Tag Archives: commissions

How the commission you pay in listing your home for sale is “split” with the buyer’s agent, and why you should care how much the buyer’s agent is paid.

Recently, a family member who lives out of state came to me to ask my advice about the commission agreement on listing his home for sale. He told me this listing agent was going to take twice as much for his services on the “Listing” side of the transaction versus what he would pay out to a buyer’s agent.

I am not licensed in that area of the country, nor am I party to his agreement so cannot give specific advice. I could only tell him what I personally do as a listing agent, and what I tend to see on data sheets when representing the buyer.

As I’ve outlined here on my website, I commonly charge in the vicinity of 5%. This has always been split roughly with the buyer’s agent at 2.5%.  If I were to offer any less to the buyer’s agent, that agent is going to be much more likely to deter buyers away from my listing and try to sell them something else.

However, I’ve heard from many clients that they’ve spoken with agents who are charging significantly higher rates, and in examining the records in the database, it appears that some agents are keeping up to 2/3 of the fee that the seller has agreed to pay and only paying out 1/3 to the buyer’s agent.

Back to my family member: my advice to him was to ask for evidence of listings where buyer’s agents accepting a lower fee. Luckily, he was provided with about a dozen “comps” for his market analysis, where he can find this info. What he found was that ALL listings gave the buyer’s agent substantially more money.

Can you see as a home seller how offering a non-competitive rate would harm you? Let’s say there is a lot of inventory for buyer’s to choose from. The buyer’s agent reads through the commission payout on the listings, and learns that other listings in the area would result in much higher income. That buyer’s agent is going to be much more motivated to sell them the home with a higher fee offered. Your home, however, is more likely to sit on the market without an offer, and the more it sits, the less likely it is going to sell for what you would like.

In my experience, if an agent is questioned on keeping more money, they will often justify it by quoting that they have higher advertising costs. This sounds like logical reasoning, but I would challenge you to ask what the difference in fee is specifically for, because I find that the costs of operating as a buyer’s agent versus a listing agent are very similar.

My advice would be to ask specifically how much the listing agent proposes to pay to the buyer’s agent. If the split is not equal, compare the rates that the agent is offering to pay to the buyer’s agent with other brokers.

The ultimate goal is to make buyer’s agents WANT to show your home, and not to sell yourself short.