Commission Fees Explained In 3 Scenarios

Many For Sale By Owner websites tell you that commission is 6% of the sale price. They even offer you a savings calculator so you can do the math yourself and see the thousands of dollars you'd save if you used their program.

However, what they don't tell you about commission are the facts.

For one, 6% is not a standard commission. There is no fixed rate for commission charged by a realtor or real estate company. These charges may vary from 0-10% with all kinds of cost divisions and conditions blended in, such as 6% of the first $100,000 and 3% of the remainder, or 1.5% on the list side and 3% on the remainder, etc. Regardless of what the options are, all commission is negotiable.

Did you know that there are actually two sides of the commission? The listing agent, which is the realtor that comes and works with you to find a buyer, is on one side of the commission. On the other hand is the realtor who brings the

Offer to Purchase from a buyer.

Often, the listing realtor determines the commission paid to the selling side of the deal. More often than not, this amount is half the dollar value that the listing agent receives, but this is not mandatory. However, if the selling commission is considerably lower than what comparable rates are offered by other listings on the MLS, many realtors will make little or no effort to bring their buyers to buy a property.

The reason is obvious: less money to be made on closing day!

Cut-Rate Listing Commissions

With the advent of the web, some agents are offering "cut-rate" commissions.

Sometimes, lower commission rates equate to a lower level of service by your listing agent. This is not always the case.

If all you want is to be listed on the Multiple Listing Service with a sign in the front yard and no other marketing or promotional services, then a cut-rate commission company may be right for you. There are a few discount Brokers that offer different levels of services for a lower fee or there are companies that charge a "typically normal" commission and perform the functions of a Full

Service Discount Real Estate Broker.

If you want an agent who will actively promote your property to other agents, spend time and money on marketing and extensively promoting your property, who has made a long term commitment on the internet and marketing your property locally, then you probably are not going to get that level of service with a reduced commission rate.

Another common practice when you see an advertisement for a reduced commission is that the compensation is lowered only when you agree to buy your next home through the same agent or broker/or you must buy of their own listings (less choice for you)/or the listing broker must list and also sell your home to a buyer themselves (therefore collecting all available commission) or else no discounts apply. Be careful and read all the fine print.

You will usually find a some hidden loophole or condition.

Sometimes, the reduced commission is not really being offered on the sale of your existing home but on the purchase of your next one. Unfortunately, the advertisements are often unclear or vague regarding these items.

You may also see ads that proclaim "maximum 2.5% commission"; and again, reading the fine print of the ad is advisable, you will see that this is usually only one half of the total commission that is being charged, so in reality there is no discount on the commission at all. Again, be careful and read the fine print.

When you see an advertisement or an offer for a lower commission, you should carefully analyze what you are giving up by accepting such an offer. All the details will probably not be readily apparent in the advertisement and you will have to investigate further and dig deeper to get the truth.

When selling your home for sale by owner:

When selling your home by owner, you will certainly save the sellers commission, but commission fees may still be an issue if you have agreed to let realtors bring buyers to your home. In this case, there is no Listing

Agreement because you are, in this case, the listing agent. If you have agreed to make arrangements with one or more realtors, be sure to have this agreement in writing. The best suggestion would be a commission letter. Any realtor can supply you with this form.

Do not get tricked into signing a listing form. Even for a 24-hour time frame. A listed property constitutes a full commission.

The commission letter will clearly state any agreement you have made with the realtor, including what amount you have agreed to pay for their participation in the sale.

Realistically, if the full commission is designed to cover the listing agent and the selling agent, then half of the commission would be fair. This realtor is only bringing the buyer, whereas you are marketing and selling the home yourself.

Just like any other real estate deal, commission is negotiable. Put whatever amount you have agreed to pay in writing so there is no confusion or unexpected charges at the time of closing.

Any and all funds the realtor expects on the closing of the sale are to be paid out by your lawyer. Never pay fees directly from your chequebook, because in fact, the commission cheque goes to the listing company, not to the realtor.

The real estate company will, in return, deal with the funds accordingly once they have received payment from your lawyer.

By: real estate info

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