Real Estate Commission

Q: I found the house, and you made a huge real estate commission! All you did was write up some paperwork - why should you be paid so much?

A:

When a broker does their job well, it looks easy. Here is what was done on your behalf for your home purchase that you may not recall:

--Set up a customized search on the NWMLS that took into account the Buyer's specific criteria, with daily emails as houses came on the market

--Drafted buyer's agency agreement, and reviewed terms with Buyer

--Supplied Buyer with required Law of Real Estate Agency documentation

--Toured several prospective houses to purchase with Buyer

--Advised Buyer on negotiable terms for a purchase offer

--Drafted all legal documents for a purchase and sale agreement

--Communicated regularly with Buyers, listing brokers and other professionals involved in the transaction

--Set up and monitored Authentisign transmissions

--Recommended other real estate professionals used by the Buyer, including title and escrow companies, and real estate home inspector

--Hired agent to attend home inspection

--Negotiated with listing brokers for Seller concessions

--Reviewed title documents, with comments and explanations to Buyer

--Monitored progress of transaction from mutual acceptance through closing of the transaction, with regular updates to Buyer

--Requested and attended final walk-through inspection with Buyer

--Requested and reviewed final closing documents

--Celebrated closing with client!

As with an attorney, you can appreciate that in order to be effective, a real estate broker is not only handling legal documentation for the largest financial transaction in most people's lives, but their professional expertise and education are essential to prevent future problems or issues. In my representation of clients, I am taking on the issues of professional liability, reporting and responsibility that the state requires of all real estate brokers. That is why brokers (like lawyers) are required to take continuing education, and have many other overhead expenses of running an independent brokerage. Yes, this is part of the compensation included in any real estate commission, which goes far beyond "finding a house." 

I trust this will explain for many what it is that your real estate broker does to earn their compensation as a Buyer's agent. There are many other duties on the sell side, which can be covered in a future blog. Feel free to leave a comment here, if you would like to add anything.

Happy Holidays! Happy Investing!

Real Estate Commissions

Yesterday's Seattle Times reported on a new upstart Seattle brokerage that is slashing traditional real estate commissions for its clients from 6 to 1.5 percent. Buyers already represented by a broker would include their fee as part of their contingency, and it would be up to the Seller to decide whether to pay by accepting it.

While a 6-percent listing commission is traditional, many homeowners do not realize that this commission is negotiable.

The traditional 6-percent commission is typically split between the buyer's agent and the listing agent, so each receives 3 percent on the sales price. Many brokerages will collect anywhere from 10-50% of the agent's commission to pay for overhead, leaving each agent with as little as 1.5% of the sales price on a home. Out of that amount, the agent must pay for all their other professional fees, insurance, marketing and business supplies.

Several local brokers already offer a 1.5% listing commission, with another 3% to the buyer's agent, for a total of 4.5% commission paid by the Seller.

One Seattle brokerage charges clients a flat $7995 on all home transactions below $1million, but collects $1000 upfront from buyers or sellers as a retainer. The balance is paid at closing.

The article went on to state that technology, such as video walk-throughs, make it easier for buyers to select homes without relying as heavily as in the past on their agents.

The real estate industry is constantly changing, and it is well-worth discussing this part of the real estate transaction in addition to other negotiable items.

Happy Investing!