Everything in real estate is negotiable. The price of the home, the mortgage interest rate, closing costs, junk fees – even the broker’s commission.
The standard 6 percent commission – which comes off the top of the sales price – doesn’t always amount to a hill of beans for certain lower-priced home sales.
The listing (seller’s) agent and the buyer’s agent generally split the commission and then share that split with their broker or real estate office.
Where the money goes
But the split isn’t the only direct expenses related to performing their job. Add marketing the seller’s property – online and off – negotiations, transportation costs, office expenses, business license, trade association costs, professional fees, continuing education and more. The buyer’s agent has similar costs including time spent preparing the buyer to come out on top when it’s time to make an offer, touring homes, finding properties, etc.
Don’t forget all the other costs that come with earning a living, often as a 1099er or small business owner – higher taxes than those of a W-9er, self-paid health care insurance, as well as vacations, holidays, retirement investments and other perks W-9ers enjoy as salaried benefits.
Diggsy.com, one of the newest real estate listings search engines and information web sites, puts the average real estate earnings at about $30 an hour for selling the average priced home.
But then there are the high rollers, listing brokers who also bring the buyer to a $2 million dollar pocket listing in a few weeks and grosses $120,000 for the effort. Even if overhead costs half the take, $60,000 in a few weeks ain’t peanuts.
It doesn’t matter – $30 an hour or $120,000 gross – it’s all negotiable, depending upon market conditions, local conventions and consumer knowledge.
Sellers can haggle over the commission with traditional listing agents, buyer’s can get rebates from some buyer’s agents and there are a host of “discount,” “fee-for-service,” “variable-commission” or even special lists or groups of agents offering deals.
Years ago, Consumer Reports found that among home sellers who negotiated the commission, 71 percent succeeded, often halving the commission they paid to 3 or 4 per percent for their effort.
Earlier, Silicon Valley’s Business Journal chronicled a paradigm shift in commission alternatives in “Alternative brokers offer cost savings to home sellers, buyers.”
Unfortunately, there is some resistance to negotiating the commission in some states for a variety of reasons, so much so the U.S. Justice Department has taken up the issue on its long-standing “Competition and Real Estate” page.
For more information, About.com offers “How to Negotiate Real Estate Commissions.”
CAARE offers new service
More recently, the Consumer Advocates In American Real Estate (CAARE) opened a new front in the real estate commissions battle.
“In order to raise awareness on this issue, CAARE has created a ‘List of Buyer Agents Who Will Discount Their Fees’,” says Doug Miller, CAARE executive director.
“What CAARE is doing is unique. Although the idea of negotiating with a buyer agent is a concept that has been around for a very long time, publishing a list of those agents has not been done before, Miller claims.
“Many of the so-called buyer rebate companies are actually referral companies and will only provide a name after they have secured a 25 percent referral agreement with the agent. They look at their ‘list’ as proprietary and use the information to actually extract more money from the transaction. Our list is free to buyers and agents and is visible to everyone,” Miller says.
CAARE also offers “The List – Details,” more insight on the issue.
Take a look at Diggsy.com’s infographic to learn more about a real estate agent’s paycheck. Mouse over, click and pop it out.