There has been an increasing amount of discount brokers representing sellers in today’s real estate market. When these discount brokers guarantee a lower cost for selling the house, it results in a lower commission for agents, sometimes so low that realtors will purposefully avoid showing the properties to their clients.
Both buyers and sellers can wind up confused and frustrated, never a recipe for good relations between realtors and their clients.
More buyers and sellers should understand the importance of a fair commission, especially if they want to enjoy a timely and productive real estate transaction.
Understanding The Real Estate Commission
In the average home sale, there will be a certain percentage that goes towards commission. If there is a commission of 5%, this amount will usually be split equally between the buyer’s agent and the seller’s agent. Although, in Kenya, this is the same agent representing both seller and buyer.
With a discount broker, the seller is told that he or she will have to pay a lower fee or commission because the discount broker is offering a great deal. Oftentimes what is happening is that the buyer’s agent is being shorted on the commission split.
Discounted commissions don’t necessarily have to come solely from a discount broker. Any agent working for any company can set a commission structure less than what the market is accustomed to seeing whatever that may be.
Commissions are always negotiable but that does not mean it is reasonable to discount the compensation you are offering to realtors.
The Negative Consequences Of a Lower Commission
When you are trying to sell your house, you naturally want to walk away with as much money as possible. Who wouldn’t? But it is important to understand that in real estate, just like in everything else, you do get what you pay for.
The more that your discount broker shorts the buyer’s agent on your home sale, the less likely that agent is to show his or her client your home.
You are creating ill will in the pool of agents, and this ill will can have disastrous effects on your home sale.
Worst of all, you may not even be aware that any of this is going on. You may just be wondering why there is no one coming to look at your house.
The discount broker that looks so appealing initially may not be the best choice if you want to sell your home – especially if you want to sell within a reasonable time frame, and for a price that you can be happy with.
Every potential buyer that is directed away from your home is a potential sale that is lost. Homes that are listed on the market can also develop a negative reputation, one that will be picked up on by all the realtors and buyers in the area.
If your home develops a negative stigma, you may wait months before its sells. You may also wind up having to take far less than you initially expected.
You’re Not Saving Money
What many sellers fail to understand is you are not saving money when you have a lower commission than all of the other homes on the market you are competing with.
You are just making the agents less motivated to sell your property. Therefore, they’ll avoid your house in favour of a property that they’ll earn more commission.
With your home sale on delay, you’ll be tempted to lower its price or the more it sits in the market they more mortgage you pay.
Buyer Agent Code of Ethics
You may be thinking to yourself that it is not right that an agent should be able to drive a buyer away from a property because they are unhappy about a low commission.
Shouldn’t a buyer’s agent be looking out of the interests of their client no matter what? An agent should not be putting their pocket before the interests of their client, should they?
The answer to these questions, of course, is YES. Realtors should always put their client’s interests ahead of their own. Exceptional Realtors follow the real estate code of ethics. Remember, however, we are talking about the real world here.
One of the things a good agent should do right up front when meeting a client explains how they get paid. Sellers need to understand that real estate agents generally do not get paid a salary.
They should understand that an agent makes no money unless they make a sale. Clients need to be completely aware of how our business works.
Hence, as a seller consider these aspects before choosing a cheaper option that will lead to more problems. Agents need the commission to act as a motivation. The better the real estate commission the faster they’ll sell.
