Sunday, April 15, 2007

Myth 2 - Your agent wants to get the highest price for you.

This is the second of five myths that were the basis of an article in Parade magazine. Well, at least this is an accurate myth, if it is a myth at all. Let’s first look at the typical sales commission and split. First, the commission is not fixed; it could be 3, 4, 5 or 6%. Second, one agent does not get the whole commission. Depending on the agent and the brokerage office they work for, it could be a 50/50 split, and that’s on the half each agent and office gets from the commission. Usually there are two agents and brokerage offices involved in the sale and purchase.

So, on a $500,000 sale at a 5% commission the total commission paid would be $25,000 and the share one agent gets would be about $6250 (25% of the total) LESS their taxes, board dues, transaction fees and other business expenses. If the agent got another $10,000 in the sale price, it would only mean another $125 in commission. Now the agent could be thinking, “Could I get another $10,000 for the seller, or could I loose this buyer completely and maybe another one won’t show up?”

It’s not worth the extra $125 to the agent if the potential is chasing away a solid buyer and having no deal at all. Because I have relationships with hundreds of real estate agents around the country I have heard the sad story many times where the seller wants to hold out for more money and the buyer walks. Everyone looses in that situation. The seller has no buyer, the buyer didn’t get that home and the agent has no commission after all the time and money they spent marketing that home.

When, and if, the next buyer comes along, the sales price could be, and often is lower. Why? Because the next buyer wants to know why the first buyer walked. Maybe there is something wrong that’s not being disclosed. Maybe the home was overpriced to start with and that’s why the first buyer walked. Maybe the market has changed. Now the property has been on the market longer, and that’s not a good sign. Bottom line; this is often an accurate myth. The agent wants to close the sale more than the agent wants a few extra dollars commission against no commission at all.


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