How the Heck Do Commissions Work?
Our reputation in the community is based on honest and ethical service for nearly 20 years. We believe that knowledge is power and it can only help you make better, more informed decisions. The commission paid when selling your home is a mystery to most people. For some reason, most Realtors believe people know how it works and therefore see no need in explaining it. Of course, the home seller always wants the cheapest rate… so let’s take a look at just what is involved in your commission.
When the home seller decides to place their home on the market, several people are involved in the process. Many of these folks work behind the scenes to assure you have a legal, efficient, and profitable sale. The Realtor is paid for time, service, and marketing expenses by an agreed upon commission percentage that is given in writing at the onset of placing the home on the market. Most sellers think the listing agent working to sell your home walks away with the full commission. This couldn’t be farther from the truth!
Let’s say for example, that the listing agent Realtor agrees to sell your home for x%. Immediately upon entering your home in the Multiple Listing System (MLS) the listing agent agrees to spit this commission with the Realtor that brings in a buyer. This Realtor is the ‘Buying Agent’. When a buyer goes to an Realtor looking to purchase a home, that Realtor looks on the MLS and assists them with finding the right home. The Realtor also knows up front what he or she will be paid on the transaction, because it is listed in the MLS from day one.
Basically, the home seller pays the expense of the commission for both sides of the transaction. This is the way real estate is handled in the state of Minnesota, and most other states around the country.
So, the Realtor that lists the home on the market first splits the share of the commission with the buying agent Realtor. If the listing agent is also the agent that brings in the buyer, this same commission rate is paid because the Realtor is still doing the work for two parties, buyer and seller. But, that is not the end of the split of the commission!
The Broker or Brokerage the listing agent works with, then gets a ‘cut of the pie’ and once again the commission is split. What was originally x% commission is now just a fraction of this amount. But it doesn’t end there! The agent selling (listing) your home for sale then has to pay all of the advertising expense, marketing expense, staff expense, phone, MLS, car, gas, brochures, internet… and Uncle Sam’s share (just to name a few)!
So you see, the original commission is a far cry from what the listing agent gets to take home in the end!
Although it seems like finding an agent that gives you the lowest possible price on the commission is the best Realtor to use, statistics prove just the opposite. An agent selling your home for 4% cannot provide you with the same marketing plan as someone selling it for 5-7%. In fact, you couldn’t have MLS exposure and marketing at that lower fee as the MLS requires about 3% in most states for the buyer side. A few thousand dollars off of your home’s price may not affect the Realtor’s income much, but it will definitely effect your bottom line!
This is why we have developed the most Comprehensive Marketing Plan in the Midwest. The difference is in marketing your home in the best way possible to the most people possible, giving you the highest possible price. It’s all about honesty, integrity and our reputation. This is the community where we work… and live!
