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How do you feel when you employ a full-service realtor and pay only half a commission? Always surprising that when a homeowner is going to engage a realtor to sell his property, especially when he next complains bitterly about paying 5% or 6% to someone who he believes does little or no work. Usually the seller marks up the property to cover the commission which over-prices the property and the result is it doesn't sell. Usually, the commission paid to a realtor® is split between himself and his "broker", who is the licensed agent in charge of a particular firm as well as the co-operating broker bringing a buyer. If the commission on a sale is $20,000, the realtor® and the broker may each get $5,000. with the cooperating agent and broker getting the other $10,000. Newer methods of payouts to agents include paying "desk fees" to the broker in exchange for higher payouts. For example, if the agent pays $135/month as a "desk fee" he may be entitled to a 95% commission while an agent paying $60/month may only entitled to a 70% payout.
If the agent doesn't sell the property he listed, but another agent does, the buying and selling brokers each get half of the commission and the 3% commissions are again split with the agent so he gets 1 1/2 % net. So for a $20,000 commission the split looks like - $5,000 each to the two brokers and $5,000 each to the two agents. This is a simplified summary of the process but illustrates the payout procedure. If the agents are on a higher payout because of their monthly desk fees, their portion of the commission is increased and their broker's portion is reduced proportionally. Industry statistics show that 95%+ of the time the listing agent does not sell the property! So the real money for a realtor is in getting the listing and having another realtor® sell it. That said, as you move up the experience and professional ladder of Realtors, you will find it isn't the same set up for them with their brokers and therefore commissions may be more flexible.
In some circumstances... and provided the timing is active in your marketplace, one way to save some of the commission is to list with a flat-fee broker who will list the property on the MLS® (Multiple Listing Service) and Realtor.com® but who does not show the property. The buyer for your property will come from a "buyer's agent" who brings a client to see your home and make an offer. He is interested in receiving his usual 50% of the full commission or 3% of the sales price. If you offer a 3% commission to the buyer's agent, you have saved 3% by not having to pay the seller's agent (listing agent)! In the above example of a $20,000 commission, the agent who brings the buyer still gets $10,000 but you are saving $10,000.
What if you are unfamiliar with the sales and contracting process and you need help? For the commission savings - you can hire an attorney to review any contract and give you advice usually for less than the amount you may have spent so you are still ahead . But better yet, the attorney can give legal advice that your realtor® can not, and you have recourse against your lawyer if something goes wrong.
So to save at least some of the commission, should you decide to have a realtor® sell your house, use a buyer's agent only and offer him a 2.5% or 3% commission. Another unique benefit of only paying a buyer's agent is that if desperation sets in and you need to sell quickly, you can increase your payout to the buyer's agent and attract many more buyers than using a seller's agent. The highest commission seen in the past year is a 12% commission to buyer's agents for condo units. In the depressed condo market these days, it is not uncommon to see 10% commissions to buyer's agents. You can save considerable money by selling your home faster just by focusing on paying only a buyer's agent to sell your home if you have decided to market your home on the MLS using a realtor. JUst be very careful on choosing your flat fee broker as many are new in the industry just trying to get their book of business started and may not have the fully developed skills or experience you would expect from a Realtor.
A caveat is to sure you have the right market. Many a seller believed thet would save money but going against the "tide" of hiring a Realtor, only to find the tide left without them on board. So be sure to do all of your homework and get good solid advice. In many ways... flat fee/discount brokers can be like selling your home yourself... so be prepared.
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