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Old 02-26-2013, 12:53 PM
 
Location: Boise, Idaho
715 posts, read 829,395 times
Reputation: 706

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Most people don't realize how a real estate commission is ultimately broken down so I will try to list a hypothetical breakdown.

Assume a $1 fee is charged to list/sell a home:

50 cents (half) might go to the agency selling the home leaving 50 cents for the listing company;

Take off franchise fees (if any they vary so take 6%) of 3 cents leaving 47;

Assume the agent is on a 75/25 split with their Broker that would leave the agent with 35 cents.

That $0.35 is essentially the agents "gross" income out of the $1.

Pay IRS estimated 25% leaving $0.26; (will be different based on itemized expenses);

Pay self employment tax since you have to pay both sides of social security contributions of 15% leaving $0.22 to start paying expenses with!

Based on this scenario, if an agent brags about being a "million dollar producer", then let's do the math: $1 million x a negotiated fee of 6% = $60,000 gross commission. (Again, since that is split between the listing and selling brokerage they are down to $30,000 gross income.) After the fees noted above, that leaves roughly $13,200 to the agent to pay the folowing expenses:

Take off any possible office "desk" fees the broker may charge;

Deduct MLS monthly dues;

Deduct mandatory errors and omissions insurance;

Deduct licensing fees (continuing education, annual or semi-annual licence renewals);

Deduct annual fees for any and all real estate designations required to maintain active designations (i.e. CRS, SRES, etc.);

Deduct membership to local building contractors association if applicable;

Deduct membership fees to local chamber of commerce if applicable;

Deduct membership fees to Better Business Bureau;

Deduct costs of typical business expenses for Realtor's (cell phone bill, internet, website hosting, advertising, etc.);

If you have taken the time to read all this, I appreciate it! Most people only see the tip of the iceberg of the initial commissions charged. If run correctly, it is a great business but as in all business, there is a lot of expense if you take time to peel back the layers of the onion!
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Old 02-26-2013, 01:13 PM
 
Location: Hernando County, FL
8,488 posts, read 19,285,142 times
Reputation: 5397
Quote:
Originally Posted by Pfhtex View Post
Lenders make fraction of what they were making in the early 2000s.

Realtors' commissions, by and large, have not budged.

Lenders do the heavy lifting.

Realtors are overpaid. By a LOT.
You do not need to use a real estate agent, you can sell or buy by owner. It is a choice not a requirement.
I really don't see why this is so hard to comprehend.
The overpaid part is just your opinion.
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Old 02-26-2013, 01:20 PM
 
Location: Cary, NC
39,045 posts, read 67,632,059 times
Reputation: 39936
Quote:
Originally Posted by IdahoBroker View Post
Wow, ...

If a Realtor is immediately willing to discount their fees, how quick will they cave in negotiating for your best deal when they can't even protect their own?
Someone HAS to write a new script. That one is SO tired and obviously self-serving.

Shoot the next broker or self-styled "guru" who teaches stuff like that to a newbie!
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Old 02-26-2013, 02:15 PM
 
Location: Just south of Denver since 1989
11,575 posts, read 31,868,176 times
Reputation: 8358
But Mike, it's kinda true. Those that can't demonstrate/prove value; discount their price.
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Old 02-26-2013, 02:20 PM
 
Location: Cary, NC
39,045 posts, read 67,632,059 times
Reputation: 39936
Quote:
Originally Posted by 2bindenver View Post
But Mike, it's kinda true. Those that can't demonstrate/prove value; discount their price.
It is not true. It is mind-bogglingly dull and would **** me off if I was a consumer and someone blubbered it out counter to my question.
I guess I have seen too many stupid formulaic script closing lines delivered by inept salespeople.

But, I'll play.... Since commissions are negotiable, what is the standard USHUD-certified price point for which all lower fees are "discounts?"
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Old 02-26-2013, 02:24 PM
 
Location: Just south of Denver since 1989
11,575 posts, read 31,868,176 times
Reputation: 8358
My post wasn't meant to be a response to a client.

The correct answer is that since commissions are negotiable, there is no discounted fee.
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Old 02-26-2013, 02:30 PM
 
613 posts, read 667,187 times
Reputation: 2131
I could not agree with Mike more! Every sophomoric, cocky, person in this business utters this inane quote. It isn't true. Negotiations begin with the company and more importantly the effectiveness of the agent and agency you hire to market your property. The house sells itself. The company/agent is the marketer and brings the buyers through, whether with another agent or not. I got tired of negotiating a commission for a nameless, faceless agent who might or might not walk through the door with a body...notice I did not say "buyer". This barnicle real estate business is the problem. I tell the sellers...."this is what I charge"...do you wish to compensate a buyers agency/agent? What would that percentage be? THAT is what goes in the MLS....not 1/2 of what I negotiate. The seller sets the standard and if they decide 1%....the marketing is never compromised because that is what I agreed to. The entire business is predicated on the lowest common denominator....did I get flak for other companies. Sure did....just showed them what I had the seller sign. The seller is in charge of the deal from the beginning....in the end it is the buyer and the seller. Never the agent. If you think so...well, you are full of yourself.
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Old 02-26-2013, 02:35 PM
 
Location: Cary, NC
39,045 posts, read 67,632,059 times
Reputation: 39936
Quote:
Originally Posted by 2bindenver View Post
My post wasn't meant to be a response to a client.

The correct answer is that since commissions are negotiable, there is no discounted fee.
OK.
Can you tell I have a hot button for that same old, same old crap?
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Old 02-26-2013, 03:16 PM
 
111 posts, read 162,226 times
Reputation: 35
Quote:
Originally Posted by 2bindenver View Post
I am keeping it short. There is no sub agency in Colorado, so this link has zero relevance.

We also do not have dual agency.

An offer to cooperate if a agent/broker brings a buyer that will close is all that the MLS does. It's commission sharing thing, not a you will work for someone you don't know thing.

Dear 2bin

I don't know. A quick google search brought up this

http://www.pagosaspringsrealtors.com/documents/MLSRulesReg082808.pdf

ARTICLE II. PURPOSE
A Multiple Listing Service is a means by which authorized Participants and Users make blanket unilateral offers of compensation to other Participants and Users (acting as subagents, buyer agents, or in other agency or nonagency capacities defined by Colorado law);

Why don't I make the case for California and then we see how it applies to each state?
If the problem is 60 billion in the USA, then California might be one 50th of that, 60 billion nationwide divided by 50 states equals 1 point something. So, I am only certain about California which makes it only 1 billion of the 60 billion. Still pretty good chunk of cash.

We won't be talking about real estate law. If anything, it is going to be contract and agency law, and for that, a real estate license does not cover it.

Thanks for your input. I'll be back in a few days. Got to do some traveling.

BB
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Old 02-26-2013, 03:34 PM
 
111 posts, read 162,226 times
Reputation: 35
Quote:
Originally Posted by IdahoBroker View Post
Most people don't realize how a real estate commission is ultimately broken down so I will try to list a hypothetical breakdown.

Assume a $1 fee is charged to list/sell a home:

50 cents (half) might go to the agency selling the home leaving 50 cents for the listing company;
Nobody is saying that you don't need the money. We are saying that it might not be your money.
Bubble boy is only talking about half of a commission that is asked in advance that "might" or "might" not be needed by the agent, but the seller pays it in advance "fer sure fer sure".
If you don't use it, return it. End of story (actually there is much more to that)

The forms, the rules, the joint escrow instructions, the code of ethics points at not keeping that money as the thing to do, plus it is reasonable. Reasonable is when you get a group of about 12 guys and girls, just like you, that agree with you.
I think that if you are not sure if you are going to use or not the money, you ought not to keep it.

Now, I am going out of town for a short while.
Please continue with out me.
BB
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