Real Estate Commission Question

I'm involved in a real estate transaction, what is popular commission in your area?

6% split 50/50 between selling agent (sa) and buyer's agent (ba)?

6% split 60% sa and 40% ba?

5.5% split 50/50?

5.5% split 60/40?

Something else?

Ours (Michigan) we just see each agent charge a 3% fee, both picked up by the seller.

I have data points for PA for 1999, 2017 and 2018.  3% seller's agent, 3% buyers is the norm.  If it is the same agent they get all 6%.

Appropos of nothing, we looked at a property we saw on Zillow in 2018 on a whim.  Since I didn't really expect to buy it, I clicked on the "I want to the see this house" link on zillow fully expecting to be put in touch with the listing agent.  Instead it was some random other agent from another realty office.  He told me that basically they pay zillow for clicks.

6%

1.5% to each

listing agent - guy who listed house

listing agency owner

selling agent - guy who sold house (buyers agent?)

selling agency owner

The goal is to be the owner and everyone else makes you money.  I did talk an agent down to 5% when he sold my first house.  

On a higher priced transaction, you can get a lower %. Seems like 5-6% is normal and a 50/50 split, I have seen the 5% be 60/40, and on high priced stuff ($1.5M+) 4%

6% is pretty standard. Seller pays.

I just paid a man $18,000 for 1 day's work. 

ALL commissions are negotiable.

However, the down side is that realtors read the commission rates in the MLS.

You can negotiate a 4% commission with a listing agent, but the house will never get shown.  Other agents will skip over it when they are showing houses to their clients because they want the bigger commissions. 

Thank you all.  Everyone's reply agrees with what I hold to be true and common practice.  

Also, as my past experiences have taught me, used house salesmen make used car salesmen look like down right respectable citizens.  

This is my house going up for sale.  Documents were emailed to me Monday at 4:30pm.  Tuesday at 9:00am I got a text from the agent generally asking if they had been signed yet and if they could be today.  I took this to mean, "please don't read", "let me set a false urgency for the signing."

What I did read Tuesday night was 5.5% with 60/40 split (3.3% and 2.2%).  I should mention that the day after we spoke with the agent, completely unprovoked, she sent us a text saying she could drop from 6% to 5.5%.  I took that to mean, "I made some phone calls and I have already sold your house, that I don't yet have a contract on."  "Now I just have to assure that I get the double dip so all 5.5% is better than half of 6%."  

When I read the contract at just 2.2% going to buyers agent (net 1.1% after that agent splits it with their boss/broker)  I see that she is just trying to assure that no other agent wants to come near the house or even worse, no other agent wants to speak highly of the house.  I would expect statements like, "oh, you dont want to see that house, it's a nightmare or has some hidden damage that I discovered."  Statements like that make the house hard to sell.  

So far, I wrote this potential agent this quick email:

I have a question on the agreement document you sent.  

Am I correct that the commissions are 5.5% to sellers agent and 2.2% to buyers agent?  

I am more familiar with the customary split being 1/2 to listing agent and 1/2 to buyers agent

5.5% divided by 2  = 2.75% 

2.75% reduced to 2.2% = 0.55% more to listing agent

2.75% to listing agent plus 0.55% more to listing agent is then a net of 3.3% to listing agent or a 10% increase to the listing agent.  

My concern here is will buyers agents be discouraged from showing my home due to reduced returns to that buyers agent? 

You offered 5.5% total commission but I do not expect that would result in you netting higher commissions by taking the commission from the buyers agent.

Or, am I totally wrong on the idea that the Board of Realtors operates on a common practice of 1/2 to listing agent and 1/2 to selling agent?  

In reply to John Welsh :

For that alone, I'd find a different agent. 

In reply to John Welsh :

You have interpreted that correctly. You are paying full commission for the right to have access to all of the MLS and the selling power of all available agents, but your home will not be shown by other agents.

Find another agent. 

You could suggest 5% split 50/50 plus an additional 1% bonus to the selling agent.

I always thought this would give incentives for agents to sell my house, but  haven't actually had a lot of luck with it. I'm not totally certain realtors can read. 

I know I should drop her like a hot potato but its complicated.  My gut reaction is to propose 2.5% listing agent, 3% buyers agent and then if she gets the double dip I think she is so confident on that still nets her the full 5.5%.  But, it should also be incentive for other agents to bring real offers.   

I also think I want to go up in asking price the $20k to where I think we should start vs where she thinks we should start.  This is because I think she knows her buyer's top end and she needs that $20k to come off to save her double dip.    

I know she is good at this game, I'm just not sure she's good "for me" more than she is "good for her."  

I might even go 6% (3/3) and the higher asking price.  I'd be potentially paying 1% more but that 1% more might be worth it to see real "other offers."  

That $20k is only $600 to her, of course she'd rather start at a lower price for an easy deal. 
All Realtors are out for themselves, vs looking out for you. 

Real estate is 100% local, and what's normal in terms of commissions varies state to state, and even local to local. I've done this 8 or 9 times to date, and have had some good realtors and a couple I never got under contract with, as they were not a good fit.  If it doesn't feel right, punt.  The extremely low barriers to entry mean that you get a lot of sub par realtors. 6% may be normal in one market, but 4 or 4.5 may be normal in a market where there is no inventory, and the listing agent wants a listing that is going to sell in a few days.  I've worked very good deals on a listing when the agent knew I was turning around to buy in the same market, so they could make it back up on the new purchase.

If by "complicated" you mean, this is your wife's, brothers, cousin who does real estate part time, run, run.  It's a business transaction, no more or no more less.  Your goal is not be best friends with your realtor, no different than you don't need to be best friends with your dentist, accountant, etc. They are there to provide a service to you.

The great thing about real estate is it's a statistically driven business.  If this Realtor can't prove to you they are in the top 10% of the local market, go find one that can. It's not like it costs more to use a top tier Realtor, why use an average or worse one.

List it FSBO. All you really need is a buyer + a title company and an attorney (and those can be done for standard rates that are nowhere near 5.5%). 

I object to giving a twentyfive year old with a high school diploma  $30,000 worth of my equilty for the privelege of putting a sign on my lawn and an internet ad. Therefore I bought and sold my two homes myself.  Its pretty easy. 

Many realtors survive on volume of sales. With listings and sales both dropping precipitously in recent months times may be tight for most of these people. There's probably at least a little desperation out there that could be motivating some of these actions.

Everything is up for negotiation.  And no realtor holds a gun to your head.  We have met with several agents over the years and some were not to be trusted.  Thirty years ago we found a house we liked.  Came in pre approved for a mortgage, offered a number and held to it.  Realtors and seller worked together to make the number work.  Those days are probably never happening again but if the market continues its trend negotiations become more important.  Good luck in your situation. 

bearmtnmartin (Forum Supporter) said:

I object to giving a twentyfive year old with a high school diploma  $30,000 worth of my equilty for the privelege of putting a sign on my lawn and an internet ad. Therefore I bought and sold my two homes myself.  Its pretty easy. 

Same here. My last two deals were private.

I even sold a house on Kijiji in a lousy market

STM317 said:

Many realtors survive on volume of sales. With listings and sales both dropping precipitously in recent months times may be tight for most of these people. There's probably at least a little desperation out there that could be motivating some of these actions.

 

 

And will likely only get worse if the Feds raise rates again next month. 

The appreciation of homes + higher interest rates, on top of many like myself who took advantage of Refinancing options during the pandemic (mortgage is now under 3%) make it a tough decision to sell/buy. We could really use a house with another bedroom, but the % rates make a such a huge difference in your monthly payment. 

On a $400k house, the difference between the rate on my house, and the best current available rate, is nearly $1000/month. 

In reply to SV reX :

I've sold a few homes on my own and have offered flat rates or small percentages to buyer's agents and never had a problem getting agents to show the house. With zillow a lot of home buyers don't even wait for their agent to suggest a house. They already see what's out there and know what they want to see. 

When I had my real estate license the first time around, I realized that real estate agents are as varied as the rest of the population.  While it might not be easy to find one that matches up well with you...it's definitely not worth working with one that's not a good fit.  There's one out there you'll feel good about working with.

I have my license again (this time more as a means to being able to dabble in property management in the future) and, while I'm not the stereotypical real estate agent...there sure are some unfavorable stereotypes being thrown around in this thread.  And I know there are good reasons for some of those stereotypes (believe me...it bugs me when I run across the blow-hard-types too).  But I guess my point is to put a little effort into finding a real estate agent that's a good fit for you.  There's really not a good reason to settle for one that you don't trust and appreciate.

The last agent I used is someone I'd now consider a friend.  On that transaction (we were the buyers) we found major roofing problems during inspection (the roof ultimately was replaced).  This problem came up while we were leaving town for vacation for a week.  Our agent lined up a contractor to quote a replacement roof so we could negotiate prior to the end of the inspection contingency.  That was top notch service and he more than earned his commission.  

To address John's original question:  I haven't assisted any buyers or sellers in the year since getting my license again.  But the commissions in our area are traditionally 6% overall.  It's certainly negotiable.  I'd negotiate a little with a friend or a really high end property but frankly, my time and experience is worth that commission.  If a buyer doesn't feel the same, then it's just not a good fit.  And that's fine, really.   There are other agents that would be a better fit, I'm sure.

The whole equal split thing bugs the hell out of me. In a buyer's market, the listing agent deserves more. In a seller's market, the buyers agent deserves more. 

Redfin only charge 1.5% (1% in hotter markets back when we did it) to list through their agents, and you should be able to get away with 2.5% to the buyers agent.