In my 16+ years working in real estate, I often see that home sellers do not truly understand how commissions work. We the agents are mostly to blame for this. Our intent is not to keep our sellers in the dark. Trying to explain the true method can be a bit confusing. Especially when you are covering so many topics while at the listing appointment. For me, I try and explain commissions in Laymen’s terms. I break it down but not really explain commissions by the letter to the law. I know that sounds really bad but keep reading and I will explain the following:
- You only pay one commission
- It’s not a buyer side commission. It’s a “co-broke”
- What you thought was a buyer commission is really for marketing
You only pay one commission
Commissions are not set in stone and are negotiable but for my example, I am going to use the number of 6% since it is the most widely charged commission here in the Valley. I myself have never charged that much but we will get to that later.
Most people understand or perceive that the listing agent and the buyer’s agent split the commission. 3% for both. That’s how it looks on paper but technically that is incorrect. The truth is you are only paying your agent*. When signing a listing agreement the amount of commission you agreed upon is paid to that agent*. How they decide to use that money to market your home is up to that agent.
It’s not a buyer side commission. It’s a “Co-Broke”
After your agent explains all the amazing marketing they are going to do to sell your home fast and for top dollar, they are going to use the number one marketing tool to sell a home. They are going to enter it into the Multiple Listing Service, a.k.a The MLS.
What does that do? It reaches out to the thousands and thousands of other Realtors in the Valley and says “Hey I have a new listing for sale.”
To be able to list a home on the MLS, your agent has to offer to listoke” to the thousands and thousands of other agents. Now your agent is saying through the MLS “Hey bring your buyers, if we can get a deal done I will give you some of my commission.”
What you thought was a buyer commission is really for marketing
Like I said before most homes are sold though the MLS and a buyer’s agent gets a commission and it is usually split 3 and 3. But by letter of the law, you are paying your listing agent the full commission. It is up to them to decide the best way to market your home. That is exactly what the MLS is, a marketing tool. the best tool an agent has to sell your home. Even more so today with the power of the internet.
When your home goes on the MLS it automatically goes on the websites like Zillow, Realtor.com, and the thousands of others.** That 3% that you thought was a buyer commission, is really marketing dollars. Think about it this way, The MLS markets your home to every Realtor in the Valley that your home is for sale. The fore-mentioned websites market your home to 95% of active buyers searching for homes. That is a lot of exposure to the right people to get your home sold.
Now that you have a better understanding of how commissions work, You can see the power of the 3% co-broke. Before, you might have thought it was strictly to pay the buyer’s agent. What you should be thinking now is, why am I paying 3% to my listing agent. Most of the marketing is already done. Are both sides of the commission equally valued? We here at the MJD Group do not feel that you should have to pay 3% to the listing agent. In fact, you can check out how our full service, flat fee works.
I am not suggesting that sticking a sign in the yard and throwing it in the MLS is going to get your home sold. It takes much more to sell your home but it should not cost you another 3%. If you are thinking of selling your home soon, give us a call and we can show you how you can save thousands when selling your home.
*note- by law commission are truly paid to your agent’s broker.
**note- agents have the option to opt-out of any 3rd party websites