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Tuesday, February 2, 2010

Realtor Commissions: When it's Smart to Pay More

Want More Showings? Dangle a Fatter Carrot

In a culture -- and economy -- where getting the best possible price is practically a religion (if not a budgeting necessity), why should home sellers consider paying their Realtor a higher commission?

Because they might actually make more money that way.

That's because Realtors who charge more often (but not always) do more, are more skilled, experienced, etc.

Put it this way: who's the better deal, a Realtor who charges 5% or even less to put your home on MLS (and not much more); or, a Realtor who charges 6%-plus and aggressively stages, markets (both pre-list and after), uses professional photography and desktop publishing, networks your home like crazy, hosts Broker and multiple Sunday open houses, promptly follows up showings for feedback, etc.?

Reason #2

Paying a higher commission today can also be a nod to market realities.

Particularly in some Twin Cities suburbs today, it's not unusual to see 20-30 relatively similar homes -- all basically at the same price point -- competing for showings.

If the competing homes are offering a 2.7% payout to the Buyer's agent, bumping that to 3.15% is a relatively cheap way to stand out.

(Note: at least in the Twin Cities, the commission is often split 55-45 between the listing agent, representing the Seller, and the Buyer's agent. On a 6% commission, that comes to 3.3% and 2.7%, respectively; on a 7% commission, the split is commonly 3.85% and 3.15%.)

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