Do Realtors Get Paid Too Much Commission?

This article was written to answer many of the most frequently asked questions on this topic. I hope you find this information helpful. I think most of us wonder out loud if realtors are paid too much commision.

The real estate market has been quite exciting over the last few years. Record sales prices, transactions and astonishing new construction development has brought one and all who is anyone into the real estate profession. With numerous realtors and so little inventory, rivalry amongst realtors has grown ferocious. instantly, the customary 6% commissions fell to 5%. then, the 5% commissions dropped to 4% and in some cases even lower than that. I am an champion of competition. I feel it keeps a healthy market flourishing. Nevertheless, what many realtors fail to spell out to their selling prospects when negotiating a listing contract and commissions is how the money is used and where it goes.

Who Does What With The Commission?
The whole commission does not go into the pockets of the realtor. Realtors only get a small portion of the total commission. Below is a usual breakdown of what happens to a commission when it is paid upon closing.

Suppose you sold your $300,000 house this year and paid 5% commission. At $15,000 total commission, traditionally it is split between both the buyer's broker and the seller's broker. Both brokers would gross $7,500. Then, your listing agent and the buyer's agent would each get a portion of the $7,500 each of their brokers received. The portion amount will differ for each agent depending on their divide agreement with each of their brokers. An average 60%. 60% of $7,500 is $4,500. Now factor in all the advertising costs including flyers, mail-outs, ads in the a number of papers and industry magazines, open house costs, placement of signs, virtual tour costs, etc. Suddenly, the $4,500, the agent is netting less than $3,000. Under extremely favorable conditions, the time it takes to list a home, market it to be sold and take it to the closing table is 50 days. If you do the math, and based on $3,000 take home for the Realtor, they earned $60 per day while actively selling your home.

If your Realtor is highly skilful and very up to date about the market and marketing homes, they are worth the commission. As an employee, your realtor is responsible for the marketing and negotiations of your home. For most people, a house will be the largest priced product you every buy or sell.

Do you really benefit from negotiating a lower commission?
Let's discuss realtors that are easily willing to reduce their commissions to get your listing. You have every right to negotiate a lower commission for realtor services. But what are you actually negotiating? The realtor commission is split up in so many ways to where nearly 4 individuals get a cut and another large portion goes into marketing costs. So, if you are the seller and usually a seller pays the commission, you are really negotiating away your marketing dollars and a realtor's paycheck. In other words, you are negotiating away the earnings of the expert that is supposed to work hard at reaching your ultimate goal; selling your property at the highest possible price with the fewest hassles. When this occurs your realtor has no real encouragement to work hard for you and the sale of your house. A realtor might decide not to market your property as much as they normally would if paid a higher commission.

If a realtor is so easily willing to give up the money they work hard for or accept at lower commission just to get your listing, how easily will they give up your money that you deserve and work hard for in the sale of your home?

The value of a realtor is really based on the level of service you expect and the results you expect your realtor to deliver. If you have been disappointed in the level of service and/or results your realtor has delivered, you should interview several realtors before making a decision. If you expect commitment and dedication from your realtor to provide quality service, inquire as to his or her real estate sales track record.

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