Apr. 9, 2008 - Transparent Real Estate Commissions

It's challenging to come up with and post commissions as they really are, and in the manner that we charge them, as there is not really one hard and fast formula.  Yet "it depends" is never a good answer, is it?

Most of our seller clients believe that home buyers find homes on the internet vs. print ads.  So almost always our commission is a flat fee that acknowledges that the seller doesn't want to waste money on print ads in newspapers or home magazines.

We had one client recently who wanted no print ads and no Open Houses who sold her home for about $550,000.  We charged a flat fee of $7,500 which we reduced to $6,000 at the end by splitting the home inspection request with her.  That worked out well and everyone seemed to be fairly happy, though all of us would have been happier if the buyer didn't want an extra $3,000 :)  That house sold to a buyer who had a buyer's agent, so the total commission to us was $6,000 and the amount to the buyer agent from another real estate company was $16,500.

Our price for listing a house is usually 2% or $10,000 whichever is less and does include Open Houses but does not include print ads.  Many if not most of our clients are both buying and selling and so the $10,000 applies to the selling their home side and then again on the buying a home side.  If they are only buying and not selling, sometimes the flat fee is $12,000 or $15,000, but rarely does that apply to someone selling their home.

That's about as simple and transparent as I can describe our listing fee at the moment.  I just want to get something down in a blog post, and will come back and review it when I have more time.  "Our" being Kim and I, and not all Sound Realty agents who are free to price as they and their clients negotiate.

We do not, by and large, keep the amount offered to a buyer agent if the buyer comes without an agent and wants that amount.  Usually that "extra" 3% either goes to the buyer's agent or the buyer or off the price, whichever way suits the buyer and the buyer's lender.

On a very low priced property or a very high priced property, there could be changes, but most often we are not dealing in a price range that requires a different price than that stated.

That covers our commission for sellers.  Usually not more than $10,000.  But what about buyers?

Our buyer clients assume a lot of the responsibility for finding property on the internet and driving by the property before asking us to meet them at the house(s) they choose.  Rarely to we "tour" homes and view everything for sale.  Most of our clients do not want to see "everything for sale".  They only want to see the ones they might buy.

If the price of the property they want to purchase is $400,000 or less, we usually accept whatever amount the seller offers, even if that amount is below our normal charge.  Often finding reasonably priced housing is more difficult due to scarcity of supply of good properties and takes a lot longer.  So our fee is generally no different from most agents in that price range.

Once you get to just under $400,000, the price is $10,000 if we are also selling your home.  If you are buying and not selling, the price is from 1.5% to not more than $15,000.

That's the best I can pin it down at the moment.  My main goal is to just get the basics down on paper and now I will review it from here or answer questions as they arise.

Transparency regarding commissions is much easier in person because it really does depend on the house type, where it is, how difficult it may be to sell, how readily available the type of property you want to buy is, etc...  But we find that most times the commission fits into a box of not more than $15,000, most often $10,000 and sometimes less.

The biggest factor is often the people themselves and how compatible our personalities are with theirs.  Sometimes we charge less for nice people :)  We never charge more for really nasty people, we just don't work with really nasty people.  It saves everyone a lot of time and trouble to evaluate how well we work together in advance.  Everyone being "on the same page" is much less stressful for our clients, and buying or selling a house is stressful enough.  So working with the right agent for you is the most important thing you can do to simplify the entire process.

Sometimes I think most agents charge a lot more than we do to compensate for having to work with difficult people.  We think nice people should get "a discount" and difficult people are not worth working with at any price, so why overcharge to compensate for them?  If our clients want to assume more of the work themeselves, or want to eliminate a service like an Open House, we adjust our fees even further.

That our clients never complain about price of our service says a lot.  No one complains that we charged too much for what they received.  That in and of itself tells us that we have hit on the correct pricing formula.