Some points on real estate commission - Posted by Dan Stra

Posted by Bill (NY) on April 19, 2002 at 19:16:14:

Thanks GB, I’ll remember that “one time showing agreement”, sounds like the agent should have offered this but also liked the 15 houses I picked out. She probably figures see can re-list all.

Some points on real estate commission - Posted by Dan Stra

Posted by Dan Stra on April 19, 2002 at 24:24:15:

I have seen a lot of different things said about real estate commissions here and felt I would clarify some things. If you are thoroughly familiar with how real estate commission splits work and so on this post will not be for you.

For starters, as an agent, I cannot divulge what “I” charge as that would be considered monopolistic practice. Furthermore, I cannot state that a certain percent is what “most” agents charge. With this in mind ALL of the numbers noted below are hypothetical.

If you, the seller, hire a broker to sell your prop and the broker charges a theoretical 6% you can expect that a full half of that will go to the broker that brings a buyer (in theory, there are exceptions). So, in this example, each broker gets 3%. FYI-The percent that the broker who brings the buyer gets is called the “co-broke”. The co-broke percent is stated in the MLS.

I use broker as the example because brokers pay differnet percentages of what they get to the agents that work for them. So, if the broker gets 3% and the agent that works for the broker is on a 50/50 split then the broker pays the agent 1.5 percent.

When an broker takes a listing it does not HAVE to go on the Multiple Lisitng Service. When that happens it is commonly referred to as an “in-house” listing. When a broker takes an in-house lisitng he may take the listing at some very low percentage. In this case, splitting commission is not an issue. Sellers should be wary of brokers who appear to be offering incredibly low commissions and make sure the MLS is going to be used. (Assuming that the MLS is important to them)

Occasionally a broker may take a listing at a very low percentage AND put it on the MLS. At this point the seller should inquire as to what the co-broker percentage is.


Human nature!

Imagine that two IDENTICAL houses come up on the market. One is NEXT DOOR to the other. Same everything, right down to the carpet color, price and drapes.

Broker A is offering a co-broke of 3% because he took the listing at 6% and Broker B is offering a co-broke of 2% because he took the listing at 4%.

Which house do you think will sell faster? NOTE: The practice of “steering” a buyer to one house over another for a reason like co-broke percentage is illegal. I don’t do it because I deal with sellers only. I don’t know if any agent does do it. However, I ask you, what is HUMAN NATURE in this case?

You decide for yourself.

When selling a property be concerned with the co-broke amount. It is your right to know.

If you get a disount that seems too good ask the broker exactly what services that includes. Take notes of what he says and ask him to sign it or put it in the contract.

Agents do offer valuable services but do occasionally get, hmmm, the word I will use it, “over-enthuastic” in their approach to discounting.

Knowing how the system works and what to look out for can help the real estate investor greatly.


Dan Stra

Re: Some points on real estate commission - Posted by Bill (NY)

Posted by Bill (NY) on April 19, 2002 at 08:12:46:


I’m looking into MLS listings in my area which have expired. I met with a newer agent yesterday to try and get on the same page so she would have a firm grasp of what I was looking to do. It was suggested to me that I work with a newer agent if I was going into REI in my area since most established agents already have their investors and retail buyers lined up. This advice was given by an established agent who told me she didn’t have time to play around with creative stuff when the market is so hot and can sell alot more RE the old fashioned way.
My question is, while looking at the expired listings I see most of the homes are handyman, fixer types,what is the best way to have the new agent approach the owners of the properties to see if they are still open to selling? I would be looking to buy below the OLP. Would a short term in house listing be the best way for the agent to get her commision knowing that I’m very interested in the property, or is there another way for the agent to make her commision on expired listings without a long term full commision agreement which may kill any possible deals. I’m looking for everyone to come out ahead, the seller sells, the new agent gets paid, I get expired listing property. Any ideas or suggestions?

Thanks in advance.

Re: Some points on real estate commission - Posted by JamesL

Posted by JamesL on April 19, 2002 at 01:33:50:

Hi Dan.

Thanks for your comments. Your subject pertains to some issues that I am currently trying to overcome. I would be interested in everyone’s input.

Say I make an offer through my buyers’ agent on a property listed by a different realtor. The offer is that the seller pays me $1000, I lease the property from the seller for 49 months, first month free, 48 monthly payments for the seller’s current PITI amount, and agree to buy at or before the end of the 48 month term for $xxx,xxx. The offer gets accepted. Now, the listing agent wants to know where the commission comes from, and when it might arrive.

Obviously, if I lived in a dream world (I do according to several of my peers,) The seller would come up with the full commission in cash up-front to pay both realtors. However even if the seller had cash laying around for this, in my town, the Board of Realtors requires that a sale take place for $xxx,xxx, before any agents and brokers get paid.
A 48 month lease, combined with an option to purchase, combined with a promissory note to exercise my option within 48 months, does not constitute a sale.

My next suggestion is that the listing is withdrawn from MLS, and all realtors get paid when I succeed in securing conventional financing for my tenant/buyer. This could be 12, 24, 36, or even 48 months down the road!
While my loyal, open-minded agent is “down with that,” it is understandably proving quite difficult to coerce the listing agents/brokers into going along with this.

Another option I have considered is to pay both realtors very, very small, interest-only payments on their commissions until I sell the property. In this scenario, they are all confused on what paperwork they need to fill out.



Re: Some points on real estate commission - Posted by GBinTX

Posted by GBinTX on April 19, 2002 at 10:47:01:

An in-house listing may be one idea. Another would be to have your agent call to see if the owner was interested in a ‘one-time showing agreement’. This is just like it sounds. The agent calls the owner of the expired listing and wants to show it one time to her client, Bill. Should Bill make an offer on the property the commission would be 3% payable by the seller as there is no listing agent. This may be an opportunity to have your agent ‘tote the note’ for her commission should you be buying sub-2, wrap etc.

This is not as unusual as you might think. Most new agents are taught to go after the expired listings under a new 6 month agreement. The seller is unhappy the house didn’t sell and, true or not, will fault the listing agent. Most Real Estate companies carry the ‘one-time showing agreement’ and you already know you have a 3% minimum price reduction just by not having to pay a listing agent.

Just an idea.

Re: Some points on real estate commission - Posted by Brent_IL

Posted by Brent_IL on April 19, 2002 at 08:48:17:

Many agents will work on a little bit now, most later commission. You can also offer them an unsecured interest-only note equivalent to the commission, due when the L/O is exercised. The idea is that it’s better than having the owner wait out the listing to L/O and they’d get nothing. Some listing agreements don’t adequately address L/O’s.