What is included in a real estate agent's commission?

Posted on Wednesday, July 19th, 2017 at 2:36pm.

exchanging money for a house

There is a lot more to buying and selling a home than many people realize. No matter which side of the transaction you are on, it’s imperative that you have an ally by your side to guide you through the process. That ally is your real estate agent!

These professionals have been through the process many times and can help you understand what you want and how to get it. Agents not only know how to correctly price a home and prepare it for sale, but they often know a lot of information about the school districts and neighborhoods clients are hoping to buy in. They can be an invaluable source of information, and save their clients hours of work and tons of stress throughout the home buying or selling process.

Traditionally, a home seller pays agent fees for both their seller’s agent and their buyer’s agent at closing. This typically ends up being around 6% of the sale price of the home – with half paid to each agent who participated in the transaction. Buyers don’t pay commissions, but will usually pay closing costs (which you can find out more about HERE).

Many times, clients will wonder what exactly their commission fees are going towards, and we’re here to answer that question for you. We asked our agents to help us explain some of the benefits that come from partnering with a real estate agents, and some of the services client’s commission pay earns them.

 

- Listing your property. It will take your agent a few days to gather all of the necessary information about a home in order to list it for sale. Information like the square footage, unique features, and potential problems must be recorded and factored into the price. The agent will also order pictures, create your listing in the MLS (Multiple Listing Service), and make the listing available to other agents. They will need to dig deep to determine what makes your listing special, what the best way to market it is, and what plan of action they are going to take to do so.

- Market your home to the public. “When listing a home there can be a lot of costs associated with marketing that most homeowners don't realize, and in some cases, they never see the extent of what their Realtor® is paying for,” says Austin agent Josh Pruitt. “In the Austin market, it is very competitive, so as a listing agent you have to stand out. That means getting professional photos, getting drone footage, getting virtual reality 3-D tours, and then promoting all of this on social media and in print. Not every listing requires an extensive marketing package, but there will always be some marketing costs associated with listing a home.”

- Offer their negotiation experience. Real estate agents negotiate for a living, so part of what you pay for when you hire one is this experience. Their objective is to get the best deal for their clients, but they usually try to go for as many win-win situations as possible. They have to negotiate things like prices, timelines, contingencies, items that convey with the property, closing costs, home warranty, leaseback, and repairs. Realtor®s ensure that nothing is overlooked and that their clients don’t feel shafted in any way. They will not allow you to sign the paperwork until the best possible agreement is reached!

- Make price recommendations. Pricing a home for sale is of particular importance. Pricing the home too high in the beginning can deter buyers, and once the home has been on sale for a long time, buyers become wary that something might be wrong with it. They also ensure that their clients don’t price their home too low, missing out on potential profit. Real estate agents earn their commission making sure their client’s home is priced in the sweet spot, where it will sell quickly, and hopefully generate multiple offers to drive the price up even higher!

- Discuss all options and potential scenarios once an offer is made. “Your agent’s knowledge about local lenders is beneficial - some are great at closing on time, and others - not so much,” warns Austin agent Pam Wachholz. “Having knowledge about the different types of financing is helpful as well - are there limits to seller contributions? Is there a chance the property won't appraise for sales price (either in value or condition)? Also, knowing the advantages of more money down, knowing what a back-up offer is, and how that can work to the client’s advantage is extremely helpful. Things like: ‘why are closing out permits so important when selling your remodeled home’ are things that most buyers and sellers know little about. Having a Realtor® who knows the contract and can competently lay out the options and potential pro's & con's is of HUGE importance value in such a high-value transaction.”

- Follow the transaction through the closing once an offer is accepted. “Typically, sellers are going to be most concerned with the process of getting the home prepared for the sale, getting it marketed, and getting it under contract,” says Austin agent Greg Vassaur. “Most sellers don't understand that the real work takes place once a contract is accepted. The listing agent moves from a marketing/advertising expert, into a transaction/contract manager. This role entails managing the nuances of the contract to ensure timelines are met, not only by the sellers but buyers alike. Many times the listing agent must manage the buyer's agent's process to ensure everything stays on track. Ultimately it is the sellers hope for a seamless sale from start to finish. The finish being a closed/funded deal.”

- Facilitate the ordering of title work. Communicating with the title company to ensure a smooth and timely closing is significant. Delayed title work can delay the date of the closing significantly if not ordered on time and correctly.

- Deal with home inspection results and handle any negotiations. “As real estate agents, we see home inspections almost daily,” notes Austin agent Stephanie Fischer. “We are well versed in the language, as well as what is most important. Inspections can be scary and overwhelming to a buyer or seller, as inspectors are required by TREC to report on every minor detail. We can help ease fear and doubt about the report by explaining what is considered minor vs. major repairs. We can also get quotes on your behalf for any necessary repairs, so you can be sure you are not overpaying for such repairs.”

- Coordinate and attend the closing. Making sure that all parties are available to attend the closing, including setting up the appointment with the title company and lender, as well as making sure this works for the seller’s schedule can be difficult. Once the closing has been scheduled, making sure everyone arrives, and on time, is part of the agent’s commitment to their client.

 

Once the deal is closed, the agent gets their well-deserved commission. There is much more about being a real estate agent than meets the eye – it’s a high work, high reward career. If more people knew what really went into a real estate deal, they might not be so quick to question the 3% commission that each agent is awarded.

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