In order for the real estate market to work, there has to be sellers and buyers. It is the role of the REALTOR® to bring those two clients together. Anyone who has ever bought or sold a house will confirm that the world of real estate is a complicated and convoluted transaction.
The role of the REALTOR® is to bring those clients together and work through all the details to make it happen. Whether you are a buyer or seller you should have a REALTOR® who will look out for your best interests. By doing so the REALTOR® earns their commission.
In the vast majority of transactions the seller will provide the commission fee. And although that money may seem like a large amount it really breaks down to a lot less than people realize.
In todays market the listing commission runs between 6% – 7%. Although I will mention that those fees are always negotiable, although most brokers will require agents to maintain a 6% – 7% range.
For the person of this article, lets assume that the seller is listing their house for $250,000 and signs a listing contract with a commission of 6%. The commission that would be paid by the seller at the closing if and when their house sells would be $15,000.
That may sound like a lot of money, and it is, but that fee does not go directly to the listing agent. It is split between the two brokers involved, the listing broker and the buying broker. For the sake of this article, lets assume that the brokers have agreed to split 50%/50%. At closing then $7,500 would go to each broker.
That fee of $7,500 would then be split between the broker and the real estate agent who actually handled the transaction. For simplicity, lets assume that the split is again 50%/50% although that percentage is very variable between agents and brokers. The amount that is now credited to the agent who handled the transaction is now $3,750.
The brokers fee is used to cover office space, telephones, television advertising, computer software, etc.
The agents fee which is now about $3,750 has to cover costs that many small businesses have to cover; such as a photographer to take pictures of the house (if the listing agent), signs, flyers, advertising, insurance, membership to the REALTOR® association, fees for the MLS, buy Sentrilocks for your front door, etc. You also have to remember that as an independent contractor, which is what most agents are, they also need to pay taxes on that amount. That amount is now down to about $2,500 for the sale of the house.
For that amount the seller’s REALTOR® will:
• Prepare a comprehensive market analysis
• Visits you, walks through the home, makes recommendations, answers your questions and fills out the listing contract
• Lists the home on the MLS
• Meets the professional photographer at your home and hangs out while that person takes photos and video
• Markets your home on various websites and print ads, and installs signage
• Holds an average of 2 Open House events
• Takes calls from prospective buyers and buyer’s agents and makes showing appointments
• Communicates with buyers or their agent regarding an offer
• Presents that offer to you, makes recommendations and prepares a counter offer
• Finalizes a contract with you and files it with the broker
• Meets the property inspector, appraiser, and sometimes handymen and waits around while they do their jobs so that your contract fulfills
• Communicates with the buyer’s agent regarding contingencies in the contract
• Presents you with additional addendums to the contract, as needed, sometimes preparing counters to those addendums
• Communicates with the escrow officer to make sure that the payoff on your mortgage is in order and that all paperwork is ready
• Attends closing with you
Nevertheless, most REALTORS® love what they do and work extremely hard to bring sellers and buyers together.
If you are thinking of buying or selling talk to a real estate professional – talk to a REALTOR® who can give you the information you need to make an informed decision.
As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com.