How to negotiate commissions with a Realtor

How much do you charge to sell a home? This is a common question that we receive from sellers looking to sell. However, this is a very poorly phrased question because this assumes that all real estate sales people do the same thing. This question really shows how ill informed the average sellers are concerning real estate and what Realtors do.

This confusion have partially be caused by for sale by owner companies (FSBO) as they make it seem simple to sell a home and that the sellers pocket the commissions that they would normally pay a broker and that there are no cost.

First of all there is a multitude of services offered by Realtors as well as commission plans but you need to find out what services are included with each to make an educated decision.

One of the reasons that sellers use Realtors is to be able to place their home on the Multiple Listing Service (MLS), this system is designed to share information and data on people selling and encourage cooperation between Realtors and increase exposure for the property. For example, when a Realtor list a home for sale and place it on the MLS system they generally offer a commission as an incentive to any other broker or agent to bring offers. This commission if up to the seller but many offers a 2.5% commission to the cooperating broker as an encouragement to bring their buyers.

Some people may offer nothing; however, a Realtor will not likely bring their buyers if there is nothing in it for them, unless of course their buyers are willing to pay them. Sellers then run the risk of not having as much activity and showings and this defeats the purpose of using the MLS system, in addition the cooperating commission goes to the buyer’s agent not the person listing.

So far the property has been placed on the MLS system and if it sells then the cooperating broker is paid but there is nothing in it for the listing sales person as of yet. So what exactly are you expecting of your listing agent, are you just wanting your agent to place your home on the MLS system and that is it or are you expecting that they will advertise the property, take the photo graphs, build a web site specific to the property, order a virtual tour, place a for sale sign, book all showing, create a feature sheet in full colour and do a few open houses?

For the most part when I list a property for sale, I incur about $1,500.00 in hard cost over a 90 day listing. Now the question is who pays for these hard costs? Well there are two ways to handle this, the seller could agree to pay upfront for this cost and then negotiate a fair compensation if the house sells. Or alternatively the seller could go on a contingency basis where they only pay if the house sells putting all the risk on the agent’s shoulders. So if their house does not sell they do not pay, which has traditionally been a very common approach to real estate. Generally speaking, in the second scenario most sellers would prefer to pay a higher percentage commission to their agent if the home sells as this transfer all their risk over to their agent.

Now instead of asking how much commission you charge and assume that all Realtors are the same, you need add and what services do you provide for this commission?

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Roy Singh

Roy Singh

Sales Representative
CENTURY 21 Heritage House Ltd., Brokerage*
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