to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9%

We've all seen it. Especially when word gets out that we're selling our home. Certain real estate agents market themselves by playing fast and loose with the truth about their commission rates. As such, I thought it might be helpful to provide to some of you who don't live and breathe real estate a little closer look into what's real and what isn't when it comes to real estate agents' commissions and what services, or lack thereof, they may represent. The other day one of my clients received an e-mail from an agent offering to sell his home for a 1% commission. What the e-mail didn't say was that the agent was rounding the already highly unlikely 1.9% down to 1% (apparently to save space in the ad). It also failed to mention that the nearly complete lack of services associated with this low 1.9% figure would leave the homeowner in no better shape than if he had simply taken the ‘for sale by owner' route. Which, of course, would beg the question: "Why pay the 1.9% agent at all?"

In an effort to be brief here I am not going to go into each and every service provided by real estate agents, but rather will address the main points of abuse when it comes to unreasonable agent commission rate claims.

The Starting Point:

Historically, real estate agent commissions have run at about 6% of the sale price of a property and are paid by the seller. In recent years, however, due to ever increasing competition, the average rates have slipped into the 5-6% range rather than holding steady at 6%. Certain "hot markets" with higher priced homes are even seeing listing rates drop as low as the lower 4% range, depending on various special circumstances and agent service offerings. These rates, of course, can vary significantly from region to region and sometimes even from city to city.

Where does this money go?

Most typically the Buyers Agent receives 2.5 to 3% of the commission with the balance going to the Sellers Agent with a fairly substantial portion of each being shared with the brokering agencies for which the agents work. For example: A home listing at 6% would generally provide 3% to each of the two agents and their brokers. However, in another example: A home listing at 4.1% would provide 2.5% to the Buyers Agent and 1.6% to the Sellers Agent. It breaks down this way because it is generally accepted that the minimum Buyers Agent commission needs to be at or above 2.5% to motivate them to show a home.

What do I get for this?

Exposure! Exposure! Exposure! And, of course, advice and a lot less work on your part. To briefly describe what you can expect:

From the Sellers Agent you should expect, at a minimum, pricing guidance, open houses, administrative assistance, and most importantly a well-written Multiple Listing Service (MLS) presence. Many Sellers Agents also provide numerous other attractive and important services in addition to these minimums. A good example would be a pictorial virtual tour of your home available on their web site. From the Buyers Agent you should expect a knowledgeable person to bring you potential buyers and show them your house. Though the Buyers Agent doesn't work for you directly, he or she is an integral part of your successful home sale. If you don't attract the Buyers Agent, you don't attract the buyers!

How do I attract the Buyers Agent?

In short: you pay him or her fairly if he or she sells your house! As Buyers Agents skim through the MLS listings to find a home for the buyer they represent they can see the commission rate offered by each seller for their home. If, as is usually the case, they find numerous properties that match the needs of their buyers they have a decision to make. Which of these properties do I show my client? Easy solution! They show them the houses with the highest commission rates. All other things being equal, who wouldn't? To generalize, 3% Buyers Agent commissions will give you maximum exposure, 2.5% will give you respectable, average exposure, and once you start going below 2.5% you observe a precipitous decline in Buyers Agent interest. For example, at 2% your home may be shown to only 5% of the potential buyers that it might otherwise have been shown to at 3%.

Is it really a numbers game?

Big time! The more people that see a house, the more likely it is to sell quickly and to sell at a higher price. It's that simple.

What about the Sellers Agent commission?

In addition to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9% a

will address the main points of abuse when it comes to unreasonable agent commission rate claims.

The Starting Point:

Historically, real estate agent commissions have run at about 6% of the sale price of a property and are paid by the seller. In recent years, however, due to ever increasing competition, the average rates have slipped into the 5-6% range rather than holding steady at 6%. Certain "hot markets" with higher priced homes are even seeing listing rates drop as low as the lower 4% range, depending on various special circumstances and agent service offerings. These rates, of course, can vary significantly from region to region and sometimes even from city to city.

Where does this money go?

Most typically the Buyers Agent receives 2.5 to 3% of the commission with the balance going to the Sellers Agent with a fairly substantial portion of each being shared with the brokering agencies for which the agents work. For example: A home listing at 6% would generally provide 3% to each of the two agents and their brokers. However, in another example: A home listing at 4.1% would provide 2.5% to the Buyers Agent and 1.6% to the Sellers Agent. It breaks down this way because it is generally accepted that the minimum Buyers Agent commission needs to be at or above 2.5% to motivate them to show a home.

What do I get for this?

Exposure! Exposure! Exposure! And, of course, advice and a lot less work on your part. To briefly describe what you can expect:

From the Sellers Agent you should expect, at a minimum, pricing guidance, open houses, administrative assistance, and most importantly a well-written Multiple Listing Service (MLS) presence. Many Sellers Agents also provide numerous other attractive and important services in addition to these minimums. A good example would be a pictorial virtual tour of your home available on their web site. From the Buyers Agent you should expect a knowledgeable person to bring you potential buyers and show them your house. Though the Buyers Agent doesn't work for you directly, he or she is an integral part of your successful home sale. If you don't attract the Buyers Agent, you don't attract the buyers!

How do I attract the Buyers Agent?

In short: you pay him or her fairly if he or she sells your house! As Buyers Agents skim through the MLS listings to find a home for the buyer they represent they can see the commission rate offered by each seller for their home. If, as is usually the case, they find numerous properties that match the needs of their buyers they have a decision to make. Which of these properties do I show my client? Easy solution! They show them the houses with the highest commission rates. All other things being equal, who wouldn't? To generalize, 3% Buyers Agent commissions will give you maximum exposure, 2.5% will give you respectable, average exposure, and once you start going below 2.5% you observe a precipitous decline in Buyers Agent interest. For example, at 2% your home may be shown to only 5% of the potential buyers that it might otherwise have been shown to at 3%.

Is it really a numbers game?

Big time! The more people that see a house, the more likely it is to sell quickly and to sell at a higher price. It's that simple.

What about the Sellers Agent commission?

In addition to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9%

de 2.5% to the Buyers Agent and 1.6% to the Sellers Agent. It breaks down this way because it is generally accepted that the minimum Buyers Agent commission needs to be at or above 2.5% to motivate them to show a home.

What do I get for this?

Exposure! Exposure! Exposure! And, of course, advice and a lot less work on your part. To briefly describe what you can expect:

From the Sellers Agent you should expect, at a minimum, pricing guidance, open houses, administrative assistance, and most importantly a well-written Multiple Listing Service (MLS) presence. Many Sellers Agents also provide numerous other attractive and important services in addition to these minimums. A good example would be a pictorial virtual tour of your home available on their web site. From the Buyers Agent you should expect a knowledgeable person to bring you potential buyers and show them your house. Though the Buyers Agent doesn't work for you directly, he or she is an integral part of your successful home sale. If you don't attract the Buyers Agent, you don't attract the buyers!

How do I attract the Buyers Agent?

In short: you pay him or her fairly if he or she sells your house! As Buyers Agents skim through the MLS listings to find a home for the buyer they represent they can see the commission rate offered by each seller for their home. If, as is usually the case, they find numerous properties that match the needs of their buyers they have a decision to make. Which of these properties do I show my client? Easy solution! They show them the houses with the highest commission rates. All other things being equal, who wouldn't? To generalize, 3% Buyers Agent commissions will give you maximum exposure, 2.5% will give you respectable, average exposure, and once you start going below 2.5% you observe a precipitous decline in Buyers Agent interest. For example, at 2% your home may be shown to only 5% of the potential buyers that it might otherwise have been shown to at 3%.

Is it really a numbers game?

Big time! The more people that see a house, the more likely it is to sell quickly and to sell at a higher price. It's that simple.

What about the Sellers Agent commission?

In addition to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9%

Agent?

In short: you pay him or her fairly if he or she sells your house! As Buyers Agents skim through the MLS listings to find a home for the buyer they represent they can see the commission rate offered by each seller for their home. If, as is usually the case, they find numerous properties that match the needs of their buyers they have a decision to make. Which of these properties do I show my client? Easy solution! They show them the houses with the highest commission rates. All other things being equal, who wouldn't? To generalize, 3% Buyers Agent commissions will give you maximum exposure, 2.5% will give you respectable, average exposure, and once you start going below 2.5% you observe a precipitous decline in Buyers Agent interest. For example, at 2% your home may be shown to only 5% of the potential buyers that it might otherwise have been shown to at 3%.

Is it really a numbers game?

Big time! The more people that see a house, the more likely it is to sell quickly and to sell at a higher price. It's that simple.

What about the Sellers Agent commission?

In addition to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9%

to the ongoing expenses of licensing fees, continuing education classes, association dues, MLS dues, office fees, web site design and maintenance fees, travel expenses, SUPRA lock-box fees, phone and fax costs, and many more that are suffered by all real estate agents, the Sellers Agent has many additional up-front costs that they have to attend to, out of their own pocket, on behalf of their client. These costs are paid on the come in hopes that they can successfully sell their client's home in order to recoup these expenditures. A small few of these additional costs include signs, sign emplacement services, promotional materials, the actual lock-boxes for keys (not just the service), software access fees (for virtual tours), various advertising expenses, and, of course, their time. Furthermore, if they sell your home, a sizeable percentage of their commission goes to their managing broker. It's easy to see how when the listing rate gets too low there isn't much left for the Sellers Agent.

Then how can the 1.9% guy give me all of these necessary services?

He can't! Not for anywhere near 1.9% at least. That's not even enough to attract a Buyers Agent even if he gives the Buyers Agent the whole commission! At that rate a homeowner could look forward to getting less than their home is worth, having their home languish on the market for what seems like forever, and, quite likely, a nasty surprise later on in that the 1.9% was actually a gross understatement of the actual costs.

Can I trust someone that is throwing out unrealistic numbers to sell my most valuable asset?

Maybe, if you've got a good microscope to watch their every move and a lot of time on your hands.

Should I risk it?

That's up to you. If you think you can afford to not be listed on the MLS, or listed poorly, and are thus confident that one guy, rather than the 25,000 other agents (in the Chicago Metro Area, for example) in the area that would see your home if it were listed on the MLS, can sell your home at the appropriate price and in a timely manner, then it may be worth the risk. But remember this, once you sign the listing contract, you are legally obligated to stick with that agent's program for the time indicated in the contract (usually 3 to 4 months). This problem can be exacerbated if your agent's questionable listing program overlaps the best selling season and you find yourself having to list with another agent in the Late Fall or Winter months.

So what's the bottom line?

Exposure isn't free and exposure is the key. But for that matter, paying two mortgages at the same time isn't free either. Good exposure gives you what you want. Poor exposure most often doesn't. A lot of people trying to sell your house will sell it much more quickly than a few people trying to sell your house. If you decide to have an agent help you sell your home: Find an agent that attracts your attention in an honest way, that provides complete service, that gives you the straight facts without the hype, and that you can trust to do the right thing. They're still out there.