Talking to Real Estate agents about commissions can be kind of… uncomfortable.
To discuss commissions with an agent can feel like asking them to hand over their paycheck for inspection and approval. It’s much easier to just swallow the questions and go with whatever the agent says, isn’t it?
But I know you still have those questions. And I care about helping you make informed decisions. I hate seeing people get manipulated or taken advantage of just because they don’t know the facts.
So let’s do it. Let’s talk about some of those burning questions about REALTOR® commissions.
What is the going rate for commissions? You won’t like this answer. It’s negotiable. One of the considerations is what competing sellers are offering as a commission to competing agents who may have a buyer for their property. In areas where properties frequently sell in a week, the commission my be lower than in an area where it frequently takes months. The main reason for this is that the longer a property is listed, the more it will cost the agent to market it. Those costs need to be reflected in the commission. I have personally charged as low as 3% for a family member (we still offer 2.5% to the selling agent) and as high as 7%. For the record, if I did not give birth to you, I will absolutely not list as low as three percent for you regardless of where or what you are selling!
Why do commissions vary so much?
There are a few reasons for the variation. One is local market. Other considerations are:
-What the agent offers. If no marketing is planned, the commission may be less. More marketing will cost the agent and need to be paid for out of their commission.
-Greed. Whether it’s wanting the high dollar (through a higher commission) or to get the most listings (perhaps through a lower commission), it’s a factor sometimes.
-Negotiation. Sometimes a client can negotiate a commission up or down to get the services they want. -There may be more than one person being paid to work for you. Some teams have administrative staff working behind the scenes that also get paid.
How much do Realtors Make?
Not as much as you think. The commission charged is shared between broker of the listing agent and the broker of the selling agent. Often it is shared 50/50. (At 5% that would leave the broker with 2.5%) The broker then pays the sales staff a percentage of that amount. That percentage varies depending on the office policies and agreements between office and agent. Most work on a commission split which can be as high as 50% of their paycheck! Subtract all the advertising and marketing expenses (professional photography, advertising, signage, etc.) incurred to sell the property. (This can range from hundreds to thousands of dollars)
Out of what’s left, the agent must pay mandatory licensing fees, franchise fees and, very often, they are also required to pay rent and fees to their broker. You know – office space, etc. Then there is just the everyday business expenses like vehicle insurance, car payments, phone bill, internet, fuel, office supplies, etc. Do the math. These kinds of numbers are why it’s a dog-eat-dog business. This is the stuff that sends a lot of newbies packing in their first year.
When all is said and done the Real Estate Professional may only net approximately 20%-30% of the gross commission collected at the end of the year. Hopefully that will be enough to cover the income tax payable to the government.
Are Commissions negotiable? Yes, but if you’re going to negotiate, I have three words for you. Do it carefully.
It can be risky to demand of and stomp on someone who you expect to work for you.
Not unlike offending the dentist with all the sharp tools in your mouth, or blasting the restaurant cook and demanding a new meal, making huffy demands is risky. What you don’t know about commissions – and the message they send to other agents – is dangerous to your deal.
Basically, if you’re going to negotiate, basically be respectful. Real estate agents are people too. And some of them really do have your best interests at heart.
Why should I pay that much just to have them sell it in a week? Review the answer to “How much do REALTORS® make?” Those numbers all apply whether the property sells in a week or 10months. The only difference is that the 10 months didn’t come by and eat up all the agent’s profits. Good for them. They got paid.
So did you. Go celebrate!
HINT, HINT, NUDGE, NUDGE…Perhaps it may be important to ask the question, “What services do you offer at that commission?” There is a vast difference in what services different agents offer at the same commission. You can pay the same commission to many agents but you won’t get 5 star service from all of them.
Don’t make the mistake of being so focused on how to get the lowest commission just to find out that you got no VALUE for the commission.
In conclusion, most Real Estate Professionals will charge you the same Commissions as the competitors. You can hire a rookie or an experienced agent for the same commission. It would seem more logical to look for the agent who will do the most work for their commissions.
Of course you will want to be sure that their work results in sales.
I will make it easy to ask us. You can request our digital pre-listing package ,otherwise known as a resumé, to learn about our services and qualifications.
Tina Plett, Sutton Group-Kilkenny Real Estate
I love getting dirt under my fingernails in the flower garden.
And the way dirt crumbles in my hand.
I especially love the way weeds pull right out sometimes, root and all.
Recently, when I was down on my hands and knees digging in the dirt, my little dog joined me. At first, she supervised nearby for a few minutes, possibly to see what treasure I would unearth. As I continued pressing my hands and tools into the soil, pulling out weeds, and humming, she decided to dive in right next to me.
She claimed a patch of weeds right beside me and set her paws to furiously digging. Dirt and leaves flew everywhere, even onto me. I paused my weeding to watch (while guarding my eyes from flinging flecks of dirt). She worked and worked, finally digging a little pit for herself. Then she stood in the middle of it and plunked herself down, nestling as deeply as she could into the cool earth.
I smiled, petted her, and returned to pulling weeds.
In the quiet, I thought about how she and I were both digging in the garden but for different reasons. I want the flowers to be visible and not crowded out by weeds, and she wants a cool place to sit.
We all have different motivations for doing what we do.
Many people can do the same thing, but for different reasons.
I’m a real estate agent, but my why might surprise you.
It’s not for the money (It’s not as much as you think anyway)
It’s not for the glamour (People tend to see agents more as salespeople than industry professionals)
And it’s definitely not for the primo hours and awesome vacation times (Days off can be hard to come by. Heck, attending a wedding uninterrupted can be hard to come by!)
No, I’m an agent in spite of all these challenges.
Because I’m a helper and encourager at heart, and I love, love, love to help people find their perfect-for-them home. As an agent, I get to protect people from pitfalls, walk them through scary and difficult circumstances, and make them super crazy happy.
Those are the things that satisfy my soul that I count as excellent results, and that drive me forward each day.
What motivates you in your work?
Tina Plett, Sutton Group-Kilkenny Real Estate
I LOVE my job – It’s got adventure, variety, and the deep satisfaction of helping people find their perfect-for-them home.
Last month put that love to the test though, I’ve gotta say. From every angle, side, and corner, various Boogiemen leapt from the shadows.
Here are a couple of general examples of conversations that may or may not have happened recently.
Client: “Hi, Tina?”
Me: “Hi, how are you?”
Client: “Hurry!!! I NEED to see this house RIGHT NOW!!!!”
Me: “Umm… you know people still live in it and need some notice, right? They might have babies napping or–”
Client: “–I don’t care! I’m parked outside of their house right now! Get over here!”
Me: *bangs head on desk*
Me: “Hi. My client would like to make an offer on your listing”
Agent: “We already have someone else interested.”
Me: “Uh… it’s for sale, is it not?”
Agent: “Yes, but they don’t want offers.”
Me: (I wonder if the agent is blocking offers from other buyers so they can double end the deal… His clients wouldn’t appreciate that. Too bad they’ll never know. Man, I can’t wait until they make that illegal (like they are about to in Ontario.) In the meantime…
Me: “Okay, I’ll bring an offer. My buyer will pay every dollar the seller is asking and then some.”
Agent: “Go ahead, but they’re not going to take it.”
Me: *bangs head on desk*
But then there was the buyer who said something shocking to me this week.
We’d been working together to find them a house, and it was… difficult. They did not have access to internet and that felt crippling. They’d had a nightmarish, stressful relationship with the builder of their home right from day one. For years, that stress robbed them of the joy of living in their custom built home. Now they just wanted out.
Because of their worn-down, stressful state, they were not only deeply sad and exhausted, but also in a desperate hurry. Not a good combination. They had three weeks to find a new house.
That’s like giving yourself ten minutes for a 1-hour grocery shop. It’s insane. Like, reality TV, run through the aisles like a madman, plowing down women and children kind of crazy.
So here we were. Dashing like madmen.
Whose hair was on fire.
The hardest part for me was seeing how the anxiety had pulled their faces into hard lines over the years. They weren’t the most expressive people, and I’d never seen them smile. Not once. Years of annoyance can make a person cranky and it made me sad that their home-owning experience had done that.
Plus, knowing they would probably settle, desperate for a new house, I was sad they would likely repeat the disappointing experience of owning a home they didn’t want.
We hunted. Looked at loads of houses. In person.
When we finally came across the one that struck them as home, I was excited because I knew something about it they didn’t.
“Ah, I know the guy who built that house. He’s a new, young builder trying hard to please people. He does quality work and treats people well.” I said.
That was all they needed to know – that they’d be treated well for once.
The buying process was difficult – sometimes it seems like agents don’t want to sell their listings, and this was one of those times. After working and working at it though, we did manage to get the house.
* * *
One week after the couple moved into their new home, I was walking up their sidewalk to check in. (They appreciated the personal face-to-face approach.) As I neared the front door, I wondered if this stressed out, anxious, desperate couple with their faces pulled in hard lines would have anything good to say about our working together. Had it been pleasant at all? Would they feel they had been treated well or that the whole thing was worth it?
With all these thoughts swirling in my mind, I rang the bell. The door opened, and there stood before me a woman I almost didn’t recognize. Where before a permanent frown had been carved into her face now shone a relaxed, upturned smile. Her eyes that had looked dead and empty now seemed to shine, almost laugh.
I mentally willed my mouth not to gape open in shock. “How’s the new house?” I asked.
That’s when she said what I never thought I’d hear from her.
Her smile expanded into a full out grin. “It feels like home.” She sighed and her eyes went dreamy, “I’m happy.”
I nearly cried on the spot. “Wow – after a week it’s feeling like home already?”
“From the first day it felt like home.” She raised a palm to her chest as though speaking of a loved one, “Tina, the chains have come off and we are free. … I’m happy. So happy. The grandchildren love it here too!”
I almost burst into tears. She was happy?
That moment was worth every difficult, head-banging, hair-pulling moment before it.
THIS. This is why I do what I do. This is why I love working as a real estate agent.
I floated back to my car and through the rest of my week, grateful for the reminder, blessed by the satisfaction of having helped someone and then being able to see that dramatic transformation.
These are the moments that fuel us through the hard days, aren’t they?
What one memory or thought keeps you going through your hair-pulling days?
Tina Plett, Sutton Group-Kilkenny Real Estate .