Reduced Commission / Realtor Territories

Asked by Sf Real Estate, San Francisco, CA Thu Oct 25, 2007

I would like to sell my 2br/2ba condo, but do not want to pay the full 5/6% commission. Is it possible to ask my selling realtor to take a 1.5 commission and also agree with this reduced commission that I would by my next house from them (with the proceeds of this sale)? Overall, they would walk with far more money and two deals under their belt.

In addition, I live in San Francisco and any realtors discouraged from doing this by their firms to protect their respective territory (e.g., I want to sell my condo in SF, but buy a home in the Marin – where this Realtor company also has an office).


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Antony Chiang, Both Buyer And Seller, San Francisco, CA
Thu Oct 25, 2007
At the risk of the dire warnings of breaking antitrust laws, I feel compelled to provide some balance as a fellow seller to the answers you've received from the very people who deservedly earn their living on the basis of your question.

The reality is that you can find a broker who will charge you $500 flat fee to list your property, all the way to charging you a full 6%. And you usually, but not always, get what you pay for. I recently sold a 2 br/2ba condo investment in SF. I was going to use a discount broker, but in the end used the hardest working realtor I have ever seen, and I am 110% confident that she obtained a net return higher than the 'savings' from selling it on my own. Our condo set the record in our complex. That said, my family and an extensive network of colleagues have invested in real estate for 30 years, and it is reasonable in certain circumstances to ask for a double deal agreement like you've described. I've seen it done. It is more reasonable though to agree to 5% listing for the sale of your condo (2.5% to the listing broker, 2.5% to the buying broker), and then to get a 1% credit back on the purchase of your next home. Then the agent is sure to get both transactions and the possibility of earning 4.5%. It is much more common when the realtor will likely get a lot of transactions from you and/or knows that they are virtually guaranteed to get a return on all their hard work. And/or that you are otherwise a great client to work with and not just pinching pennies but driving towards a true mutually beneficial agreement and relationship.

In your specific case, I would not recommend this route. You are moving to a new city, and your SF selling broker simply won't have the expertise or the experience in Marin to provide you with the best service. Your 'savings' on the buying commission could easily be overshadowed by over paying for a home in Marin because your agent didn't have the experience to best advise you on making the right offer.

Right now with this post-subprime market, use a great SF realtor who can attract the most qualified buyers. Then ask for recommendations for the best realtor in Marin.
4 votes
Wei, , San Jose, CA
Mon Oct 29, 2007
I fully understand and appreciate the effort and costs involved in marketing a home for sell. A good agent who has done the work deserves to be paid fairly. What I don't understand is the sales commission rate (5-6%) is the same across the country, whether the average house cost 100k or 10M. Even in Bay Area, the rate remain the same as average house price shoot from 300k to 1M in matter of years. Does the marketing cost really change that much from area to area and from then to now?
2 votes
Patti Philli…, , Carlsbad, CA
Thu Oct 25, 2007
Dear Home Buyer, I agree with what Brett says. Let me ask you, if your boss asked you to cut your pay by 75% this year, but next year, if the company is still in business, they'll pay you your regular salary- would you take it? Doubtful. If you find an agent who will take that deal, good luck on getting your home sold.... They will have NO marketing budget, no one coming to see the home- because other agents won't be showing it, they aren't able to negotiate their own salary- so if they ever even GOT an offer they won't be able to negoitiate a good selling price for you....- you'll get less in your pocket..... doesn't seem to me like you are going to make out ahead in the end.

People don't go to their doctor and ask him to cut his fees for surgery, they don't go to the dentist and ask for a deal on a root canal, they don't go to the auto mechanic and ask for a deal on their brake job, but realtors should always cut their fees. I don't get it. Maybe I'm cranky today because we have all been evacuated around here due to the fires. Those of us who haven't lost our homes, know dozens who have- so maybe I am a nasty crank today........

Good luck on selling your home. You'll do much better by using a PROFESSIONAL realtor who can get the job done- especailly in today's market.
2 votes
Annette Merr…, Agent, Half Moon Bay, CA
Tue Mar 16, 2010
Wow - How does one articulate - you get what you pay for?

I guess what comes to mind are two items; Do you shop at a discourt thrift store for the most important outfit of your life? Well then why would you expect discourt thrift store prices for the most important / largest investments of your life?

Second: What type of a Realtor do you think is going to work for this amount of money? None of the large, well respected WELL INSURED Brokers would allow their Agents to agree to a 3% commision? Forget it.

This is important - hire a professional that will be happy to work hard for you and negotiate the best possible deal, protect you from future legal concerns and find you the best possibe local Realtor in Marin.

1 vote
R, Home Seller, har
Sun Mar 7, 2010
But why should an agent receive more than $30k in SF to sell a property when they would get $10k in another market for the same property? They didn't invest in the house being sold, we did, they have to do the same amount of work and expense as when they are in a lower priced market!
1 vote
Charlie Mader, Agent, San Francisco, CA
Wed Oct 31, 2007
Everything in Real Estate in negotiable; especially commissions.
1 vote
Patti Philli…, , Carlsbad, CA
Sat Oct 27, 2007
I wanted to thank Antony, as a seller, for answering from the experience that he has had, and continues to have. It is very important to get the perspective of those who are on the "consumers" end of the transaction. Thanks so much Antony for taking the time to give your input!

Patti Phillips
1 vote
Julia Huntsm…, Agent, Long Beach, CA
Fri Oct 26, 2007
First of all, commissions are negotiable, so you can ask, but an agent can refuse. It's just like when you go on a job interview--are you going to take less than what you think you deserve? The public often has an impression that agents make a ton of money which they are keeping under their floorboards somewhere, and therefore don't need to earn money by working with you. The fact is, out of their gross commission, after their office has taken its split, agents pay state and federal income tax, health insurance, Social Security (because they are self-employed), their mortgage or rent, their own retirement contributions, and all their other normal living expenses. All their business costs are upfront until they receive their commission check. So why do you need to ask your agent to make less money? Is it a question that you think they just don't deserve it, or are you in dire straits yourself? If you went to an attorney, do you think the attorney would reduce his/her fee for you? Would your dentist? What if your employer asked you to take less money because you were going to make more money elsewhere by taking a second job? Hmmm....
1 vote
Carrie Crowe…, Agent, Southaven, MS
Fri Oct 26, 2007
Sounds like you need a discount broker to list your home and then get a realtor in Marin to represent you for the buying process. 1.5% commission would not even begin to satisfy a split for the buyers agent.

I want to give you an example of a breakdown on commission. This is an example based on 6% commission for 100,000 piece of property just for the sake of keeping it simple.
100,000 Sale
6% Commission
Split between agents
Listing Agents Broker 3% or 3000.00
Buyer Agents Broker 3% or 3000.00

Listing Agents Split with listing broker
65% to Agent 1950.00
35% to Broker 1050.00

Out of the 1950.00 that the agent gets, they deduct all advertising and marketing costs and pay taxes for self-employment.
They would need to put at least 500.00 back for taxes and in a 4 month period would be likely to spend 500.00 on marketing and it could be much more than that. Running an open house ad is about $50.00. How many open houses do you think you might run in 4 months of marketing.?

I hope this breakdown help you see how taking a 1.5% listing could actually cost the listing agent money. They would have no advertising or marketing budget at all! They would have nothing to invite a buyers agent to bring a buyer to the property. Good luck. Carrie
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1 vote
Brett Dunne -…, Agent, Upland, CA
Thu Oct 25, 2007
Dear SF:

First, the commission that the listing agent will receive is not 5/6 % but normally 1/2 of that. So, you are asking the listing agent who would list for say 2.5% (1/2 of 5%) to take a 60% cut in commission to sell your home at 1.5%. Additionally, the agent has a split with the brokerage so maybe the agent will only receive gross 1.12% of the selling price before taxes and expenses.

Second, most professional real estate firms will not take a listing for 1.5% (total of 3%).

Lastly, in our market here in Southern CA, if the seller will not offer out to the buyer agent at least 3%, then most likely the property will not get shown.

Have a professional realtor explain, belly to belly, why you should pay a 6% commission and how that actually helps you acheive your goals.

Good Luck!
1 vote
Dave Griswol…, Agent, Bridgewater, NJ
Tue Mar 16, 2010
Annette has it right! You get what you pay for. It's possible to give any amount for commissions.
Quality Service, Knowledge, Experience and getting a good or top dollar price for you properties, what is that worth to you?

Again as Annette said What type of Realtor are you looking for? As I recall those 2 to 4% commission realtors went out of business due to the over 10,000 lawsuits against them their inexperience, and lack of knowledge in this, One of the most important and valuable assets in one's life.

I can respect the fact you need to get the most value out of your home and with that in mind I might suggest that you offer top commission and if the Realtor you choose both lists and sells your property you can ask for a 1% discount that would be a fair offer as I see it.

I do you wish you all the best and hope things work out for you.
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0 votes
Lance King, Agent, San Francisco, CA
Fri Mar 12, 2010

You can ask for whatever you want, and comissions (like just about everything else) are negotiable. However, you need to know that the agent cannot decide this on his//her own. It is the Broker who decides, and many firms have staunch policies against this.

It is also correct that in many cases reduced fees mean reduced services, but not always. There are firms like ours, who offer full service and lower rates. However, with as much money as there is on the line, you should be more concerned with how good your representative is. Cost should not be your primary consideration.

Best Regards,

Lance King/Managing Broker
DRE# 01384425
0 votes
Ron Rovtar, Agent, Boulder, CO
Sun Mar 7, 2010
Hi SF Real Estate:

You need to understand that your agent receives two benefits from your listing.

The First is, of course, the possibility of making a commission, which seems pretty straightforward.

The second agent benefit is that the act of marketing your listing frequently attracts new clients for your agent. This benefit is a bit less straightforward, but can be highly profitable, even if your house never sells.

Buyers often call listing agents based yard signs, and internet ads. These are some of the best phone leads an agent can get because almost all of these buyers are just starting the buying process. If they had their own agents, these buyers would call those agents. But, because many are just starting out, they probably will not buy your home until they have seen a number of other homes, which your agent hopes to show them. If, for example, a buyer sees ten homes before making a choice, then, all else being equal, there is a one-in-ten chance the buyer will chose your home. Whether the buyer chooses your home or another, the real estate agent who works for this buyer gets the buy-side commission.

So you have to ask yourself if a low-commission agent will work harder at selling your home or obtaining buy-side commissions, which will be higher than a reduced commission you are offering. If the agent is motivated by the buy-side commissions, then actually selling your home may not get much attention.

Unfortunately, the only way you will know if any agent is really motivated to sell your home quickly is to hire the agent and see how he or she performs. If the agent spends time and money really trying to get your home sold, then you probably have found an agent who puts your best interests first. Such agents want to sell quickly because it benefits you and because longer listing periods cost more time and money, which reduces profits.

Because a seller never really knows how hard an agent will work until the house is listed, I always suggest that sellers insist on an escape clause in the contract. This should let you out of the agreement within a few days of written notice unless the agent has already accomplished his/her job of finding a buyer. (I put this clause in all my contracts.)

I hope this helps.

Kind Regards,
Ron Rovtar
Prudential Real Estate of the Rockies
Boulder CO
0 votes
Gerard Dunn, Agent, Chevy Chase, MD
Sun Mar 7, 2010
Commissions are fully negotiable.

Just remember - reduced commission often means reduced service.

You often get what you pay for.
0 votes
Dot Chance, Agent, Burbank, CA
Sat Oct 27, 2007
That's right...commissions are negotiable. What part of the sales process do you want your Realtor to let slide? Realtors spend a LOT of money marketing a home. If you are asking your Realtor to discount his/her fees are you also asking them to discount the service they provide for you?

An agent licensed in California can sell you property anywhere in the State. What are the guarantees that you will find a property you wish to purchase or that you will qualify to purchase that property after your property has sold?

What you really need is an agent who works in your area and has a great marketing plan. That can save you money in the long run. Your property should sell quicker and at a higher price if your agent knows his/her business.

Best of luck to you!
Web Reference:
0 votes
Wendy Taylor,…, Agent, Beverly Hills, CA
Sat Oct 27, 2007
Commissions are not set. The standard is similar across the country, please go on the NAR (National Association of Realtors) website to reference. It seems that you want to let the seller of the property you plan to buy pay your agent rather than yourself. I would urge you to reconsider and ask yourself why you want to undervalue the professional your are hiring to sell a major financial asset.
0 votes
Carrie Crowe…, Agent, Southaven, MS
Fri Oct 26, 2007
I want to state for the record that in my example below, all number are examples Each broker has their own commission split, some are 50/50 which would mean 1500.00 to agent and 1500.00 to broker and some are better. Of course for every 100,000.00 in sales those numbers would just mulitply up. You can do the math on your own sales figure.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Thu Oct 25, 2007
Hello S. F. Real Estate -

I understand your desire of wanting to offer lower commission so that you can get what you perceived as a good deal on your transaction - at least you think you are going to save something from the get go.

I have to say that your priority is wrong by looking only at the commission.

My assumption is that what you really want is the overall maximum profit on your sale and the house that meets and exceeds you needs and wants at the best price on your purchase.

So, what you really want is a full service Realtor who can offer the best service to you from both ends:

On the sales side - help you get your condo to the tip-top condition for sale, price your home correctly, do full out marketing for your home, negotiate on your behalf, help you each step of the way during escrow process; until close of escrow

On the purchase side, help you find the right property that meets or exceeds your needs and wants (physical attributes, community, location, school, commute, recreation, environment, much more), at the right place, negotiate for the best price. Also help you inspect the house, find the red flags, negotiate again for any possible repairs, help you throughout the escrow process.
At the same time, they need to be able to advise you on how to time and carry out the sale and purchase of your properties at this stressful time.

There is so much to what we offer. The net effect for years to come can be much more than the simple percentage you are so concerned about.

My newest listing is from a seller who met me at my open house (closing next week); we chat about discount brokers and their service (he did his own research also), told me that they really liked what I do but decided they’d go with their close, close, friend who offered a discount on commission. They ended up cancelling the contract, are now with me and extremely happy with what I am doing for them. The commission was hardly brought up.

BTW, my company is located in both S.F. and Marin and, of course, I would love to help you. Maybe the first thing you should do is to interview the Realtor on what he/she can do for you before asking what they will do with the commission.

0 votes
Salt Lake Ag…, , Salt Lake City, UT
Thu Oct 25, 2007
do you realize your are being baited to violate the law with this post?

Run very fast from here
0 votes
Mike Kelly A…, Agent, Santa Rosa, CA
Thu Oct 25, 2007
Not to reiterate the preceding comments but if the FIRST THING your Realtor/Licensee does is reduce their fee, how do you think they will handle protecting your PRICE? Also, the first thing you're going to do is remove any motivation by the Realtor/Licensee to get OTHER Realtor/Licensee's excited about selling your home? That being said you can ALWAYS find those who will do something for less than the other guy. If your standards for professionals lean towards mediocrity and less than average performance, by all means, contact a limited service broker. However, if you truly wish to protect one of the largest investment's of your life--opt for a quality professional who will work to preserve your equity and protect your interests. I reccomend Betty Tasich with Coldwell Banker. Betty lives in Marin County but works SF and Marin with equal distinction. Her number: 888-338-0121
0 votes
Susan Kelly, Agent, Auburn, CA
Thu Oct 25, 2007
Do you realize that the commission is figured into the market value? Did you know that half of the commission goes to the agent that brings the buyer? At the close of escrow, the buyer's and seller's agents split with their brokers. Realtors such as myself have to pay all our own expenses such as advertising, office space, insurances for legal protection and veichle, association dues, multiple listing fees, phones, gas, staff etc... Do you realize the risk a realtor takes when listing/selling a property regarding a potential law suit. There is a lot of work you are probably not aware of or haven't thought about.
Please keep in mind that most realtors are highly trained high-minded professionals. Would you ask your doctor or any other professional to cut his/her fees? Would you cut yours?
If you allow your realtor to represent you and protect you in your next purchase, she will be paid by the seller. Yes, she will make more money, in the next 4-way split but she is working for you and deserves to be paid his/her full commission.
Best of luck with your sale and move.
0 votes
Vicki Moore, Agent, Roseville, CA
Thu Oct 25, 2007
In addition to what the others have said, I would also caution you against using a realtor that does not specialize in Marin. The company may have an office in Marin; that doesn't mean the agent knows the area like they do SF. There are different business practices, laws and regulations between the two areas.
0 votes
Linette Carr…, Agent, Wilmington, DE
Thu Oct 25, 2007
Nothing is ever for free! If something is too good to be true it probably is. These are two familiar sayings to everyone. The reason they are around is because wise men and woman who have tried what you would like to do (get a bargain rate) have found that whenever you think you are getting something for a great price there is usually a very good reason. Here is another one. You get what you pay for.
0 votes
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