How to choose a Low Commission Rate (One Percent Commission Rate) Real Estate Agent | MLS REALTOR | Hamilton Ontario|
When choosing any REALTOR to sell your home, be it a low commission rate REALTOR, a one percent commission rate REALTOR or a high commission rate REALTOR; make sure he/she is an experienced, qualified, Full-Time REALTOR who will place your home on the local MLS and on Realtor.ca. The MLS exposure is one of the most important tools that REALTORs have to sell your home.
FACT: the vast majority of homes are sold, not by the same REALTOR that lists your home and places it on the MLS but, by another REALTOR who is working to find a home for a buyer.
When choosing a REALTOR to list your home, keep in mind that the MOST IMPORTANT item on the MLS listing data sheet that will be seen by all the Buyer REALTORs is the commission that they receive for selling your home. If this commission amount or rate is not comparable to other similar homes in your neighbourhood, the result may be that your home receives less exposure to potential buyers.
Why might this be the case?
The reason is that each MLS Listing contains a data field that shows the commission that will be paid to another REALTOR that brings an accepted offer. This is the essence of an MLS listing. The listing contains the relevant information about the home AND the amount of commission that will be paid to another REALTOR who participates in selling the home by bringing the buyers and the offer. If this “selling commission” is not comparable to other homes in the area, there may not be enough incentive for the buyer’s REALTOR to work to sell your home. As with all commission based professions, money is a very important motivator. Almost all REALTORs work exclusively on a commission basis and therefore the amount of commission that they can earn is a very important motivator.
Commission rates may vary from brokerage to brokerage. Therefore, in order to find a REALTOR that will provide the MLS Listing exposure that you want AND a low commission rate, you’ll need to find a REALTOR who is prepared to take a very small commission amount for himself/herself as a Listing Commission AND provide a comparable Selling Brokerage Commission to the Buyer’s REALTOR. Although the total commission rates are always negotiable by law, a fair and reasonable total commission is 3.5% total commission. It is very important that the vast majority of the total commission is offered to the Selling Brokerage (the buyer’s REALTOR: the REALTOR that brings the offer). Therefore, the Selling Brokerage commission should be in the 2.5% range. This leaves 1% for the Listing Commission: the commission for the REALTOR that Lists the property on MLS.
If the home is exceptional and will require very little effort to sell because it is priced very competitively or there are very few homes available in the area and there is a high demand for your type of home, then maybe you can get away with a 3% total commission. 1% for the Listing Commission and 2% for the Selling Brokerage Commission. Because you can negotiate these commission rates, you’ll need to discuss them with your REALTOR and see what option works best for both of you.
Some low commission REALTORs may want to take the total commission paid by the home seller and divide it equally between the Listing Commission and the Selling Brokerage Commission. Remember that if the Selling Brokerage Commission is too low, it may not be enough incentive for the buyer’s REALTOR to work to sell the home. So, for example, if similar homes listed on the MLS in your area are offering Selling Brokerage commissions of 2%, 2.25% or 2.5% AND your listing will be offering 1% or a small amount of $1,000, $2,000 or some other amount that is not comparable to other MLS Listed properties in your area, then why would a REALTOR whose income is based on the commission earned have the same incentive to sell your home instead of the other MLS properties?
You’ll also note that since another REALTOR other than the Listing REALTOR will likely be the Selling REALTOR (the one that brings the offer), it is less important which brokerage or REALTOR you choose to List with as long as you get a low commission rate as described above. Once your home is placed on the local MLS and it goes on the Realtor.ca website, as long as your home is offering a comparable Selling Brokerage Commission, your home will have the same exposure and the same opportunity to sell as all the other homes that have paid a much higher Total Commission.
You don’t need to get caught up with the colour of the sign on your lawn or with which REALTOR sends you magnets for your fridge every month. Your search for a good REALTOR just needs to consider what experience the REALTOR has to offer, his/her qualifications , whether the REALTOR is a Full-Time real estate professional and will be committed to working on selling your property Full-time and not as a hobby AND the TOTAL COMMISSION that you’ll have to pay for his/her REALTOR Services. Remember also that it is important to use a low commission REALTOR that has experience at selling homes using a low commission approach.
A traditional commission REALTOR may sometimes give a low commission on a one-off basis to simply compete with a low commission brokerage. But, you must consider if the traditional brokerage will have the experience to know how to sell homes using the low commission approach. The low commission REALTOR must be willing and able to take a much lower Listing Commission and must know how to divide the Listing and Selling Commission properly so that the low commission MLS property will offer the same incentive for the buyer’s REALTOR to sell the property. The REALTOR that uses a low commission strategy with all Listings and has the proven results and experience with the low commission approach will best be able to employ this type of strategy.
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Below are some additional tips about choosing a REALTOR as described by Fabrice Taylor and Published in The Globe and Mail as a Special Report (Published Tuesday, Mar. 13 2012).
Fabrice Taylor writes about investing in Report on Business.
When house prices are surging and a modest home can cost $600,000, excitement can lead to indifference about what agents charge. But that’s a mistake under any circumstance. Homeowners who understand how the realty business works, which this little primer will attempt to explain, will be far better off.
Don’t hire a friend
The easiest mistake is hiring an agent simply because you know him or her – it’s a friend, a second cousin or just an acquaintance. You might not even want to hire that person, but it’s awkward to say no, or to haggle.
A friend of mine who wanted to sell his house hired his childhood pal because he pressed him for the listing. The agent sold the house in two days, which my friend at first thought was great work. When he discovered it sold fast because it was very underpriced, he had second thoughts. He paid $22,000 for this “service.”
Takeaway tip: Make your agent earn your business whether you know him or not.
Myth: You get what you pay for
Most people think commission rates are high but accept them anyway. There are full-service discount realtors who charge less and offer the same service. Why hasn’t this caught on faster?
Some homeowners are convinced by the industry that “you get what you pay for.” That’s what traditional agents always say. But it’s clearly not true. Are agents working twice as hard today as they were 10 or 15 years ago? Obviously not, yet commissions have doubled in that time along with home prices. Rates vary by province but assuming a 5-per-cent commission, the cost of selling an average-priced house in Toronto is $25,000 today compared with half that a decade or so ago.
If you got what you paid for, they’d be working two times harder right? In fact, technology – Internet, smartphones, iPads – has made their jobs a lot easier. Commissions are too high in many cases. But what’s the right number? Is it 1 per cent? Or 3 per cent?
Takeaway tip: You should always negotiate the commission. Before you even let an agent in your door, ask them what they charge
How the realty industry operates
Before answering the 1 per cent or 3 per cent question above, you have to understand how the industry works. Agents who work for big-name firms have to charge a lot because they’re charged big fees, as much as $2,000 a month. It’s not that agents are greedy; it’s that big firms are charging them through the nose.
Takeaway tip: Avoid agents with big overheads; they’re more likely to be desperate to generate a quick commission to pay their bills, even if it’s at your expense.
Final takeaway tip: Do your homework and shop around. It may be old-school advice, but it’s so worth it.
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For more information or details about our commission rates and real estate services visit www.coronarealty.ca or contact Corona Realty Inc., Brokerage at (905) 525-3311
2013-06-03
