Thank you to Kathy Haines for this article.
When a client asked me recently to reduce my commission, I told her honestly that the only reduction I will consider is when the Seller is also going to use me as their agent to purchase another home after I have helped them sell their current one. This is my “frequent buyer” program. Being ensured two transactions, I feel comfortable reducing commission on the front end knowing I have another opportunity to make money on the back end.
Today’s real estate transactions are more difficult and cumbersome than ever before. How agents are paid for their services has long been misunderstood. What most buyers and sellers understand about the real estate commission structure is that typically 6% is paid and at the closing – 3% to the buyer’s agent, 3% to the seller’s agent. This is only partially accurate.
In reality, 3% goes to the company the buyer’s agent represents and 3% goes to the company the seller’s agent represents. The agent is then paid a percentage of that 3% based on the real estate agency’s structure. Payout starts around 50% and goes up based on the agent’s annual sales volume.
While most people calculate the 6% and decide that their agent is well paid, reconsider their take at closer to 1.5% and see what you think about that income. Agents will tell you, as is often true, many closings don’t even amount to minimum wage after the hours spent plus all the documentation that is so important on every transaction. And let’s not forget gas prices. How many miles did your agent drive before you found the “perfect” home?
The old story about working twice as hard for half the money is easily true in real estate today.
And, finally, it’s really not fair to Seller’s who are paying full commission. Why should someone get a reduction for the exact same job? The job I do is first-class and complete. There are no options that I remove when a commission is reduced, and I wouldn’t know where to start with removing things I do on a daily basis to help get a house sold or enable a buyer to buy at the very best price.
What would happen if I went to the doctor for a procedure and asked for a discount? Is he or she going to leave something important out of the process? I hope not!
Does this change your opinion about asking for a discount?