Real Estate Agent’s Commission Explained

So what I'm going to do is explain the real estate Commission. It varies from state to state whether you have a real estate agent or a real estate broker. As an example, in North Carolina, you have what's called brokers, and then you have what's called a Bick or broker in charge. So everyone in the real estate profession is called a broker. whereas Back in Texas, you have a broker that runs several agents or Nevada is the same. So it's very common for there to be a broker and then have several agents.However, NC is different in that there is a broker in charge and a broker. Normally a buyer's agent for purposes of this discussion, gets paid 3% that can vary per region or per city or area. The reason I say that is because in Raleigh, the average agency fee for a buyer's agent is 2.4%, not three.So it's standard in the industry in that area to pay 2.4% to the buyer's agent. However, if you're in Charlotte, it's 3% to the buyer's agent and the rest of the state, so it can vary.And what you want to do is you want to pay the buyer what they're due. If you pay them less or more, it's not going to make a difference.

So let me explain, If you decide to pay them more because you want them to be more motivated to sell your home, that doesn't happen psychologically or even any way you want to slice the pie. And the reason I say that is because nowadays most buyers, if not all, or a very high percentage of them, go out on the Internet and look at all the homes that are listed first and are available.They'll go to a site such as Haran, Houston, Texas, as an example or the MLS. In other places, they'll go to Realtor.com or Zillow because all of those sites are feeding to each other. And so what they will do, is they will go in and they will look at all the homes in the areas that they're looking at, then go to the agent and tell them the houses they want to look at. Back in the olden days, the real estate agent knew what all the listings were, and they would come and show the buyer the listings that they felt were best and they could deselect out the houses that they didn't favor.

And so if you paid an agent more money or offered more money, they could drive that buyer to the house they really wanted them to buy. That principle is not really valid even in the olden days.It's not going to work as easily, because the mere fact of the matter is you're going to have an issue with ethics.If your agent and you're doing that, and if not, you're still driving your buyer to something that they most likely won't want to buy in the end. And so the odds of the canceled contract and other things are going to make it unlikely or not a wise idea to do that.But in today's market, everyone can see everything online, so there's no sense to pay the agent more.However, if you decide to pay an agent less, this can be disadvantageous because in that case, you have the person who's representing the sell of your home ie (that is) showing a buyer that they're not making as much so their attitude will change and be different and not as helpful.

They might tend to share light on the negative aspects of the home or do things that would otherwise not give your home a benefit. Now, once again, nowadays the buyers see everything online. They know what they like, and so that's going to be harder for them to do. They're going to try to drive them away from your home. Now hands down, the best thing to do is pay with the market demands in that area, don't discount it. So that has to do with a buyer's agent Commission. So now let's shift to the other side, which is a seller's agent Commission. In our particular model, we pay our agents 1% and we pay our agents 1% as a base fee. We pay them a quarter point if they stop the counter on an appraisal and a quarter point if they stop the request of concessions or the counter on repairs, concessions on repairs.These are the two areas that buyers tried to destroy the deal financially is through coming in and hammering you because they say that the appraisal is lower or that the repairs cost more.

They hand you a book and say these are all the things that are wrong with your house.Now give us another ten grand off basically. Now give us another ten grand off basically. So our agents are not motivated to get an appraisal counter or a repair counter, which can pay them up to 1.5%.Those two strategies combined along with they also have one other requirement, and that is that they must hit the comp value in the market. So if we run a comp on that property and it's a 225, they have to get 225. Plus stop the counter on appraisal and repairs to make a full one and a half percent. Now what you might say is, wow, you're paying your seller's agent too low. We're not. And here's why, because we're investors.

And so our agents don't do all the books and the brochures and the yada yada to get their seller to come to them.Our deals are spoon fed right to the seller's agent and they make their money in volume. So if you ask any agent, we have a four year agent in Texas that's been in the business for many years and she'll take our check over anyone's check all day long. And the reason why is because she knows she has to do less work in her marketing, and she knows that she's going to get a volume of deals.She'll list four to ten homes a month as an example, right? And she doesn't have to go chase the deal. She can just simply just hand it right to her and she can take them with them, get them on the market.

The other thing is, she knows she's working with experienced sellers. So in our case, we have a ten day program on how we sell a home and the protocol is the same for every deal, every house. So she knows exactly what to do. She doesn't have to go back to a seller that's picky or doesn't know what they're doing or try to bring around the corner or try to talk them out of a bad deal.All of those things are respectively, gone. And so it allows the agent to write down the business, get that house on the market and get it sold.So in our case, we pay a one and a half percent Commission. If you are a person who's just selling out there as a retail seller and it's your only personal home, then expect to pay the 3%, and I would not pay it less. Once again, you want that agent motivated to your side to do what you want them to do, and you want them to feel comfortable that you're going to do the standard in the industry.And if you discount them, most likely, they're going to put you at the bottom of the list rather than in the list with everyone else.