First let me start off by saying that not all agents charge 6% commission. Commissions are negotiable. Some agents charge less and some charge more.
With that being said, let me share with you why many agents charge 6% commission and why most agents won’t negotiate that commission down if you ask them to.
Some people are under the misconception that the listing agent keeps that entire 6% for selling your home. This is not the case. That commission is also split with the buyer’s agent. In most cases the commission is split between the agents 50/50, but once again, this is not always the case. Some listing agents want more than the 50% due to advertisement costs. Some agents offer more than 50% to the buyer’s agent as an incentive. You should know at the time of listing how the commission with be split between the agents. If it’s not in the listing agreement, then ask your agent to add it in there. Does it really matter what percentage of commission you offer to a buyer’s agent? That’s another post I will write about soon. But I digress….
As an example we will say the listing agent split the commission with the buyer’s agent 50/50. So that now leaves the listing agent with 3%.
So now you’re thinking the listing agent gets to keep 3%. Not too shabby, huh? Not so fast. I haven’t even begun to explain what else come’s out of that 3%. Unless your listing agent is the broker of the company and doesn’t have to split the commission with anyone, right off the top, that agent’s broker gets a chunk just for being the broker. Depending on the agents company, that can be anywhere from a few hundred dollars to as much as 50% of that 3% commission.
But wait…there is more! There are plenty of other expenses that agents have to pay.
Signs, sign posts, flyer boxes, info tubes, rider signs and such
Lockboxes
Office equipment (computers, fax machine, printers, scanner, digital camera)
Office supplies
Websites and a contact management database
Advertisement expenses (newspapers, magazines and such)
Business cards
E&O Insurance
Cell phone bills
Car expenses, such as the car itself, car insurance, gas, maintenance on the car
Health Insurance (we are self employed, so we don’t have the luxury of benefits)
MLS dues (local, state and national)
Assistants (some agents have assistants to help them out)
Lead generation
Showing appointment service
Toll free info lines or Talking House
Virtual Tours
Continuing Education
Postage
Uncle Sam (can’t forget to pay him)
Our time (Yes, our time is worth some money too)
I’m sure I’ve forgotten some things agents have to pay for. Please feel free to add to my list!!
Of course if you’re a broker, you have many more fun expenses to pay for like office leases…and well, I digress again….
Hopefully that will shed some light on why many agents charge the 6% commission they charge. As a consumer, you have the right to pick and choose which company you want to list your home and for what commission percentage you will pay. It’s your money. However, I hope I have been able to show you the expenses agents incur for being in the business and why many of them will not lower their commission if asked.
