October 16th, 2014
Real estate agent commissions – an unavoidable, fixed cost of buying or selling a home, valuable only as incentive to real estate agents. Right? Wrong. Here are five little known facts about real estate agent commissions.
1. Real estate agent commissions come out of the actual cost of the home. Some people think of their real estate agent’s commission as a fee. It’s not. Because most homes in the Portland real estate market and around the world are bought and sold using a real estate agent, market prices reflect the value of the home, real estate agent commission included. It’s not tacked on above and beyond the price the home eventually sells for.
2. Real estate agent commissions keep the market moving. The agent commission system is set up the way it is — in Portland, Oregon, the US and most developed countries — because it works. Real estate agents are motivated to sell homes because otherwise they don’t get paid (no bimonthly paychecks!) This keeps market inventory at a reasonable level, and in a sense keeps homes values high. Real estate agent competition creates powerful marketing platforms and systems to get the job done.
3. Real estate agent commissions are a good deal. Some real estate agents work as “limited representation” agents, charging a flat fee or hourly rate instead of a commission. This arrangement might work for some home buyers or sellers, but because limited representation agents don’t do everything a traditional agent does, they can end up costing more or working less efficiently than an agent earning a commission. Limited representation does not provide legal protection in case of a buyer seller dispute and provides very “limited” marketing opportunities. Also buyers agents tend to avoid “limited representation” listings because they know it is more liability and work for them.
4. Real estate agent commissions are not fixed by anything but tradition. Typically, 2.5% of the sales price of the home goes to the buyer’s agent, and 3.3 – 3.5% goes to the seller’s agent. In Portland, the average total commission is 5-6% (agents who represent both the buyer and the seller reduce their commission slightly). But there’s no law that says commissions have to total 6%! In fact, I offer my services to Portland home sellers for a 2% commission (and offer the standard 2.5% to the buyer’s agent). If I represent both the home seller and the buyer, my total commission never exceeds 3%.
5. Real estate agent commissions pay for themselves. Yes, it’s technically possible to pocket more of your home’s sales price by listing it yourself. On average, however, homes that are sold by their owners don’t fetch their full market worth (See NAR research stats), or they take so long to sell that the homeowner negated any potential savings by continuing to pay out on the mortgage for those additional months. Real estate agents do their work (namely, marketing your home) in order to generate a greater number of offers, which translates to a better sales price for your home. We typically get over 100,000 online views per listing! This often translates into as many as 2,000 online buyer views a day. That is STRONG marketing you can’t obtain by yourself. Once that offer is in, your real estate agent will continue to work on your behalf to insure the deal doesn’t fall through.
Still have questions about Portland real estate agent commissions? Feel free to contact me. For 4.5% to 2% commission, I offer one of the best listing packages (if not the very best) in Portland, and work fast to put your home in the hands of a 100% satisfied buyer for a fantastic price!