This “headline" would not surprise you if you were reading about an agent’s family who lived in the recent hurricane disaster areas of Louisiana, or even Texas. You could not conceive of this happening to an agent living in an area that has experienced the recent buyers feeding frenzy. Yet, there are an increasing number of agents who are willing to discount their commissions. How will you compete and also care for your family? Consider this. When selling a home, the total commissions are split 50/50 between the selling and the buying agents’ brokers. At the brokers’ office, the commissions are further split to pay for the “services" provided by the broker to the agent. This is generally about 30%. Now the agent has to pay for Income taxes as we all do. This also amounts to about 30%. What remains is the “salary" the agent feeds his/her family on.
The agent actually only receives only 33% of the 50% his broker receives. Putting it another way, take a dollar bill, and tear it in half. Then tear one of the “halves" into thirds. One third for the broker, one third for taxes, with the final third representing the agent’s commission.
Out of this “third" the agent pays for advertising (about 1% of the purchase price), any gas and oil, meals, printing of flyers, web site maintenance, dry cleaning, and other business expenses. The remainder is what their family lives on.
That is the economics of the “deal". Here is another side to consider. Let’s say you and your boss are discussing your performance and raise for the year. You have performed very well, working hard, saving the company money, securing many new accounts. How willing would you be to “discount" your salary?
What about the suggestion that discount commissions automatically discounts the “other" agent’s earnings as well? Agents, who have a signed buyer / broker agreement with their buyer, must look to negotiate another condition of sale for those homes listed at a discount.
Discount if you must. Just take the “smaller" share and offer the buying agent their full commission. After all, they work hard for their buyer!
© 2005 by Ric Gabbert All rights reserved Ric is a seasoned business executive currently representing buyers and sellers of real estate in the Phoenix and surrounding areas. You may contact him @ http://www.synergyrealestateonline.com.