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Asked by Gertrude, Marshfield, MA Tue Jan 25, 2011

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237
Bill Tierney, Agent, Cohasset, MA
Tue Jan 25, 2011
BEST ANSWER
Hi Gertrude,

I would say that "ordinary & customary" comission rate here on the South Shore is closer to 5%, bu it is not uncommon to see listings at a 4% rate.

I am appalled that in this, or any, market, a real estate professional would let a slightly lower commission rate stand between his beliefs and allowing a potential buyer to find, or even see, a home. I would agree that such behavior is unethical. However, I am hard pressed to think that the vast majority of my peers would exclude your home from a home search based on the lower comission rate.

The two main factors that will sell your home are price and marketing. Be sure you are covered on both fronts, as both will drive traffic. Remember, you only need one buyer.

Good luck with the sale of your home!


Bill Tierney, REALTOR

Virtual Homes Real Estate
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Mon Jan 31, 2011
sorry - here I go again:

" I think it is an agents job to explain to people where that commission check really goes, even taking it as far as breaking it down to what we actually walk with after taxes"..

No, (imo) it's not an agent's job to do that.

Please........break down what we pay in taxes? - what we net or walk away with??? Whose business is that?

Do you care how much profit your dentist makes on that crown he just put in your mouth - does he explain it to you?
Do you care what your CPA pays in taxes, after charging you $750 to prepare yours?
Maybe my attorney should tell me how much his rent and payroll are, so I can feel better about him charging $400 an hour as his fee.......guess what - I don't want to know.
Does the restaurant owner tell you how much he paid for that $75 bottle of wine?

None of that matters........and the consumer really doesn't care how much your gasoline costs or that you have to pay your own health insurance - or that you worked every weekend for the last 4 months with people who never bought a house from you - they only care that you will do the job they are hiring you to do.....that you are professional and competent

Charge what you want, or what your company will allow.
Believe that you are worth it ....and don't feel the need to justify, break it down, plead or or explain it.
"Mr Seller, this is my fee"
"Here's my marketing plan showing what I will do to earn that fee and to get your home sold"

What I walk home with after taxes, or what percentage/split my company takes is no one's business but mine.
12 votes
Debra (Debbi…, Agent, Livingston, NJ
Fri Jan 28, 2011
"Your realtor seemed like they disvalued our profession and them selves offering you a discount for multiple transactions"..................

Sorry, can't let this absurd statement go without a response.

Her realtor "disvalued" our profession?
Why?
Because she negotiated a commission that you might not agree with?? (may I remind you that ALL commissions are negotiable)!
Because she did what is LEGAL and offered Gertrude an option that was agreed to between the 2 of them ?

First of all, try reading the Realtor Code of Ethics,

Duties to REALTORS: Article 15 REALTORS® make only truthful, objective comments about other real estate professionals.
Article 16 Respect the exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with their clients.

Gertrude has an ongoing, exclusive relationship with her agent - you did not "respect" that relationship - you denigrated her agent and cast aspersions on that ongoing business relationship. Your comments were certainly NOT objective or truthful - they were your negative conclusions and opinions, and, in my opinion, they should have been kept to yourself.

And then you have the audacity to ask for a BEST ANSWER from Gertrude for that?
Geesh!
9 votes
Mack McCoy, Agent, Seattle, WA
Sun Jan 30, 2011
- Gawd, I hate sounding so dang preachy and I know others resent it but I just want better for this profession and the people we serve. Don't you all??

Well, I don't start from the position that real estate brokerage is a cesspool and that I am its savior. In fact, I start from the position that real estate brokerage is a reasonably honorable profession where reasonably honest people help the general public buy and sell real estate.

Explaining this is like trying to describe land to a fish, but you righteous, "I'll do anything for my clients regardless" agents need to recognize that a lot of your colleagues work with buyers but are not really their agents. They may be competing with other agents for their loyalty, they may have cajoled that buyer into going out and looking at houses with them, there are a lot of scenarios where the agent IS NOT LEGALLY OR MORALLY OR ETHICALLY OBLIGATED to show that client your under-commissioned listing.

In fact, even if they are in a formal agency relationship, it's a tough argument to make that the agent should give priority to the under-commissioned listing, come showing time. And if the buyer falls in love with a property before they've come to the one with a low commission, is it really the agent's job to say, "Well, let's wait a minute. I know you don't have time today, but why not wait until next weekend, and we can go check out Charlie Cheapskate's listing - I don't know anything about it, but YOU haven't seen it yet . . ."

Tammy sez we should never let commission dictate whether we show a property or not. Well, hands up, folks - how many agents who do not have commission agreements with buyers show FSBOs that aren't paying commissions?

Broker relationships with buyers vary. With some, we really are their agents - they're committed to finding a home, and we're committed to them. Others, it's a bit more casual. Yeah, maybe we can go look at a couple of properties next week. Somehow, I think agents that work that way aren't going to make an under-commissioned listing a showing priority.
7 votes
Erica Ramus,…, Agent, Pottsville, PA
Thu Feb 3, 2011
To all agents and brokers who keep mentioning specific commission percentages -- STOP IT! It is against the law to be discussing commissions and specific numbers. And to do so in a public forum is ridiculous. Never ever discuss what your percentage is to other firms or agents, and don't mention numbers as being "normal" or not. There is no NORMAL. There is just a commission rate, and that is your choice or your broker's choice. Period.

Geez, go back to real estate licensing school, please. Can we say "Sherman Anti Trust Law" again?
6 votes
Erica Ramus,…, Agent, Pottsville, PA
Wed Feb 2, 2011
There is no such thing as "full commission" or "reduced commission." There is just COMMISSION.

All commissions are negotiable. If I negotiated and got a 10% commission on a listing would that be "super commission?"

Agents need to get over the "full" vs "reduced" terminology.

Now a buyer's agent may indeed decide that the figure offered is not ENOUGH for him. In that case, he should negotiate with his buyer to make up the difference so he is paid ENOUGH to do the work.

Me, I'd rather have a piece of something than zero.
6 votes
Alan May, Agent, Evanston, IL
Sun Jan 30, 2011
Debbie (or Joan as I keep accidentally calling you... so sorry)...

Keep hammering away... it's a losing battle (especially, it seems with Ramona, who seems to think that "breaking the law" is protected within "free speech") but it needs to be said.

There is no "normal, usual, regular, average, standard, typical, everyone charges this" or any other type of commission that might suggest that we all charge something similar.

Commissions are negotiable. Period.
6 votes
Gertrude, Home Seller, Marshfield, MA
Fri Jan 28, 2011
Thank you Debbie for all of your helpful answers, especially for responding to @Mack. My realtor is awesome, that wasn't a question for me and the insinuation that she devalues her profession because she seeks to make long term relationships with her clients is absurd. Because of the way she acted 5 years ago when we bought our house, we recommended her to 3 other friends. Now that we are selling our house, we are using her again, along with using her to buy our new house and you better believe I will sing her praises to anyone I know who is selling or buying. She was the #2 top selling agent in her agency (which is a HUGE agency) for the last 8 years, were you? So no, I'm not going to choose your answers as the best answer because I found nothing helpful or constructive about it. Thank you to everyone else whose answers were constructive and thoughtful, you really helped me make a decision!
6 votes
Alan May, Agent, Evanston, IL
Sun Jan 30, 2011
@ Debby Frank

You asked: "Alan, I am curious what your response is when asked by a homeowner 'what is the customary commission paid in our area'?"

My response is simple. It's the same response I keep hammering away at HERE on Trulia, on Zillow and i person... it doesn't change:

There IS no "customary" commission paid in our area, each agent and each agency sets their own fees based on the marketing that they do and what they require in order to fulfill those needs. You will find different fees, from agent to agent, and office to office. Feel free to contact other agents and agencies and negotiate with them. I am aware that there are agents and agencies that charge less than I do, and those that charge more than I do. All I can say is "this is what I charge, and here are the services and anticipated results you will receive for that" Period.

Telling a client or customer or random phone call that there IS a customary commission, either in your area, region, city or state... is patently against Sherman Anti-Trust laws. Double Period.

If you're still unsure, and you feel that Debbie/Joan and I are full of horse-pucky... don't take my word for it, please, PLEASE ask your managing broker to sit down with you and review this thread. I think you'll be surprised.
5 votes
Oggi Kashi, Agent, San Francisco, CA
Tue Jan 25, 2011
Gertrude

There is no "standard commission" rate. Furthermore, an agent has the fiduciary duty to show any and all properties that meet his client's criteria regardless of the commission rate. What if there was a FSBO (for sale by owner) property that was ideal for a buyer?

If a seller does not want to pay a commission or offers a rate lower than what the buyer's agent is accustomed to, he/she can negotiate with the buyer instead to pay for the difference or the entire commission whichever the case might be. If you look at the exclusive buyer representation agreement, it offers a similar provision.

When I search for properties for my clients, the offered commission rate is irrelevant.

Oggi Kashi
Paragon Real Estate Group DRE1844627
Web Reference:  http://www.oggikashi.com/
5 votes
Gertrude, Home Seller, Marshfield, MA
Mon Jan 31, 2011
Tammy, thanks for breaking that down. There has been a lot of discussion about what is ethical, what is moral, what is legal, what is slimy, etc. Something I mentioned earlier is that I am a person who takes pride in knowing that I am doing a good job, no matter what I do, how much I am making etc. (I mentioned before that I am a teacher with a Masters, so I have a lot of education with a very small paycheck to show for it) I guess what I'm wondering is whether those of you who would not show my house or any other house with a (slightly) reduced commission (remember 6% is NOT average in my community, most houses are listed with 5% so my commission is only .5% off "average") factor in pride in your work and wanting to be good at what you do? To some, this is an old-school concept - which is very sad if you ask me and the reason that so many of my students are constantly looking for "prizes" instead of good grades. If the feeling of respect that comes from a job well done and a feeling of helping others (something I thrive off of since I'm certainly not teaching for the $$) does not do it for you, what of the idea of repeat business, word of mouth referrals, etc. as opposed to making the most $$ on a single sale? I've already made my decision about what I'm going to do, but at this point, I'm just curious.
4 votes
Patrick Beri…, Agent, Seattle, WA
Sat Jan 29, 2011
Your agent discounted the commission to 4% and expects the buyer's agent to split that discount? Then Yes--She's hurting you by doing this. ATTENTION LISTING AGENTS: If you discount the commission for whatever reason--It's YOU who should take the cut. If I want to give my former client a deal--Why would I punish the buyer's agent for that? How stupid would that be? In buyers market you need to make your listings MORE attractive to buyers and their agents, not less.

If a buyer's agent has only 2 hours to spend with a buyer and 50 houses she could show them, she's got to weed through the list. When she sees that you're offering her much less commission do you think your house is going to make the list? She may NEED that full 2.5% or 3% because she may ALSO be giving her client a discount. If I'm paying my buyer's closing costs, am I going to try to sell them something that may actually end up costing me money?

If your agent gave you a discount then she needs to eat that discount herself; otherwise she sure ain't doin you any favors.

PS--Please spare me the "It's our duty to show all properties to our buyers regardless of commission, blah blah blah." As a listing agent I know this is BS because there are times when I answer the phone and the buyer's agent's FIRST question is "What is the SOC?" Let's just face reality--The things that get rewarded get done.
4 votes
Debra (Debbi…, Agent, Livingston, NJ
Tue Jan 25, 2011
Hi Gertrude - I read through your responses here, and let me say that I think you are a very nice person! I think your concern and thoughfulness towards your agent and the various opinons offered here is admirable!

I'd also like to mention, as a word to many of the agents here, due to the Sherman Anti Trust laws, agents should not engage in discussions among themselves in regard to commissions - all commissions are negotiable - there is no legal concept of "customary", " usual or standard" when it comes to commissions! Statements that indicate a certain commission is expected really steps all over those anti trust laws!

Ok....so that being said - shame on any agent who refuses to show a home because the commission is less than they expect. In this day and age, with the internet and sites like Realtor.com, Trulia and Zillow, in addition to the MLS online, most buyers are very knowledgeable about what is on the market.
How embarrassing for any agent to have their buyer ask them why they didnt tell them about a certain listing! I'd love to hear the answer to that question!

If one is working as a buyer's agent, they have a fiduciary responsibility to show any homes that are appropriate.

Gertrude - the key to getting your home sold is making sure it is competitive, and really priced right. It needs to stand out from the crowd. That's what you need to discuss with your agent!.

By the way, shame on anyone suggesting that your agent "should take the hit", as that is trouncing all over the Realtor Code of Ethics and interfering with an ongoing business relationship.

Good luck gertrude - I hope your home sells soon!!
4 votes
Albert B. Ro…, Agent, Newport Beach, CA
Wed Feb 2, 2011
You would probably be rather surprised at what you would learn if you asked your agent to run the sales performance within your relevant market for listings with 2%, 2.5%, 3%, and higher commission rates to the selling broker. I ran these numbers for a top producer in a South Orange County, California market, and saw that within the prior three years, this agent's sales performance increased between 50% and 283% depending on the year for his 3% versus his 2.5% listings. This means that he sold up to nearly three times more of his 3% listings proportionally than he did his 2.5% listings.

Perhaps even more importantly, his 3% listings had an average of almost $94,000 less in price reductions compared with his 2.5% listings. (His sold prices during this three year period averaged between $1.6M and $2.4M.) After taking into account both the $12,000 in savings from the 0.5% lower commission as well as the $94,000 in higher price reductions needed to sell the properties, the 2.5% commission rate effectively cost these sellers just over $82,000, on average. In other words, the sellers walked away from the transaction with a net of $82,000 less money, and these were the lucky ones who found a buyer given that so many of the 2.5% listings ended up not selling at all. These data are readily available to your agent and can be calculated for your relevant market to help you affirmatively answer this question specific to your property.

Furthermore, offering a premium incentive to the agents working with buyers represents perhaps one of the most cost-effective marketing dollars that could possibly be spent on a listing. Let's say a seller were to offer a 4% commission to the selling broker. At a 4% commission, a buyer's agent could be financially motivated actively to seek a buyer such as by going through their rolodex, open house visitor lists, sphere of influence, etc., and cold-calling to find a buyer for such a property. And, when many agents act in like fashion to find a buyer for a well-incentivized property, the beauty is that while the seller is motivating "an army of buyer's agents" to find a buyer for their home, the seller only has to compensate just one of them -- and only if the seller gets an offer they find acceptable. These agents often represent the best and most cost-effective source for finding a buyer compared with other potential marketing activities or expenditures. Incentives can and do influence agent behavior positively, not just negatively. Buyer's agents often have well more homes that are good candidates for their clients than they have time (or client willingness) to show. And, many of them will show the highest commission properties first. As a seller, I would rather be on a buyer's agent's Top 5 list rather on their Bottom 5.

Keep in mind that the selling price of your home will depend on the level of demand (among other things), and anything a seller can do to increase the level of demand (including frequency of showings) for their property cost-effectively will be worthy of serious consideration.
3 votes
Mark Atteber…, Agent, Louisville, KY
Wed Feb 2, 2011
I'm not going to pretend to read all 224 answers because it seems they got pretty far from your question. The answer is YES, reducing the commission rate to the Buyer's Agent is hurting your sale. I know this because your agent shared that at least one person did not want to show it because they did not feel the rate YOUR AGENT set was fair for the work they put forth. Consider this: Your agent agreed to lessen their commission based on your continued business. The buyer's agent doesn't have this same repeat business with you but your agent thought it was appropriate to lessen their commission in an equal ratio as though they did. Is that fair? If YOUR AGENT wanted to sell the house fast and market it in the best strategic way and still cut you a break, they should have agreed to accept 1% on their part and 4% if they acted as a dual agent. If the commission rate didn't matter then HUD, Freddie MAC and a slew of private sellers would have never offered a bonus to the selling agent. The fact is, when there is a bonus, selling agents think harder about who they know that matches that house. The "slimeball" in this case did you a favor by SAYING what others were THINKING and saving you the time and energy of guessing why it is that your home didn't sell. Your agent should tell them thanks and adjust their split so your home sells. At the end of the day, 2% of 0 is still 0 and she is paid only when it sells.
3 votes
Mack McCoy, Agent, Seattle, WA
Wed Feb 2, 2011
One confusion is that we're really speaking in the third person - will some agents refuse to show Gertrude's home? Meanwhile, we're taking to each other as if WE are the people who will refuse to show Gertrude's home.

Good agents bring clarity of thought, and the less we confuse matters, the better.

Joan, $3500 may make your month; I know agents whose monthly overhead is a multiple of that, and the difference between 2% or 3% on a $1M house IS, in fact, enough for them to walk away from taking the listing. Regardless of our opinions on the matter.

Which leads us, ultimately to the answer. Regardless of our opinions on the way agents "should" behave, the fact remains that agents can, in many circumstances, ethically discriminate on the basis of commission amounts, and that we can price our co-brokerage accordingly, or not.
3 votes
Ray And Karen…, Agent, Mount Dora, FL
Sun Jan 30, 2011
Gertrude,

Is anything for free?

Lower fees = Less Advertising=Lower Exposure=Lower Offers= Lower $$$ in your pocket.

Think about this: Has there EVER been a discount company that has held a number one position for market share in any major market for more than one year?

No to my knowledge.

Too good to be true=too good to be true.

Hope that helps you out.

Take care,

Ray Levy
Coldwell Banker-Camelot Realty
Mount Dora, FL 32757
352-978-8551
3 votes
Kim Noonan, Agent, New Lenox, IL
Sun Jan 30, 2011
Alan - yes, yes, a thousand times yes!!!

Your OWN individual company may set their OWN commission structure.

In fact, that may even be the "standard" commission for YOUR company, or YOUR business. You and/or your brokerage has the right to set your own fees and terms of doing business, and a seller or buyer client has the right to accept those terms, or shop for those offered by other brokerages and other agents. Your brokerage may allow you, as an agent for that company, leeway in the business model, and that is perfectly allowable.

When ANY of us tell a client or prospective client that "everyone else will charge you this" or "this is the going rate" or "this is the customary/normal/standard/regular commission in the area" you are breaking Anti-Trust laws, plain and simple. And of course you have the freedom of speech to do so if you'd like, but you'd better make sure that you and your broker are prepared to face the consequences of your actions.

Back in the stone ages when I obtained my broker's license, it was frowned upon in questions, tests and classwork to even identify a numeral at all for items regarding antitrust matters; rather, commission X or Y or Z were used (as in: "Every company in my area charges the seller X for commission, and when I told someone that, they said I was colluding with other companies to fix a commission rate of X. Is that wrong?"

By cavalierly using ANY commission rates in our answers, we subtly convey there is a "norm". Gertrude told us the amount of her negotiated commission; we should not be telling her what she "should" be paying based upon what we believe a "regular" fee to be.

If Gertrude and her agent feel that any part of her contract or marketing might be hindering buyers and agents, they should determine what they need to do to address that. I again will say that if, in my business, I agree to assist a home seller with a rate lower than that which I usually charge, I assume any discount in MY standard commisison on my end of the transaction, and not in the compensation I offer to the buyer's agent.

I sense that many a broker/owner would poop their pants if they saw the language their agents were using in places such as Trulia and Zillow. Me thinks an awful lot of folks badly need refresher CE class.
Web Reference:  http://www.kimnoonan.com
3 votes
Debra (Debbi…, Agent, Livingston, NJ
Sun Jan 30, 2011
Ms-, Miss,- Mrs Ramona - if I could understand half of what you just said, I would comment.

" We can't just write so we look good on paper:"............well, that is quite obvious ( but, you might want to try).

"they are just practicing their first amendment rights"??? .................so if someone asks you what the racial makeup of a street or town is , you are just practicing your first amendment rights by answering that question?

Nice interpretation of the Constitution...........

Lots of luck to you......... glad you "got this out of your chest"

and by the way - Gertrude is a SHE, not a HE....and, who was "trigging" who? (you saw a naked king?)

oy
3 votes
Tammy Deitz, Agent, Lakewood, CO
Sat Jan 29, 2011
Gertrude,

I read through several of you answers here, but have to admit I did not read all 99. I have to say Patricks answer below where he said "Your agent discounted the commission to 4% and expects the buyer's agent to split that discount? Then Yes--She's hurting you by doing this. ATTENTION LISTING AGENTS: If you discount the commission for whatever reason--It's YOU who should take the cut. If I want to give my former client a deal--Why would I punish the buyer's agent for that? How stupid would that be? In buyers market you need to make your listings MORE attractive to buyers and their agents, not less." Is absolutely spot on!!!

I have taken a reduction in commission especially in situations where it will make the difference on whether my client is upside down. But it is ME as the listing agent that takes the hit. Not the buyers agent. In Colorado, we offer 2.8% - 3% to the Selling Broker (Buyer's agent). I don't know if you agent is offering 2% to the Selling Broker (Buyer's Agent) or what she is offering them, but I know here in Colorado...if you were only offering 2% to the Buyer's Agent, it would most definitely affect showings. There are a 6-12 month inventory of properties in most neigbhorhoods and neither the Buyer's agent nor most buyers want to see that many properties. I would not be surprised to see a Buyer's agent just simply not put the property in an email submission of properties that they might be sending to a Buyer because the split is so low.

Sorry, but I have to agree that, although you think your agent is great, she is absolutely hurting your sale by reducing her commission and passing that reduction on and expecting the Buyer's agent to take the same reduction because she has choosen to.

Tammy Deitz
3 votes
Debra (Debbi…, Agent, Livingston, NJ
Thu Jan 27, 2011
"Its normal to pay 6-8% in the country i.e. 3-4% to Listing Agent or Buyers Agent. ".............

NO, it is not " normal"......... "customary or usual"
Quite frankly that is NOT the typical range for my area - so there!!!!! - be very careful when making statements like that.

Please read up on the Sherman anti- trust laws.
3 votes
Joan Braunsc…, , Morris County, NJ
Thu Jan 27, 2011
The blatant discussion of specific commission rates, especially what is considered "standard" is a big no no. Anti-trust stuff and all that. Agents who have done that here, I would be very very careful because it can come back to bite you.

The discussion of the buyer's agent's commission percentage effecting showings one way or another has occurred many times.
The fact of the matter is it is just plain wrong. Agents are suppose to put their buyer's needs before their own pocketbook.
Unfortunately, apparently the fact that it is wrong doesn't matter. I guess there are agents out there who look at commission percentage as a factor of whether or not to show a home. Its inexcusable, its shameful but I guess its a reality.

The problem with this question is I never know what to say. I tend to agree with your agent, because someone openly admitting that they won't show the home because of how much it will pay out is unethical as far as I'm concerned. Yet, if it is indeed affecting showings, you don't want to leave yourself at a disavantage. Its kind of like condoning bad behavior in order to get your listing seen.
For this reason, I really don't have an answer I feel comfortable with.
3 votes
Mack McCoy, Agent, Seattle, WA
Tue Jan 25, 2011
- Furthermore, an agent has the fiduciary duty to show any and all properties that meet his client's criteria regardless of the commission rate

May-be.

It really depends on your agreement with your client - if you have a signed brokerage agreement with a buyer, then, yeah, I think so.

But if you're in a casual relationship, not so much. If you're going to take somebody out and you're not in a formal relationship with them, or you're thinking about calling up leads with hot new properties to show them, you really can discriminate among the properties you're going to show them based on commission.

What our sellers need to know is that they can not obligate co-brokers to show their properties, they can only incentivize them.
3 votes
Leslie Reed, Agent, Seattle, WA
Tue Jan 25, 2011
If I were to ever reduce a commission for a seller, I would only reduce my side of the commission and not the selling office size. I feel that it is not in the seller's best interest to offer a reduced selling office commission because it is true that agents will not show the homes with reduced commissions (whether it's ethical or not). I would recommend offering whatever is a customary selling office commission in order to get the best market exposure.

Best to you,
Web Reference:  http://www.thereedteam.com
3 votes
Dan Tabit, Agent, Issaquah, WA
Tue Jan 25, 2011
Gertrude,
What you want to insure is that the selling office commission is consistent with what others are offering. While some will argue that it is unprofessional or unethical for an agent to exclude your home, those agents are out there. If your agent is giving you a deal, by reducing the commission for multiple transactions and they are not offering a competitive commission to the buyer’s agent, than it really isn’t much of a deal.
Here’s and example; if 6% is common in your area and this is evenly split between the two offices, 3% & 3% and you are offering 2%, you are at a competitive disadvantage. Your agent is asking to “split their good deal” with the buyer’s agent. It would seem more reasonable for your agent to absorb the reduction as a benefit to you and to keep you competitive with the others you are competing with.
“It’s only 1%” you might ask? It’s % of the eventual selling price. To a buyer’s agent it represents 33% of what they might earn selling a different house.
What you and your agent agree to do is between you, but since you asked I thought you should know that if the one agent with a buyer who would like your house, won’t show it you could be hurt.
3 votes
Gerard Carney, Agent, Spring Hill, FL
Wed Feb 2, 2011
Actually there was no crime in the statement, unless the person the buyer's agent was working for asked to see that house, then it would be a violation of our transaction agent statement. But just as some agents use smaller commissions to lure more listing, it does in fact hurt the seller, commissions under 5% just don't compete very well in the market. also if you agent wants to offer sellers lower commissions that is fine but then you need to ask if say that 4% commission is going to be 2.5% for the buying agent and 1.5% for the selling agent, this way you stay competitive in the MLS listings. Just because you agent decides they will lure you into a
listing with lower commission rates does not mean that we all have to suffer for their eagerness. Simply put, if you pay lower commissions and you seller doesn't take a cut on his side to make the buyer side attractive, they are doing you a great injustice! The average Commission is 6% which counts as 3% buyers side and 3% seller's side. I personally offer 3.5% on the buyer side to attract all the eager beavers with clients looking and take 2.5% for my side, in the long run the numbers work for me and for my sellers.
2 votes
Patrick Beri…, Agent, Seattle, WA
Wed Feb 2, 2011
I kind of think we covered all the possible relevant answers about 200 posts ago. Can we please stop adding to this post now? Or is there someone else who wants to let everyone know something that someone has already said?
2 votes
Star Team Re…, , Sagamore Hills, OH
Tue Feb 1, 2011
Let’s role play for a second. Excuse me doctor, before you perform this Brain Surgery for me, will you agree to cut your fee by 33%?

Now as silly as that sounds, it is exactly what I here when I am asked to reduce my commission. Profit versus Ethics, I do not see a conflict here. I personally do not look at the commission offered by the listing agent until I am writing the purchase offer. Now the next question is how hard do I work to keep the deal alive when there are other properties on the market that pay higher commissions?

Have I ever sorted showings by commission? Usually when there is a bonus over the normal commissions in my area, YES I DO!!! A Buyer Agent Bonus means the Seller is motivated and willing to deal with my Buyer. So Yes, the commission to the Buyer agent is simply GOOD BUSINESS for everyone concerned.

Discounted commissions mean the exact opposite. The Seller is less motivated, in a tight spot for what ever reason, and less likely to accept an offer that benefits the Buyer that I represent. Your listing agent should be talking to you about a short sale. This is where the bank that holds your mortgage agrees to let you walk away with-out paying the difference between your selling price and what you owe. Recent laws require the bank to send you a 1099 to pay income taxes on the short fall but you can get out of these taxes by filing insolvency on your tax return. Consult your income tax specialist to see if you qualify for insolvency before you accept the short sale, but in either case the taxes are way less then covering the short fall at 100%
Web Reference:  http://www.Rate-n-Term.com
2 votes
Mack McCoy, Agent, Seattle, WA
Tue Feb 1, 2011
Gertrude, I would work with Debbie, too.

My brother-in-law is a teacher with Seattle Public Schools, and my mother-in-law was a school psychologist for decades. I think we all get the financial challenges teachers face.

But your question isn't whether the real estate community should have a teacher program (maybe they shouldn't fight against taxes that support the schools), it's whether a reduced commission rate is hurting your house sale.

For whatever reasons, it's clear that fewer agents will consider your listing with a reduced commission. It doesn't matter whether that makes them selfish, greedy, or anything else, the consensus is that it will limit showings.

The fact that real estate agents are, on average, doing about half the transactions that they were doing five years ago at 25% lower prices means that, even with attrition, the typical top-20% agent is making about half of what they were back then. The wager on whether they should pick up the phone to make $3500 or hold out and make $7000 may be even more important today than a few years ago.

For the most part, everybody would prefer to pay less, and be paid more. That's pretty much the way of the world. I wrote something a couple of years ago about the legendary advertising genius, David Ogilvy, who wrote that the best way to get top performance from your agency was to pay 16% instead of 15% - the agency's profit margin was generally 1%, and by doubling it, you became twice as valuable and twice as important to their success. And I got about 25 replies telling me how crazy that idea was; why should you ever pay more?

I haven't found that agent bonuses are especially effective.

I disagree with Kristy's POV; I don't think it matters what you or I enjoy telling our clients, what's important is what they want or need to know. I think that if they wanted to know about our personal finances, they would at least drop a hint every so often. At least as often as they ask how flexible the sellers might be on the price, or how many days on market the property has, or even whether you keep snacks in the car.
2 votes
Chris and Di…, Agent, Naples, FL
Tue Feb 1, 2011
It could very easily hurt your number of showings, especially when there is so many homes on the market. Put yourself in the realtor's shoes. If you were going to show your client 10 homes and there were forty that are available. Half of those were at 6% (splitting commission) and half were at 4%, which ten would you choose? If your realtor wants you to stay at 4%, have her cut her part, where she takes 1% and gives the co-broke 3%.
Web Reference:  http://ChrisAndDick.com
2 votes
Joan Braunsc…, , Morris County, NJ
Mon Jan 31, 2011
Well....I'm both a rookie(kinda) and starving. I still think that $7000 (if I remember correctly that is the number Gertrude named) split with my broker 50/50, which comes to $3500 is pretty good.

And you say, no matter what the price? Its reality? So....even on a 500k property? 1M+ property? Agents would turn up their nose at 2%?!

Maybe, but I want you all to think about what this thread and its implications look like to the general public and although I do believe that the majority of agents are decent, honest, hardworking people this is hard to swallow for me, so I can imagine that it isn't going over so well for consumers.

I'm not naive. I understand what you are saying Tammy about a listing agent's responsibility to their client regarding the "reality" of the situation. I really can't argue that.

Again I say that threads like this feed beautifully into the negative perception so many consumers have of the RE profession.

Don't have a solution other than changing the fee structure for RE agents but I am not of a mind to just "accept reality". I may have to deal with it. I may have to tell my sellers the reality of it. But I refuse to just shut up about it and accept it because frankly we just come off as a bunch of greedy self serving a*ses.
2 votes
Kim Noonan, Agent, New Lenox, IL
Mon Jan 31, 2011
I think part of this debate is that some agents who have only been exposed to the types of brokerage law in their own states cannot quite wrap around the idea that in other states, there is a very distinct difference between client and customer, and the levels of service they receive (and the choices buyers have to select those levels of service.)

It is confusing, especially when you've always been taught: "These are the rules, this is the law." Your rules and your law may be different than mine, or Mack's, or that crazy Florida! Heck, in Illinois we even get to be "Ministers", and perform those duties! ;-P

Again though, I would like to say that whether an agent acts contrary to their own agency rules by not showing a listing to a buyer client due to "low" compensation...OR opts not to present all listings to their buyer-customer, the buyer may still buy the home.

If a listing agent is beating the drum, getting it out there in the internet and public eye; if it is priced attractively; if it shows at the top of its game & is easy to view...that buyer may well indeed find the home and either ask their buyer-agent to show it to them, or contact the listing agent or another agent to see it, especially if they suspect the agent they are working with is withholding data.

So Gertrude - keep doing what you can to work on your property. Price it right. Squeaky clean and smelling fresh. Accept showings when someone calls. Eliminate clutter. Neutralize vivid paint colors. Make sure the curb appeal is solid. And once more, price it right! I hope your buyer finds their way to your door soon!
Web Reference:  http://www.kimnoonan.com
2 votes
Gertrude, Home Seller, Marshfield, MA
Mon Jan 31, 2011
I don't have any idea what percentage of the commission agents actually make, and I am sure there is a huge amount of expense that goes into showing houses (i.e., gas mileage). However, 2% of my home sale is roughly 7K, so I'm not sure how anyone could make the statement that I'm expecting them to show my house for free!!! Also - two things that I didn't address earlier: my agent did let me know that she would split the commission down the middle when we signed the contract (I assumed this was normal - I have never sold a house before) and while thinking about it now, my agent never has used the word "standard" (I think that's just something I said), when she has referred to commission, she has used the word "average", i.e., the average commission in this area is... Thanks everyone for all of your opinions! Whether they are what I wanted to hear or not, I appreciate you taking the time to share them!
2 votes
John Sacktig, Agent, New Jersey, NJ
Sun Jan 30, 2011
Gertrude,

Don't sweat the comission statement by that other Realtor.

I am in this business to sell houses, I sell them to my buyers that ask me to see homes, when I see a good house that has what my client wants.. we go. I don't look at the commission. Well, I probably glance at it.. but it is in no way a deciding factor in what I show to my buyers. Period. I'll sell your 4% house and then sell the 6% down the block and then sell the 4% with the $3000. bonus... what ever my clients wants to see. If it fits the bill, good house. I'll sell it. Period.

My client and my future relationship with them is my concern. After I sell them your 4% commission home I will let them know at some point, in a subtle way, that this was a lesser payday for my business but it was the right home for them and that is what matters to me. This will endear me to them forever.

That person that said that they would not show your home is full of baloney. You made your deal with your agent, stick with it. I doubt that person had a buyer anyway.


John Sacktig
Broker / Manager
Orange Key Realty
Direct: 732-213-1409 732-213-1409
JSacktig@orangekeyrealty.com
2 votes
Alan May, Agent, Evanston, IL
Sun Jan 30, 2011
Mr. Alan:
telling this Seller, his listing would hurt with lower commission is breaking the law? No further comments.
~~~~~~~~

Nope, never said "telling the seller lower commission would hurt his sale" is breaking the law (and I wish I could believe you when you say "no further comment"... but I don't.

What I said was: "There is no "normal, usual, regular, average, standard, typical, everyone charges this" or any other type of commission that might suggest that we all charge something similar." and saying that there IS a standard is illegal.

That's what Debbie/Joan was complaining about (if YOU'D bothered to read HER post carefully)... and YOU said that they were just exercising their first amendment rights. THAT'S what I commented on... apparently YOU seem to think that discussing standard commissions is within your first amendment rights... and it simply isn't.

(unless you'd like to declare that you didn't understand the comment??)
2 votes
Mack McCoy, Agent, Seattle, WA
Sun Jan 30, 2011
- A 10% commission to the buyer's agent plus a $5000 bonus won't sell it if it isn't priced right.

And, it would be worth it if the house sold at a high enough price!

We can reverse-engineer this answer; if we really believe that the commission doesn't matter, and that any "ethical" agent would show any property regardless of the co-brokerage arrangement, then we might as well save our sellers money and not offer one.

If we think it matters, then it needs to be competitive.
2 votes
Debra (Debbi…, Agent, Livingston, NJ
Sat Jan 29, 2011
sometimes answers here just make me cringe

I am going to say this one more time..... for the last time (even though it is futile), then click my heels 3 times, and go back to Kansas (well in my case, I wlll remain in NJ instead)

ALL COMMISSIONS ARE NEGOTIABLE - there is NO SUCH thing (legally) as a "customary" "usual" or "standard" commission!!

Fof those of you who don't get it - PLEASE educate yourselves on the topic of price fixing. Refer to the Sherman anti- trust laws - google it for goodness sakes!.... You can even .check with your local board of Realtors or your state's Real Estate Commission.

To those of you who have chastised Gertrude's agent due to the commission she has NEGOTIATED with her - shame on you!.. They have an ongoing business relationship, the property is listed, and it is wrong to try and denigrate that relationship. Show some professionalism, and read our Code Of Ethics!

And on that note, come on Toto, let's get out of here!

Take care Gertrude.........bye!
2 votes
Mack McCoy, Agent, Seattle, WA
Fri Jan 28, 2011
Well, I guess that's what "Thumbs Up" is for!

Joan, I think Debbie found the subject. Business practices differ, even in the same market, and one can be honest and ethical but have different business practices. Even in "residential" real estate, there are sub-specialties, and the practitioners in those sub-specialties often bring buyers to "our" listings.

The problem with bonuses is that they're too small to be motivational. On a $300,000 property, a $3000 commission variance can make a difference to an agent, but to a buyer, they're often hoping for a much larger discount than that.

Back to Gertrude's agent, I think that the details matter. She should be horrified if an agent representing a buyer would avoid showing the property, but she shouldn't be surprised that other agents would avoid it. Because, and I feel I am not explaining this properly, all agents who pull up the listing aren't necessarily representing buyers. Yet.
2 votes
Mack McCoy, Agent, Seattle, WA
Fri Jan 28, 2011
- No matter what, I don't care what kind of business relationship you have with a buyer (casual or contractual), that is wrong.

Except that it's not.

Real estate brokerage, I repeat, is a business. People are not "entitled" to your services, and it seems to me that if you wouldn't show a FSBO because they weren't offering a satisfactory commission, you might well not show a co-brokered property for similar reasons.

And if you are a seller, you should at least be aware that not every prospective buyer has a commission agreement with an agent, and that many sales result from agents who do not. If you want to attract the latter, it would be useful to make the sale attractive to those agents.
2 votes
Joan Braunsc…, , Morris County, NJ
Fri Jan 28, 2011
@Mack: I obviously don't believe we should be working for free. That's silly. If it turned out that I had buyers that were interested in a property that paid little to no commission, I guess i would have to talk to them about it. I would be honest with them about it though and not keep the property out of the running, just because I determine that is what is best for ME.

I suppose if there were two absolutely identical properties (doesn't happen- even brand new condos with the exact same floorplans are in different locations), and one had a commission percentage higher than the other, I could point this out to my buyers and have a discussion with them about it.
But again, I would be honest with them about it and not steer them toward one property or away from another.
This is what bothers me the most- the deception that is involved in omitting certain properties or, on the other side, steering buyers towards higher commissioned properties.
No matter what, I don't care what kind of business relationship you have with a buyer (casual or contractual), that is wrong.
2 votes
Kim Noonan, Agent, New Lenox, IL
Thu Jan 27, 2011
Debbie, Joan and everyone else who correctly commented on "standard" commisison rates....thank you thank you thank you. I started reading this from the first set of answers and was STUNNED by how many of our colleagues think is even remotely acceptable to post such language. I certainly hope they are not going into listing presentations in their area telling sellers what the "normal" 'standard" or "going" commission rates are in "their areas'. YIKES!

Gertrude, you are asking clear and thoughtful questions. I wish you best of luck on the sale of your home. As someone who works about 40% with buyers (historically) I know this: if your home is priced right, shows well, has GREAT photos on line and is readily available for showings (buyers want to look when they want to look, homes that are difficult to get into linger), buyers will ask to see your home.

I cannot tell you how many times I have gotten calls from other agents' buyers...just checking to see if a listing is still available. And yes, a few times it has turned out that their agent has prevaricated about the status, for whatever reason. Imagine being the buyers' agent on the other end of THAT conversation!

My take is this: If a buyer has a brokerage agreement with a buyer's agent(cy), and has agreed to compensate them X for their help, and you are offering X minus..the buyers agent MUST still inform their client of the listing, along with informing them that the co-op commission offered is lower than the amount which they are obligated to pay. Do they still want to view your home?

And if the buyer's agent is not in an buyer's agent relationship/status...it is tru the agent does not need to provide them with all the listings available that might suit their needs, because they are not working at client-level status. However, that agent runs the risk of having the buyer call someone else if they find they are not being shown homes they're seeing on the internet.
Web Reference:  http://www.kimnoonan.com
2 votes
Mack McCoy, Agent, Seattle, WA
Thu Jan 27, 2011
David, I ask you to re-read my post more carefully before commenting on it. I specifically make a distinction between our "clients" - people with whom we are in an agency relationship - and people that we have a casual relationship with.

People in the first group, we're showing them everything, because that's what we've agreed to. People in the second group, they may want to go out once to check you out, there are fifty properties easy that fit their broad general parameters, you have time to show them three, why not take them to FSBOs?
2 votes
Mack McCoy, Agent, Seattle, WA
Thu Jan 27, 2011
- Agents are suppose to put their buyer's needs before their own pocketbook.

Well, maybe. I don't think so, exactly - otherwise, we would work for tips.

I am open to reinterpretation here, but it is my short take that we are hired to represent clients in the purchase of real estate in exchange for compensation. We are not volunteers, we are not a public agency, and we (or our brokers) are specifically designated by the State as being the only profession licensed to charge for real estate brokerage services.

There is an area for contention where a licensee is acting as an agent for a buyer and selects properties based on commission, which is easily avoided by entering into a commission agreement with the buyer.

But it's useful to realize that many agent / buyer relationships are informal and non-exclusive, and in those cases, why wouldn't a sales person try to sell a property with a higher commission again?
2 votes
Debra (Debbi…, Agent, Livingston, NJ
Thu Jan 27, 2011
Gertrude - I gave YOU a thumbs up, because I really do think you are a thoughtful person - who is asking questions with good intent - you want to do right by your agent, as well as the buyer's agent - you are caught in this bad economy , and are trying to lessen the hit you are going to have to take by selling your home now.

I understand that.

Fortunately, there are agents who will put their buyer's needs above their own, and will show your home if it is the right one for their client..

Good luck, and please let us know how things work out!

All the best...
Debbie
2 votes
Gertrude, Home Seller, Marshfield, MA
Thu Jan 27, 2011
My house is not in the millions, if it was, I'm thinking I could probably afford the extra 1/2%. I'd rather not discuss exactly how much my house is, but it's in a nice seaside community, south of Boston, so it's not $100K. Either way, my point was, I don't have the extra money to pay the full 1/2%, but could afford about $500 more. Jodi, I'm not surprised that you feel that way, but I am surprised that you flat out admitted that you wouldn't show my home on here. Isn't that illegal, and can't you lose your license for saying such a thing? I'm not trying to short change anyone here, I understand you all work hard for your money. I guess I just really want to sell our house, we bought high and are selling low, and I'm trying to find the balance between offering the buyer enough incentive (price wise) to find my house attractive, offering the buyer's agent enough incentive to even show their client my house and compensating our realtor. At the end of the day, I guess I will just have to hope that enough agents have the integrity to show their clients what they want to see and if our house falls into that category, so be it. PS, I am a teacher with a Masters degree, so I definitely think I know a thing or two about not feeling like I'm being paid enough, but I still do my job to the best of my ability because it's what I love to do and because I take pride in knowing that I'm good at my job.
2 votes
Debra (Debbi…, Agent, Livingston, NJ
Wed Jan 26, 2011
Actually Kathleen, to be perfectly honest - while I have been clear on my position that a client's needs should be served, even if it means making less on that transaction.........I am in the business to earn a living, not just to "help" others. This isn't charity work, so while helping others is certainly a driving force, and something I enjoy - equally driving is the need to pay my bills.
2 votes
Debra (Debbi…, Agent, Livingston, NJ
Tue Jan 25, 2011
by the way - Bravo Oggi - right answer in regard to commissions and fiduciary duty!!

:)
2 votes
Eli Givoni-S…, , Boca Raton, FL
Tue Jan 25, 2011
My suggestion would be that your Realtor take the hit and offer out a competitive commission. For example, she should offer out 3% and work on 1%. She's the one who's getting your repeat business, not the selling agent. In this buyer's market, many sellers are offering bonuses to the selling agents to get the properties sold. She should work with you on the discount commission and push the property to the selling agents.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states
2 votes
Melissa Manc…, Agent, Plainville, MA
Tue Jan 25, 2011
All very good points here. One piece to the puzzle that is missing and may help put things into perspective for you is that Buyer Agency Contracts are very popular. Much like a listing agreement with a seller it lays out the terms of what is expected from each party. (Buyer and Buyer Agent) and outlines time frames in which they will be working together as well as what the compensation terms are for the agent. If the buyer agency contracts stipulate that compensation is “X%” but the seller is offering less than that, the buyer is expected to make up the difference to their agent. So in the end, it could be the buyer that refuses to preview properties that they have to pay a real estate commission towards because there are so many other properties for sale that are offering “the going rate”.
2 votes
Johnna Little, , 77581
Tue Jan 25, 2011
When I give my sellers a discount for listing their home when I sell them a move up home, I take the 'hit' on the commission. I only discount my fee by 1%, but I take the reduction of commission. I feel it is unfair to expect the buyer's agent to pay for a concession that I give to my seller. I can see where a buyers agent will not show a home with a lower commission rate, when they can make more money showing other properties. Not that it's right, but it happens. Especially in the market of some areas of our country.
2 votes
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