Real estate commissions – you get what you pay for!

One of the first questions that comes up when I meet with potential listing clients is commission rate. There’s a rampant belief that getting an agent to agree to a lower commission is always good for the seller. Why agree to a full service commission if you can talk them down to a lower commission? After all, if the agent gets less, that means the seller gets more, right? Not necessarily!

What does a seller really want? To sell their house for the best possible price and keep as much of the sales price as possible. That’s obvious. But how do you get the best possible price? By getting as many agents as possible to show and promote your house. And what makes an agent want to show your house? A fair commission. So, if you were an agent and one listing promised you a higher commission, and another promised substantially less, which one would you take your buyers to? Right – the one with the higher commission.

That makes sense for the realtor, but what about the seller? Here’s a true story that says it all:

A client of mine decided to sell his home, a classic FSBO. His wife wanted me as their agent, but he was determined to do it on his own. Not surprisingly, nothing happened. Realtors have only so much time to show potential buyers the available houses, and they aren’t going to send someone to a for-sale-by-owner that has no commission attached.

After a while with no action, husband decided to take on an agent, a low cost one. He bargained hard and got a rock-bottom commission rate. And again, nothing happened…no sign, no advertising, no calls, and no showings. Finally, as their anniversary approached, his wife put her foot down. For her anniversary gift she wanted just one thing: “I want to sell my home with Margaret Rome.” Reluctantly, he agreed.

And then things started to happen. We talked about what they wanted to net out of the property, then we listed it at a price higher than the low cost agent had, with a full service commission. Within the very first week, we had a full-price contract. The house that wouldn’t sell as a FSBO or as a reduced service commission suddenly became attractive to other real estate agents and the buyers they brought with them.

Like they say, you really do get what you pay for!