How do real estate commission rates work for selling and buying a property?

I realize I am a bit late jumping in here, but I think the real question is:
What exactly does a seller get for the 3+1% (or whatever the rate is) and is it good value?

If I list a $600K home today, what will it cost me to sell it? Why does it cost that much? Will the house sell if I don't spend that money? How much less will it sell for?

Thanks for the help.

Welcome to Vibrant Victoria gjdavis55.

I just listed my house to go on the market for just under $1M.

The commission will be around the $30K mark.

I think it is money well spent.

I want as much exposure and effort as I can get.

I realize I am a bit late jumping in here, but I think the real question is:
What exactly does a seller get for the 3+1% (or whatever the rate is) and is it good value?

If I list a $600K home today, what will it cost me to sell it? Why does it cost that much? Will the house sell if I don't spend that money? How much less will it sell for?

Thanks for the help.

A common commission is 6%100k + 3%balance. This is typically split in half (3.0%100k + 1.5%balance) between the listing REALTOR® and the buyer's REALTOR®.

- With a 6%100k + 3%balance commission it will cost you $23,520 including HST to sell your home (commission alone, legal fees and other extra.)

- Why does it cost that much? Very good question. In my opinion, I think commissions are too high. Let me put it this way, so far this year I have been involved in 14 transactions (on pace for about 50 for the year). If I was charging 6%100k+3.0%balance (which I don't - I charge a lot less) I would be on pace to make $200,000-$300,000 with less than $20,000 in overheard and a course that can easily be done in a two months. With my Masters (took me 8 years) I would be lucky to make $80,000 - $95,000 and the job would be much more stressful than real estate.

- Yes, your home will sell if you don't spend the money. Honestly, I can tell you I've lost a number of listings; however, the homes that ended up selling (with another REALTOR®) sold for a lot less than what I had it listed at. Let me give you the classic example.

Discount ABC Realty lists property A for $525,000 with a $12,000 gross commission. After 90 days property doesn't sell.

At this point the seller panics and assumes the reason for lack for sale is the Discount ABC Realty not doing enough "marketing."

"Full Commission Realty" lists property A for $499,900 with an $18,000 gross commission. It sells in two weeks.

Why did it sell?

The buyer of 2012 is online. What they look for is a) price b) pictures c) description/data and the number one place they look is MLS®. A buyer does not care which REALTOR® or which brokerage has the property listed. Classified ads/advertising on buses/billboards, etc...is like burning money in my opinion and does not help to sell your property.

Also, do fall into the trap of "discount real estate" vs "full service real estate" as that sort of comparison is complete nonsense. I can tell you that many "discount" REALTORS® offer more service and expertise than "full service" REALTORS®. It really should be "lower commission" vs "full commission."

Let me give you an example from two weeks ago....

There was a property listed in the Sunnymead area for $648,800 for 96 days and it did not sell. It was listed by a full commission brokerage.

The seller did something extremely rare, he dropped the price down to $599,500 and went with a lower commission brokerage. My buyer saw in online in his PCS (private client services) account, called me, we went to see it, he and made an offer the same day - SOLD.

I can tell you this seller is in approximately the 1-2% (I've been collecting stats on this). 98% of the time it is the other way around.

Let me give you an example from two weeks ago....

There was a property listed in the Sunnymead area for $648,800 for 96 days and it did not sell. It was listed by a full commission brokerage.

The seller did something extremely rare, he dropped the price down to $599,500 and went with a lower commission brokerage

 

a) It makes good sense that a major price drop would catch the attention of a large field of buyers who had not earlier considered the property at the higher price (eg. they might have earlier 'screened' out being aware of any properties over $600,000).  That the property was by the 96 day point becoming 'stale' (perceived as rejected by many previous inquirers), would matter little with such a large price discount of nearly 10%.  And, the listing gets a 'fresh' MLS number (the earlier listing's on file if you were looking for it but not 'in your face', almost a "fresh start").

 

b) Unless the property were badly underpriced (raising red flags of the character:  "What's wrong with it?"), the perception of value is boosted at the lower price level, so buyers (and their agents) do not feel looking at it is a speculative effort and tend to take the property (and the vendor's motivation) more seriously.  Those buyers (if any) who had viewed it earlier, might well have had their interest level seriously woken up.

 

I believe 'MLS' does (well, can, when done properly) promote a property much better, perhaps many times better than private efforts (a larger field of qualified buyers tends to end up with more qualified viewers being assisted by salespeople, which will very often help sell a property faster and likely at a higher price, offsetting the commission costs involved).

 

I doubt if any licensed real estate agent (especially a Realtor member), would risk their livelihood by (significantly) ostracizing discount commission brokerages.  A buyer who could otherwise afford a property but cannot top up the Buyer's Agent commission by one or two percent if there were a shortfall by the discount listing brokerage, seems an exceptional circumstance to me.

 

jbw

 

ps.  Looks like "Dual Agency" is being phased out.  Will there soon be no way for an agent to both list and sell a property (double ending the commission)?  I'd of thought prominent disclaimers on the offer form would cover this adequately (along the lines of:  Buyer Be Warned:  YOU are not being represented in this transation by any agent in any manner.  Seeking legal advice is strongly advised.)   The RECBC could allow red quarantine style caution forms to be used (I really like how those went over, back in the day when they were in common use).

Edited by James Bay walker, 28 November 2018 - 11:54 AM.

ps.  Looks like "Dual Agency" is being phased out.  Will there soon be no way for an agent to both list and sell a property (double ending the commission)?  I'd of thought prominent disclaimers on the offer form would cover this adequately (along the lines of:  Buyer Be Warned:  YOU are not being represented in this transation by any agent in any manner.  Seeking legal advice is strongly advised.)   The RECBC could allow red quarantine style caution forms to be used (I really like how those went over, back in the day when they were in common use).

 

 

I believe that it is even more draconian than that.  It doesn't have to do with the property, but the client.  So if I have buyer Client A selling a place and looking to buy and I have vendor Client B who happens to have the perfect property for Client A, I have to tell one of them to engage a realtor from a competing brokerage to represent one of them.

 

ps.  Looks like "Dual Agency" is being phased out.  Will there soon be no way for an agent to both list and sell a property (double ending the commission)?  I'd of thought prominent disclaimers on the offer form would cover this adequately (along the lines of:  Buyer Be Warned:  YOU are not being represented in this transation by any agent in any manner.  Seeking legal advice is strongly advised.)   The RECBC could allow red quarantine style caution forms to be used (I really like how those went over, back in the day when they were in common use).

 

An agent can still double end the commission.  They just can't represent both buyers.  This makes sense if you think about it, obviously one agent on competing sides of the same transaction cannot effectively act in the best interest of both the buyer and seller.   That never made sense and they nuked it as an option.

However there is still the option of representing the seller, and then helping the buyer make an offer on the place.  The agent can't give advice about price or anything else, but they can help the buyer draw up an offer as directed.   As you say, there are various mandatory disclosures that need to be made to the buyer to advise them to seek independent legal advice and advising them of the risk of going in unrepresented, but they can still do it.

 

More info here:  https://www.recbc.ca...ng-Services.pdf

I believe that it is even more draconian than that.  It doesn't have to do with the property, but the client.  So if I have buyer Client A selling a place and looking to buy and I have vendor Client B who happens to have the perfect property for Client A, I have to tell one of them to engage a realtor from a competing brokerage to represent one of them.

 

Correct, except the part about the competing brokerage.  It could be another realtor from the same brokerage.

Edited by LeoVictoria, 28 November 2018 - 02:55 PM.

Correct, except the part about the competing brokerage.  It could be another realtor from the same brokerage.

Actually, I believe that will soon Not be acceptable (it's seen as 'Dual Agency', which relates to the brokerage, not the individual salespersons).

 

I believe the 'chinese wall' concept of two desk mates in the same brokerage (or, operating out of branch offices of the same brokerage) reliably acting completely independently is becoming seen or is now seen as unrealistic.  (I think we have Vancouver to thank for this.  So far as I know, Victoria's not seen any major abuses.)

 

jbs

Actually, I believe that will soon Not be acceptable (it's seen as 'Dual Agency', which relates to the brokerage, not the individual salespersons).

 

I believe the 'chinese wall' concept of two desk mates in the same brokerage (or, operating out of branch offices of the same brokerage) reliably acting completely independently is becoming seen or is now seen as unrealistic.  (I think we have Vancouver to thank for this.  So far as I know, Victoria's not seen any major abuses.)

 

jbs

 

It used to be that the entire brokerage represented you when you hired an agent (brokerage agency), and thus any of the agents of that brokerage were equivalent to your agent in terms of responsibilities.

That has not been the case for quite a number of years with the advent of designated agency where only the specific agent is representing you.

So I believe you can still refer out to another agent at the same brokerage, however not if those agents are on the same team (this is why a lot of teams have been disbanding).  

 

Here is the relevant section of the real estate council professional standards manual:  https://www.recbc.ca...ncy-disclosure/

 

"Under designated agency, as long as the buyer/tenant and the seller/landlord or the competing buyers/tenants have different designated agents, even thought those agents are in the same brokerage, there is no “dual agency” and therefore no conflict. Under designated agency, dual agency would only arise if the same designated agent tried to act for both the buyer/tenant and seller/landlord, or tried to act for competing buyers/tenants in the same transaction."

Edited by LeoVictoria, 28 November 2018 - 10:40 PM.

Leo is correct....you can refer to another agent at the same brokerage.

I believe 'MLS' does (well, can, when done properly) promote a property much better, perhaps many times better than private efforts (a larger field of qualified buyers tends to end up with more qualified viewers being assisted by salespeople, which will very often help sell a property faster and likely at a higher price, offsetting the commission costs involved).

 

Why not list on MLS® with the lowest commission cost involved?

 

I am a huge fan of MLS®; however, there are a number of lower commission models that get you on MLS®. I also don't buy the argument that the higher the commission you pay to be on MLS® that you will somehow achieve a higher price beyond market value.

 

 
 
Why not list on MLS® with the lowest commission cost involved?
 
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Because while the "lowest" may (or may not) be less than $10,000 [which I don't think is attractive at all for the low end of the market, say, $150,000 to $200,000], considering the MLS fee by the VREB to agents is still only around $100 (correct?), my impression is that I'm getting really bad value: a service by a "sales" person, who can't sell the concept of listing without resorting to a deep discount to undercut their competitors' offerings. If they can't sell their own services at the going rate used by a competitive field of fellow salespeople, I'm apprehensive about how my property would fare in their hands (eg. if they need to discount their commission to get someone to list with them, their demonstrated viewpoint appears likely to be to discount my property's price to get action such as a sale). jbw

Wouldn’t the agent charging less want to sell for more or have far less motivation to undercut other listings?

It just seems odd to conclude that a lower commission equates with a lower sales price.

I think what he is trying to say is if someone rips him off right at the start, they are more likely to act ethically to achieve the best possible sale price. 

Yeah, which is a peculiar point of view.

 

The agent who discounts his rate might take home 50% of the commission, etc., from each client but he may have three deals in the time a full-rate agent has one. Of course that also means more work for the discount agent, but ultimately that work may prove more valuable (more clients/more experience/more demand).

 

Yeah, which is a peculiar point of view.
 

(1) The agent who discounts his rate might take home 50% of the commission, etc., from each client but he may have three deals in the time a full-rate agent has one. Of course that also means more work for the discount agent, but ultimately that work may prove more valuable (more clients/more experience/more demand).

 

(2) ((my point was: if they can't sell themselves, selling your listing (competitively) appears pretty much doomed unless your asking price is rock bottom, and there seems also likely a modest or more than modest stigma out there with a cooperating realtor giving a discounter the time of day, unless their buyer is being pushy))

(3) There are areas (eg. Toronto) where the agents have allowed cheap MLS listings ($99 is what I've seen at times, $499 is commonly shown now on google, = https://oneflatfee.ca/package-1 ) -- now THAT'S the sort of non-refundable commission fee I'd like to see for Victoria (& I'll do my own dealing with inquirers thank you very much, while skipping the whole $9,500+ "discount" rate). And sure, if a realtor shows up with a buyer, I don't mind paying them a customary 3%/1.5% (though, I'd somewhat rather the Buyer pay their agent directly).

jbw

The buyer can go and buy someone else's home, though, so it's in your interest that an agent brings you a buyer.

 

The rule of thumb is the guy selling the pencil is the one with the problem, not the guy looking for a writing utensil.

And sure, if a realtor shows up with a buyer, I don't mind paying them a customary 3%/1.5% (though, I'd somewhat rather the Buyer pay their agent directly).

I think you pretty much have to put it right in the ad otherwise agents won't ever tell the buyer about it.  I am going to guess 90+% of people buy with an agent

I think you pretty much have to put it right in the ad otherwise agents won't ever tell the buyer about it. I am going to guess 90+% of people buy with an agent

The cooperating agent (aka buyer’s agent) commission is listed in the private fields of the listing so agents can see this right off the bat