What Percentage Commission Do Real Estate Agents Charge?

Posted by Steve on Jul 22, 2013 5:42:39 PM

In greensboro homes for sale, GreatNest, GreatNest, percentage, percentage commission, real estate agent, real estate brokers, Sellers, set fee, search phrases

I spend a little time each month to determine what search phrases real estate consumers use online to find real estate brokers. When I discover the phrases consumers are using, I sprinkle them throughout my websites (including this blog) and thus increase the number of times GreatNest and The Vincent Group show up in search results.  In 2013, that's just good marketing!

Most phrases are predictable:  'Greensboro homes for sale', 'Kernersville foreclosures'.  But sometimes I uncover something unexpected.  That's what happened over the weekend.  Here is a Google search phrase that is being used a lot in one form or another:

"What Percentage Commission Do Real Estate Agents Charge?"

People want to know what they'll have to pay a real estate professional to market their property -- no surprise there.  But what jarred me this weekend was not the question, it was the word:  PERCENTAGE.

Seventy plus years of 'that's just the way we do it' has trained the public to expect to pay a percentage of the sale price of their house to an agent when it sells . . . and that makes no sense whatsoever.

What does a percentage of you home's value have to do with getting it sold? Nothing!

Think about it:

Here you are in your $225,000 house. Thankfully, you are not upside down. You have roughly $40,000 in equity. So you decide to sell, and list with ABC Realty**, who charges you (and every seller with whom they work) 6%*. When your house sells (for full price), that's a commission of $13,500!

I'll give you a moment to catch your breath . . . before I point out that that may be 6% of the sales price, but it's more than a 33% of your equity!

Meanwhile, your neighbor down the street also wants to sell, but his home is smaller. It's only worth $180,000. He also lists with ABC and agrees to pay the 6% Commission. When the house sells for full price, the homeowner is going to pay $10,800 -- still high, but not nearly as high as your $13,500 commission.

Now, here's the question of the day: What did YOU get for the extra $2,700 you paid to sell your house through ABC?

More Advertising?

More Open Houses?

A better Sign?

Oh, maybe your agent worked $2,700 harder! Right.

What you got for the extra $2,700 you paid is this:

Absolutely Nothing
In almost every case it takes no more time, effort, energy, money or marketing to sell a properly priced $225,000 house than it does a properly priced $180,000 house. There are some situations in some areas where a market niche, say, luxury homes, might take a little more time and might require additional or specialized marketing. But these situations are rare . . . and $2,700 extra dollars to sell your $225,000 house? That's absurd.

It makes no sense today, made no sense yesterday, and will never make any sense at all.

Come on: you don't pay your dentist a percentage of your net worth when you have a tooth filled, do you? Of course not! There's no relationship between the two things! Just as there is no relationship between the percentage based commission you are paying your real estate firm and the effort it will take to market your home and process the sale.

At GreatNest and The Vincent Group, we charge home sellers a set fee. It's logical. We've worked very hard to determine the hard costs of carrying a listing in the Triad marketplace. We then add a reasonable profit to those costs, and . . . that's it.

Here's a little bit of scripting I actually heard in a REALTOR seminar some years ago. It's what an agent is supposed to say when a potential seller is shocked by the high percentage based commission.

"I know it seems like a lot, Mr. & Mrs. Seller, but think about it for a moment. We're getting 6%, yes, that's true; but YOU'RE getting 94%! I think you'll agree our commission is actually a bargain!"

I hope next time you need to sell, you'll do the right thing and call the set fee alternative, GreatNest. You'll save a bundle (the set fee is usually thousands of dollars less than whatever percentage based commission you're being quoted). And you'll have the satisfaction of knowing that, finally, for the first time in your real estate life, you haven't been taken to the cleaners!

*Commissions, whether set fee or percentage based, are always negotiable. They are not set by law or REALTOR rule. They are set individually by office Brokers. Price fixing occurs when different Brokers get together and agree to charge the same thing. That's highly illegal. Different GreatNest offices charge different Set Fees, because the carrying costs of marketing a listing vary from market to market, as do the number of days it takes a properly priced listing to sell.

**The "ÄBC Realty" referred to in this blog is fictitious and is used only for illustrative purposes. Any resemblance between it and any other "ABC Realty", is purely coincidental.