The following is my professional informed opinion why you should Not be looking to pay lower commission to your REALTOR®
First off, I want to give you a little inside information about realtors and their motivations. Did you know that statistics show that 20% of realtors make 80% of the money? The average wage for a realtor in Ontario is around $30,000 per year, based on an average 10 deals. So from what I have just told you 80% of realtors are hungry and not doing to well! 20% are doing really well and there is probably a good reason for that, which we will get into later.
In almost all real estate deals the seller is paying the total commission with the average being 5%,
whatever the listing agent accepts is split, half for the seller agent and half for the buyer agent. As mentioned the average is 5% so 2.5% usually goes to each, if however the listing agent accepted 4% then 2% will be paid to each. Alternately if the commission was 6% then obviously 3% will go to the buyer agent.
Are you aware that when a Buyer agent is looking for potential homes for a client on MLS they will see what commission will be paid to them should they close the deal?
Imagine then you are an agent for a moment, your client is looking in a particular area and there are 15 homes that meet their criteria. They are all pretty much alike, 2 of them offering 3%, 11 offer 2.5% and the other 2 offer 2% Which homes are you going to show first? Subconsciously you will promote the higher paying homes. Some People will openly avoid homes that pay less than the average 2.5% commission.
This is no different to you searching for a job, and finding two almost identical jobs but one paid $5000 per year more than the other, would you feel bad not taking the lower paying? I don’t think so, we all want to earn as much as we can or at least be paid what we think we are worth.
Ok having said all that, I am sure you can see by now that negotiating a lower commission to sell your home will ultimately only hurt you.
As mentioned earlier the average realtor is not really doing that well, they know that their commission based on the average for many years should be 2.5% if you are able to convince them to take less then I would suggest that you look for another agent. Why? This agent has just proven to you that they are not a good negotiator. They caved in at the first hurdle and settled for less than most agents are being paid. To him or her the most important part of this transaction will be their wage, and you just convinced them to give some of it to you. How then do you think they will fair when a potential buyer wants to offer less for your home than it is worth? Do you believe that they will all off a sudden become the person that fights for you in order to get the top price for your home? The most important aspect of a successful agent is their negotiating skill next to that their Marketing skill, if however they are willing to accept less than they know there counter parts are getting they cannot offer the same level of service and will ultimately fall into the 20% category due to a lack of sales.
Remember your home is worth whatever an informed buyer will pay. The market value of your home is based upon property recently sold that is similar to yours for example your neighbors home, identical to yours, sold last week for $200,000 that is the market value of your home. This price includes the commission , lets say the average commission in your area is 5% then that is part of the $200,000 so the actual value is $190,000 so you can see that overall higher or lower commission will not in the long term benefit you the property owner.
The 20% of realtors that are doing ok are doing so because they are closing the most deals. Why? Because they know what they are worth and will not accept less, they are great negotiators, marketers, and know their product. Listing with a top agent for a higher % will usually get your home sold quicker and for the most dollars in YOUR pocket.
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