What is a commission split?
In order to help you truly understand where your commission dollars are going, it is essential that you grasp the concept of commission splits. As a seller listing your home with a real estate company, you are being charged a "total" commission. That "total" commission is then split, thus compensating both your listing agent and the agent working with the buyer.
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For example a common scenario might be:
A total commission of 6% is charged to sell your home. The listing agent would receive 3% and the buyer's agent would receive 3%.
Note: not all commission splits are necessarily even.
Regardless of our example, the important concept to grasp is that the commission you are being charged is actually paying for two sides of a transaction to be represented, seller and buyer. |
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Why is a commission split so important?
The commission split is vitally important to the success of your home sale. The reason you are hiring a real estate company to sell your home is to make sure that your property gains maximum exposure to all qualified buyers, which today should include buyer agents from all local real estate companies.
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When you offer your property for sale and sign a listing agreement, the listing agreement will define how much of the "total" commission will be offered to agents working with and representing buyers (buyer"s agents/BBR). This information is then published in the MLS (multiple listing service) system by your listing agent so that all other agents know what they will be paid if they are to sell your property. This process is understood as broker cooperation and has been utilized in the real estate industry for decades.
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Because most homes are not actually sold by the listing agent, it is important that you discuss with your agent how much of the "total" commission is being offered to other agents with potential buyers. It is vital to make sure your listing is attractive to other agents. Without the cooperation of all agents with potential buyers for your property, your chances of selling for top dollar will diminish.
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In today's local market place, we see commissions being offered to buyer agents that range from 2% to 3% of the actual selling price. Your agent should make that information available to you when you review comparable sales in your area so that you can 1) see what has been successful in your market segment and, 2) what other sellers are currently offering as incentive to attract buyer agents and their clients.
Note: Not all houses are equal. Each property and situation should be assessed individually.
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WARNING:
DO NOT LEAVE THIS PORTION OF YOUR LISTING AGREEMENT UNATTENDED. IF THE COMMISSION SPLIT YOU OFFER FAILS TO ADEQUATELY COMPENSATE BUYER AGENTS, YOU GREATLY REDUCED YOUR OPPORTUNITY FOR A TIMELY SALE AT FAIR MARKET VALUE. |
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What commission split should you use?
What commission split should you use?Not all home sales are the same. Not all real estate markets are the same. Hence, commissions offered to buyer agents to sell various homes in various market conditions also vary. For instance, in a very "hot market" where demand is high and homes are selling quickly, it would make sense that buyer agents would be compensated less. Conversely for a home that is hard to sell, it might make sense to offer the buyer agents by a higher commission as greater "incentive" to show & sell the property.
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Evidence of your market conditions will appear in the market analysis (CMA) as we review with you recent home sales in your area, days those homes took to sell, and what buyer agent commissions were paid on those properties. This will help you in your decision of what buyer agent commission is most appropriate for your situation (most rates vary from 2% to 3%).
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| We believe knowledge is a powerful tool. The more informed you are, the better decisions you will make. You are the one paying the commissions, so we feel that you should fully understand what you are paying, why you are paying it, and where it is going. |
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| Note: Luke Real Estate offers and promotes a fully serviced, fully marketed home sale for 3.5%- and it is available to you regardless of the market "conditions" evidenced in the market analysis statistics. We just want you to know you have a choice if you feel that would be more appropriate for your situation. It"s your choice. |