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RSS FeedQ & A: Why is Commission important? |
Oct. 14, 2006
Tagged with: commissions
| Q: Why is Commission important? A: The marketing fee or commission is the most vital part of the marketing plan because this is precisely what sets the enthusiasm for cooperating brokers. Since commissions are negotiable, we'll talk in terms of averages. Let's say an average commission for a certain area is 7%. The fee is normally divided evenly between the selling office and the listing office. Let's trace the path of this 7% just for illustration purposes. In a $100,000 home, the commission would be $7,000 which is split up between both offices- $3,500 for the listing office and $3,500 for the selling office's effort in securing a buyer. This $3,500 is then divided between the office and its respective agent. On the listing side we'll say $1,750 (50% for illustration purposes) for the office and $1,750 for the agent. From this the agent must pay taxes, MLS fees, expenses incurred on advertising and promotions, desk fees, etc. The agent that procured the buyer would be a similar situation- where their $1,750 would go to pay taxes, MLS fees, expenses incurred with client, time, gas, meals, brochures. All of the sudden, what started out as being a large 7% commission has now dwindled to a near 1% commission. This is why it is crucial to offer at the very least the average commission for your area. It is even highly recommended you consider offering a 1% higher than average commission for the sale of your home. A one percent raise in the commission translates into a 14% raise to the real estate agent's paycheck. |
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