Understanding The Real Estate Commission… Still confused about real estate commissions? You’re not alone. Here are some answers to a few of the most common questions that are asked.

Q. What is the average commission on a home purchase?
A. The total real estate commission that is charged is not published and not shared with other brokers. Unfortunately, we cannot state a “rate”, or even a “range of rates” because of the Federal Anti-trust Act. Commissions may vary with the level of services offered. Remember that the listing broker usually splits the commission with a co-operating broker who brings a buyer.  Most all listings show the Buyer Realtor’s commission to be 2.5% to 3.5% . The listing agent retains the balance of the total commission called the listing- side of the commission. This video maight be of interest to you.

 Q. Who pays the commission?
A. On the settlement statement it shows it is paid by the seller. In reality it is actually paid by the buyer, because the buyer is normally the party bringing the purchase funds to closing via a mortgage loan or cash or both. Think about it when you buy a car who money really pays the commission on the car you purchase. The dealership normally does not pay the sales person anything unless they sell a car. The dealership uses your funds to pay for the car and to pay the sales person and their other overhead expenses. Essentially you can easily say the buyer pays for all the dealership’s expenses. That’s the reason that dealership go out of business when they don’t sell cars.  No. The listing broker’s firm sets the commission after negotiating with the seller before listing the property. The listing broker then places the listing on the MLS and offers part of the commission – most often 50 percent – to the broker whose agent brings a willing and able buyer. Both brokers then share their portion of the commission with their agents who work with the seller or the buyer. The agents’ portion of the commission may be as little as 40 percent or as much as 100 percent, depending on how they operate.  

Q. Is it possible to negotiate the real estate commission?
A. Yes. Commissions are completely negotiable by law however buyer rebates are not legal in Tennessee. Most established full service full commission companies have a set amount they charge for their services and as amtter of company policy do not deviate unless they feel it is absolutely necessary.

Q. Will I pay less if I buy a house without using a real estate agent?
A. Not necessarily. Most homes are listed on the MLS priced independently by the seller with advice from the listing agent. The best way to negotiate a reduced price is to be informed about the commission and the value of homes in the area. Then use a Buyer’s Realtor who does not have any conflict of interest when negotiating the best purchase price possible. Our Flat Fee Buyer Service is designed to do this. We prepare your offer with “zero commission” being paid to our company as the Buyer’s Realtor. In addition to that we provide you as the buyer current information on home sales in the neighborhood.

Q. Is a real estate agent likely to push me to buy a more expensive home to earn a higher commission?
A. Not necessarily. The Buyer’s Realtor commission for example on a $250,000 home versus a $260,000 home is not significant. The biggest conflict we see is if an agent is offered less or more compensation to sell one home versus another one. We see this happening daily. Some agents will steer their buyers towards a home that offers a bigger pay check and away from another listing that offers a smaller pay check without considering what might be the best home for their buyer. Also some Brokers often offer their agents an incentive to sell their company’s listings. For the buyer the fairest and most ethical way for an agent to handle this is to provide all the applicable MLS listings available to their buyer for consideration and stay away from selecting listings based on the commission. Note: Most buyers never see the full agent print out that shows the commission and any bonuses being offered.  

 Q. Are there any commissions that buyers don’t see?
A. As previously discussed in some cases, a seller, listing agent or builder might offer the buyer’s agent a bonus or other incentives to help sell their house. In our opinion the Buyer’s Realtor should disclose this, but you will may need to ask. With our Flat Fee Buyer Service bonuses or other incentives are always disclosed to our buyers. This in turn offers an opportunity for our buyers to negotiate for additional savings over and above the typical commission and price adjustment and/or closing cost to be paid by seller. Once the seller has committed to pay the bonus the seller is prepared to pay for it at closing which used to benefit our  buyer during negotiations not our company financially.

Q. Can I get a lower fee by using a discount real estate company?
A. A discount company may offer you lower fees in exchange for you doing more of the work. Many states allow a rebate on percentage of the buyer agent’s commission . Rebates are not permitted in Tennessee but some companies may offer a gift card from a major home improvement store like Lowes. Beware of services offering you full service for less. These types of services can easily have more conflicts of interest than traditional full service full commission services because they can invest a significant amount of time with showings. The key in our opinion is to have a service that removes as many conflicts of interest as possible. Anytime a sales person is working to earn a commission they have a big conflict of interest with their buyer. The way our Flat Fee Home Buying Service is structured we have zero conflict of interest.

Q. Beyond the commission savings what are some other benefits that the BUY-WISE Flat Fee Service offers?.

A. Because of the commission savings other opportunities become available such as:

1. Less failed negotiations since many negotiations fall apart due to a difference of 5% or less
2. Over priced homes become more affordable with a Zero Buyer Realtor commission
3. Withdrawn and expired homes are available to be negotiated with no commission
4. Buyers who want lots of closing costs paid by the seller can be easier to negotiate
5. Contingency contracts with kick out clauses can be bumped easier
7. All types of residential listings and properties can be considered such as: FSBO, REO and Short Sales
8. Contingency offers are more appealing by the seller to accept
9. The overall working relationship with our service should be improved since we do not have conflicts of interest that plague  commission based sales

 

Check with any traditional real estate agent. They will give you thousands of reasons to use the same out dated commission based service that they have provided for years. Most all of those reasons also have a BIG dollar sign attached to them.

Bottomline: You will have an opportunity when using this service to negotiate your home purchase with zero Buyer’s Realtor Commission being paid. You will have an experienced Buyer’s Realtor whose interests are not in conflict with yours. You will substantially increase the probability of benefiting from the hard work you have already done selecting the best area for you to live in. You have nothing to loose if you decide this approach is not for you just let us know. We will refer you to a full service Buyer’s Realtor and pay for your home warranty up to $350.00 at your closing, if you purchase a home within 12 months of us referring you to a Full Service Buyer’s Realtor.

Our company’s mission and goal are the same:  Receive many referrals from Tennessee home buyers who chose to BUY-WISE™