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| How Much Are Real Estate Commissions? |
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| Category - Home Selling Questions - Agent, Offer & Commissions FAQ's
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The amount of the commission paid by the seller is negotiated between
the seller and the listing agent before the home is placed on the
market. The commission negotiated includes the total commission due
when the property is sold, including the listing agent's side and the
selling agent's share of the commission. Typically, the commission
negotiated between the seller and the listing agent is split 50/50 with
any broker who brings a ready, willing and able buyer.
With the advent of the internet, some brokerages and agents are
offering “discounted” commissions. As with all else in life, typically
lower commissions are tied to a lower level of service. If the
homeowner only wants to be listed with the Multiple Listing Service and
a sign in the yard, then a discounted commission may be right for them.
On the other hand, if you want an agent who will actively promote your
property to other agents and spend money on advertising, then you
probably are not going to get that level of service with a reduced
commission.
There are also agencies, which charge a moderate amount upfront plus a
very discounted commission rate, to place the home in the MLS
system and to place a sign in your yard. Typically, these companies
provide only those basic services and will not make an effort to sell
the home. Their revenue is derived from the upfront charge.
Lower commissions may also be offered if the seller agrees to tie in
other services offered by the broker, such as using a specific lender,
escrow, settlement, home insurance or title company. Often brokers may
have some type of ownership or profit participation in those
businesses. The problem with agreeing to tie in to these other
companies is that they do not have to be as competitive in pricing
their products or services.
Another practice commonly found with offers for reduced commissions is
that the compensation is lowered when you agree to buy your next home
through the same agent or broker. The reduced commission may only apply
to the purchase of your next home or you may be able to negotiate a
combined agreement, whereby your selling commission is lower if you
agree to buy your next home from the listing broker. In this case, the
listing agent may include those terms in the listing agreement and the
seller is bound or will be charged the full commission, if the he/she
defaults from buying the next home through the listing agent. If you
agree to a discounted commission scenario, be sure the commission
offered to the selling agent in the MLS
system is within acceptable ranges for your area, in order to attract
the buyer agents to your home.
If you consider an offer for a lower commission, you should analyze
what you are giving up by accepting it. Before making a decision, the
homeowner should be sure to ask many questions.
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