, none of us are worth our pay and have no pride in the jobs that we do. Maybe I've just had a bad day, maybe the seller just had a bad day. Still, when I hear that the seller feels a little "pinched" about his agreed commission, I am not hearing "I will have difficulty paying this much" but "I don't want to uphold the agreement I made". It's possible that I read something into that question that isn't there, but I have been doing this long enough to know it's a pretty small possibility.

"he same point of view holds that you, the consumer, pay packaging and advertising and delivery costs for the supermarket. C'est la vie, non?" Another conversation entirely - but that is certainly the best description of why things cost what they do - straight out of economics class and it's spot on.
1 vote Thank Flag Link Sun Mar 27, 2011
You do that only if that is what your listing agreement says. In Texas it is customary for the listing agent to collect the listing commission and from that commission the listing agent/Broker then pays the Buyer agent his commission. If you do not authorize the listing agent to pay the buyer agent, then I seriously doubt that any buyer agents will be interested to show your property. Most professionals I know work in order to make a living, not as a charity and even most charities pay their people well for a job well done.

I agree with most here and especially - Kim: When you continue to be able to deduct your mortgage interest from your annual income tax, thank a Realtor. When you sell a property without a state transfer tax, thank a Texas Realtor. When you pay a 6% to get your home sold by a professional with the skill and knowledge to help you sell at the best price the market will bear in the shortest time possible.
1 vote Thank Flag Link Sun Mar 27, 2011
Buyers can pay for their services on their own. There's nothing that says the seller must pay for both, but it is customary in residential sales. In commercial sales buyers frequently pay, not the seller. The representation agreement basically says that the buyer agrees to pay, but the buyer's agent will attempt to get the seller to pay and if not, the buyer is obligated to pay.

The MLS is a cooperative of brokers who offer a commission to another broker bring them a buyer. Hence, if it's in MLS, it's almost for sure that the seller has agreed to attract buyers from any broker by paying a commission. That's the long and short of it.

As to the other comments about how easy it is to be a Realtor and how unethical conduct is tolerated - I strenuously disagree with these characterizations. TREC requires 210 hours just to take the licensing exam. After licensing, the Realtor must take 60 hours of training every year for 3 years and then 15 hours for renewals.
Ethically, Realtors must (to be renewed) take a legal update and an Ethics course. The Texas Association of Realtors runs a program that allows ethics complaints to be filed anonymously, just to make sure that ethical compliance is high on the priority list for all Texas Realtors.

I can't comment on other places, but we don't cotton to unethical or dumb Realtors - it's a disservice to our customers and the public.
Web Reference: http://www.SumnerRealty.com
1 vote Thank Flag Link Sun Mar 27, 2011
Dpaee, what is the price of your house? The higher the price of the home, the more likely it is for the agents to negotiate on their commission. Also, the amount you will accept for the house is determined by how motivated you are to move. If you only want to move because you feel you can buy more for your money now, then you will hold out for a higher price most likely. If you really need to sell, you will accept the best offer you are getting in the shortest period of time.
When thinking about how much an agent deserves to earn, you have to realize that most homes are not sold by the listing agent, So that each person involved in the transaction ends up with 1.5% of a 6% commission because they split it with the company they work for.
1 vote Thank Flag Link Sun Mar 27, 2011
One other thing, what you want to get out of the house is utterly irrelevant. Sucks but true. Market conditions dictate what buyers are willing to pay and your wants and needs have nothing to do with it.
1 vote Thank Flag Link Sun Mar 27, 2011
Welcome to the world of real estate Dpaee. You're correct that it doesn't really matter what you need to net from the sale...the only thing that really matters is what the market will allow.

Keep in mind that few agents will agree to reduce their commission until they realize that 5% if better than nothing. If you decide to interview additional agents, let those agents know in advance of your commission structure and that it's not negotiable. Then you'll only be interviewing agents who you already know will work for the reduced commission.

Believe me, the agent that said you couldn't trust her unless she received 6% commission probably can't be trusted even at 8%.
Web Reference: http://www.phgbrokers.com
1 vote Thank Flag Link Sun Mar 27, 2011
Dpaee, there IS no standard and no broker has to negotiate but these days especially, its beyond me why they wouldn't.
The agent who got all huffy and puffy with you about asking what you had every right to ask was absolutely wrong and I would have called her broker and let the broker know about the agent's unprofessional behavior.

To answer your question, I can understand why it may seem unfair, however its a way for the commission to be handled with the proceeds from the sale, as opposed to out of pocket. You price your home with the commission in mind. The buyer may not think of it that way but they are the ones who are handing you the check at the closing table so although the commission comes out of your proceeds, the buyer pays you the money to do just that.
1 vote Thank Flag Link Sun Mar 27, 2011
I'm a newbie here and learning how this works. I didn't actually mean to select Robin as the best answer. I was trying to respond to her answer. Unfortunately for me, my commission was not determined as you suggest. Nothing was really mentioned about what I wanted to get out of my house. Everything seemed to focus on what the market would allow. And, even though I asked that my agent reduce the standard 6% commission, none of the agents I interviewed were willing to reduce. One even reprimanded me for asking, wanting to know how I would feel if my boss expected me to do my best work for a reduced salary. And, if she was willing to reduce her commission, how could I trust her to do her best work for me if I wasn't willing to pay for her work.
This is my first experience working with a realtor and, unfortuantely, in some ways, it reminds me too much like buying a used car...
1 vote Thank Flag Link Sun Mar 27, 2011
It is customary, but not mandatory for the seller to pay his/her broker and the broker will be responsible for paying the buyer agent upon a successful closing. If you hire an agent, that agent will generally be obligated to pay the buyer agent a set amount (as determined by your listing agreement) once he/she places your home in the MLS.

You can also try to sell FSBO or pay a flat fee broker and save money on the listing side of the transaction. You could consider offering less than 3% to the buyer agent (for instance, a 5% total comissions split between the two agents/brokers)....just depends on your motivation and preferred time frame to sell.
Web Reference: http://www.phgbrokers.com
1 vote Thank Flag Link Sun Mar 27, 2011
The seller is paying for the commision on the entire sale but the buyer is sharing in that cost based on what they are paying for the home. You need to meet with you realtor to into greater detail but price your home out so you get the best net in the end.
0 votes Thank Flag Link Wed Jan 4, 2012
In reality the closing costs are shared by the seller and buyer. Your agent should give you a sellers net sheet from the outset of the transaction. This breaks down the costs associated with the sale of your home and gives you an idea how much money you will net after selling your home based on the price. This knowledge will help a seller determine the minimum amount of money they are willing to accept at the closing of the transaction.
0 votes Thank Flag Link Fri Sep 23, 2011
The right answer is that you are only paying the agent you hired to sell your house, and he may pay another company that assists in the sale.

The real answer is because years ago when all sellers had lots of equity (needed 20-40% down), so they had all the $. The used to pay the buyers "mortgage Points" too.
0 votes Thank Flag Link Fri Sep 23, 2011
well i f eel if u must then why not pay just make sure you protect yourself and everything u pay for please make sure u get a receipt
0 votes Thank Flag Link Fri Sep 23, 2011
Dpaee - great question! In short, many years ago when a seller listed their home the law was such that only the seller had representation and it was paid by the seller. However, due to numerous law suits against sellers, many states went for the "Agency" state ruling that buyers should have somebody looking out for them. While it may seem unfair to you, it provides more protection against law suits.

Unfortunately, if you choose not to pay it then no real estate agent in their right mind will represent you nor will a buyer's agent show your property. Good luck!

Cathy Bureau
0 votes Thank Flag Link Fri Sep 23, 2011
The seller, directly or indirectly, is including those commissions in their sales price.

So it is really the buyer who is paying for both commissions.
0 votes Thank Flag Link Fri Sep 23, 2011
It's not! your agreement is to pay your Listing agent a set percentage of the sale as their payment. They decide, in order to be efficient in sales, that they agree to pay other agents part of that commission if they have a qualified buyer that makes the sale happen! So please calm down, you are not paying any more commission that was brought up to you when you signed the Listing agreement!
0 votes Thank Flag Link Wed Sep 7, 2011
Because most often the buyer is financing and they have enough cash out of pocket. It is easier for most deals to build it in to the sellers side as most buyers would rather finance more. At the end of the day it is all about sellers net and buyers ability to make a deal. In reality the buyer is paying it. It is all about the math.
0 votes Thank Flag Link Wed Sep 7, 2011
Excellent question Dpaee and it definitely resulted in a robust discussion. The simple answer is because that is what is stated in the contractual agreement that a seller signs when hiring an agent to sell their home. Is it the only way to get your home sold? Of course not. Is it the best way to get your home sold? Absolutely.
0 votes Thank Flag Link Wed Sep 7, 2011
One viewpoint here that is not being considered is this sellers that have recently lost a tremendous amount of value in their homes. I am selling my home and only have offers that leave me empty handed or walking away with $500. (I put 25K cash into this home in the last three years) Add into that equation, the buyers automatically assume that you are going to pay half their closing and a lot of sellers these days are are really being screwed. And let's be honest most sellers are going to up the price of their home based on what the agents are going to walk away with anyway. I would love to see the system revamped so that both sides bear the burden of the agents fees (yes, when I buy as well) In the current economic situation sellers are asked to lay down and let the buyers walk all over them and I don't feel the old system is doing anyone any favors. Perhaps with each side bearing their fair share of the "costs" there would be fewer homes in foreclosure and the housing market would rebound. The answer that "this is the way it's always been done," is not helpful to anyone. Sometimes things do change for the better. Luckily, I have an agent that is willing to work for a set fee because she knows my situation. If you allow both sides to pay the costs for realtors the huge swings in home values and the horrible economy will not have as strong of an adverse effect on sellers in the worst of times and therefore would help the economy overall. Let's even the playing field for distressed home-sellers! When you say ."It's a buyers market," what you really mean is we are sticking it to the current sellers and homeowners!
0 votes Thank Flag Link Mon Sep 5, 2011
Because the Agents feel you have money and equity in your home and it is a Great selling tactic for both Agents to get a sale and their commission, ( a sales pitch for the buyer). Actually you can negotiate any and all fees you want. But the Agents or Brokers have set the fees they want to get the most perks for the buyer in order to make a sale (unfortunatly they have made this a standard thru the years) and if the buyer really, really wants your property he may comply with your request, if not, you most likely will loose a sale. It is all just a sales pitch for the Agents and Brokers - (At your expense)

Regards
0 votes Thank Flag Link Mon Aug 22, 2011
To simplify this answer in basic outline.
The seller is compensating the listing Brokerage Firm. Typically there is a pass through at closing from the listing brokerage to the Selling brokerage. These Brokerage firms are responsible for the adequate compensation of their individual Agents. The "Seller" is only paying their Brokerage firm.
For a typical breakdown of the "Breakout" Listing agency 3% Buying Agency 3%
Brokerage to Agent: .50% or 1.5% Broker to Agent
100,000 sale workout: Sellers Agency splits $3000.00/ Buyers Agency splits $3000.00
Typical exp ratio per transaction here in NYC $600.00 to $800.00 in advertising costs on each side of the deal . This is an Exp. to the Brokerage. As an agent, I have lost money due to Expenses on both the sell side and the buy side. If you want a break down of the most resent loss.
1722 Madison in Ridgewood. NY Ini sale price. 660K 1.5 % comm. $9,900.00
245 Hours Working the deal would have worked out to 40 Dollars and hour. Before the Chop.
Bank Cut structure down to 4% total on contract. Based on Additional Concessions I requested for the buyer.
Savings to Buyer, 22K Plus 3.5% Finance rate.
New sale price 638K Projected Comm. $ 6,380.00 0r 26 dollars per hour. Not bad for 30 Days work.
Tax rate .369% NYS, FED Leaves .61 cents on the dollar
NY City 10% makes it a Cool .53 cents on the dollar.
Don't forget travel, insurance, gas, and tolls!. Let's Just face it. If I did not love my Job, If I did not get a kick out of helping people make their dreams come true, I couldn't afford to do my Job! Some deals work out quickly. Some don't. I work on the Buyers side of the deal for the most part. It is my Job to complete the Due Dil for my client. The sellers Agency has a job to protect their Client with the same respect as I have for mine.
Sure, From time to time things go so smooth that it is like skating on ice. It looks easy from the Client's side.
I'm sure that a lot of the Seller's Agency would say the same about their client. Truth is. Buyer's Agents and Seller's Agent have to do a lot of talking. From time to time we go at it tooth,nail, and chain saw. When it's time to sit down at that table, the Lawyers take over and the fighting is done"almost" The Agents lay down their swords once again and smile at one another. We will meet again. We will continue to answer the other realtor's phone call. Even when that smell of burnt flesh from the last scorching we took is still lofting in our own home. End of the story on 1722? The deal broke up at the closing when the bank disclosed Contractor Liens payable by them to a service provider. Seems that the Contractor filed the lien one day before closing!
So, the Agents, Brokers, bank, and lawyers will meet again. Yes that was Monday 8/15/2011. I stopped counting the hours last month, but my Broker has not!
0 votes Thank Flag Link Wed Aug 17, 2011
You pay the buyers agent for finding the buyer of your property. If the listing agent could do it for 3%, there would be no need to pay the buyers agent the other 3%. If your agent is willing to take 3% total commission, he can split it up however you all agree too. The only problem is try to find a realtor that would show a 1.5% commission.
0 votes Thank Flag Link Wed Aug 17, 2011
I want to share a link that helps put some perspective on the entire commission question.

Most of us don't know who Colby Sambrotto is. He created a web company that assists homeowners who want to sell their homes by themselves or with a discount broker.

Now, Mr. Sambrotto will stubbornly insist that homeowners can sell their homes without an agent, but he turned to a real estate broker when he couldn't sell his condo in New York. Note that Sambrotto was clueless about what price he should sell the unit for and his broker had to convince him he was way under the market.

By upping the price $150,000, the sale covered the cost of the $120,000 in commission - and more importantly got results.

Sambrotto sniffed that the Manhattan market is tightly controlled by real estate agents. (If that's the case, why would anyone waste their time and money using his service.)

Here is the link:
http://www.dailymail.co.uk/news/article-2022112/For-Sale-By-…

Real estate professionals live, eat and breath the market. That's who you are competing against when you go to sell on your own. Agents and brokers are widely networked. Those contacts have value.

This is an excellent question, Dpaee. Thanks for your post.

SuZ
PML of Longmont, CO
0 votes Thank Flag Link Mon Aug 15, 2011
Hi Dpaee,

The seller pays one comission. The comission is then co-broked to the selling broker if there is one. In some areas of the country each side pays respectively, but in most areas, the seller agrees to pay the Realtor as set fee and the realtor pays out from there :O)
0 votes Thank Flag Link Mon Aug 15, 2011
The seller pays one cost for commission and then that commission is split between the listing agent and the buyer's agent. Basically, the listing agent is paying a portion of his/her commission the buyer's agent for procuring a ready, willing and able buyer. The seller does not pay both the listing and buyer's agent, he/she pays only the listing agent. The listing agent has the authority to decide how much of their commission they want to share. For example: I charge a 6% commission rate to list properties and I will pay a buyer's agent 2.7% of that if they produce a ready, willing and able buyer. So I keep 3.3% and share 2,7% with the buyer's agent.
0 votes Thank Flag Link Mon Aug 15, 2011
The commission rate you're paying your agent is split between them and the Buyers agent. This is the cost of getting your home sold. While there's no law or rule that it must be done this way the reason it is is simple, if the buyer had to pay the fee separately , it could not be rolled into the mortgage and it would simply add that much more to the buyers closing costs effectively taking a large number of buyers out of the equation. When you bought the house you're now selling would you have wanted to pay your agent 2.5%-3%+/- more as an out of pocket expense?

You need to understand that while you feel you're paying both sides commission, the buyer feels they paying both sides; as it's their money your paying with. If you were only paying one side and the buyer had to pay their broker, do you honestly believe you'd get the same price? It's only one pie and this is the most practical way of slicing it.
0 votes Thank Flag Link Mon Aug 15, 2011
Asa home seller you are not required or responsible for anything you do not want to do. The reality of selling a home is as a seller you pay teh listing agent an agreed upon amount to sell your home. They in turn split their commission with a buyer agent if they bring a buyer to your home. It is not costing you anything addition as if your listing agent found his/her own buyer. Your listing agent works for you, their job is to guide you, assist you and find a buyer to buy at the best possible price in the quickest amount of time. Sure you could use a discount broker, get discount service and still be waiting for that buyer, you could try it yourself and sell for alot less and have to pay an attiorney to review your sale. A good listing agent mor ethan pays for teh commission you pay in service and that quicker sale at that better price.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Aug 14, 2011
It is the seller's decision to pay a buyer's agent a certain portion of the total commission. The seller makes this decision at the time he or she enters into a listing agreement with an agent. As I listing agent, I recommend that my sellers agree to pay buyer's agents because it will greatly increase traffic to their listing and result in a faster sale.
Web Reference: http://christinamacuska.com
0 votes Thank Flag Link Sun Aug 14, 2011
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