The Dream Weaver Real Estate Team’s Misty Weaver explains how a real estate agent’s real estate commissions are split, dispelling myths and misconceptions about what is charged and why. And what better way to use visual aids that some delightful glasses of wine! Much like wine, with real estate commissions, there is plenty of sharing to be done. Please watch the short video below, or if you prefer to read a transcript of the video follows…
Hey, guys! Misty here. We are talking about commissions today. I’m going to make this as easy to understand as possible and hopefully as short as possible.
We are using wine, and in front of me I have six wine glasses. Now, commissions are completely negotiable. I’m going to use six because it’s an easy number to understand. It also just happens to be the number that I charge sellers to sell your home, so six percent.
Everyone thinks that the agent gets that six percent. Not true. Not at all. I wish I got to drink all six of these glasses! I don’t.
So right away when you create your contract with your agent to sell your home, you say what the full commission is and how much is going to go to the buyer’s agent. So in my case I’m going to split that equally; three glasses of wine are going to go straight over to the buyer agent. Okay?
I went from six down to three. Lost a lot of wine there. It doesn’t make me happy, but I want to be fair to that buyer’s agent because they’re going to do a lot of work and I want all of them in the area to bring their clients to see your house, so that’s why I split it evenly.
So I’m down to three glasses now. I, as a Virginia agent, have a broker, and I have to pay that broker. I pay that broker 30 percent of my commission. That’s another glass of wine I don’t get to drink. It goes to my broker. I’m down to two. Another 30 percent goes to pay taxes because I like drinking my wine at home, rather than a jail cell. I’m kind of spoiled.
I’m down to one glass.
This glass has to pay not only my bills, to feed my children, and keep a roof over my head — and the college bills that are coming, not happy about those — I also have to pay all of the marketing for your home; professional photos… I’m not bringing my cell phone in and taking photos. I’m hiring a pro. We’re doing video of your house. We’re doing social media ads. I want your house in front of as many people as possible, and that comes out of this glass.
So what happens if you ask for a break on commission?
We’re going to start back here with our six glasses of wine, and let’s say you ask me to lower it one percent. Well, one percent is not one percent. One percent out of six is like, what? 18 percent. It’s not one percent. So make sure you understand what you’re asking.
Let’s say we do that and we negotiate that. We’re now down to five glasses. And now we’re going to go down to two and a half if we’re splitting that evenly. And what happens is on the other side of that — we’ve got two and a half here — what happens is the buyer also has an agreement with their agent. They have said how much they’re going to pay their agent. But in that contract it states that most of the time it’s coming from the seller. So that three percent that you said earlier, or the two and a half percent that is outlined in your contract is going to go to that buyer’s agent.
If that buyer’s agent and their client negotiated three percent and you are only offering two and a half percent, the buyer has to come out of their pocket with cash to make up that difference. As you can imagine, if you think back to when you bought your house, you probably didn’t have a whole lot of extra cash to do that. So if they don’t have that money to make up the difference, basically they either need to re-negotiate with their agent or they can’t see your home. So you’ve just lost potential buyers. Not a good place to put yourself.
If the average in your area is three percent and the other agents are negotiating to be paid three percent, that can affect you. Your home could sit on the market longer. Is that another mortgage payment out of your pocket? Is that two mortgages out of your pocket? Is that a longer time not getting the home that you want because you haven’t sold yours yet?
So you need to discuss these options with your agent and understand how everything is done. As I said earlier, I split my commissions evenly in contracts. Some agents do not, and if they do not, you need to understand why. Are they paying for something extra in marketing for you? Are they doing some staging in your home and they need to recoup that cost? It’s not always even, but you need to understand why and understand how it affects the marketing of your home.
There’s my short little concise, hopefully, talk on commissions. If you have any questions, let me know and if you need to sell something, definitely reach out. Talk to you later!
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