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Is a Five to Six Percent Real Estate Commission Still Acceptable?
By: Marketwired .
Dec. 6, 2012 02:09 PM
TORONTO, ONTARIO -- (Marketwire) -- 12/06/12 -- In some cases, it seems that paying a five or six percent overall commission might seem a bit steep, but it's important to consider all of the factors that drive these costs. Like any other business, there are costs associated with earnings.
Looking at a relatively new real estate agent, someone who's new to the industry and still learning the ropes, building their contact lists and networking can be very expensive. These real estate agents don't have any referral business coming in, they don't have a network in place and they need to start from scratch. So, like any other business, there are a lot of start-up (up-front) costs to take into consideration.
For example: having a web presence, mailing campaigns, ads, billboards, other local advertising techniques to try and drive awareness and conversion of leads to clients. Beyond their advertising methods, we also can't forget monthly fees including payment to their respective brokerage firms, companies and local real estate associations, ongoing education/certification, accounting, legal, insurance, etc. And, depending on the type of agreement that these REALTORs have with their respective brokerage firms, they'll also have to cough up a percentage of their commission every time they close a sale.
But, as a consumer, should you be paying higher commissions so that real estate agents can build their business?
"It comes down to what's right for the home buyer and home seller, what their needs are and what services they are looking for", says Andrew Brest, co-founder of Sundaybell Inc. (www.sundaybell.com), a free service focused on introducing and building relationships between consumers and real estate agents. "A fair commission is something that should be determined between the parties having the discussion, the services required, market dynamics, and other factors in play and not what is considered to be an industry standard", adds Brest. "I think it's up to the real estate agents to find more cost effective methods of acquiring new business so that each individual client can be looked at independently and commissions can be negotiated based on their particular situation, rather than industry expectations. Not to say that the average commission isn't right, but if a client isn't looking for all the bells and whistles, or if homes in a particular area are selling within a few days, then in my opinion, there might be an opportunity to discuss commissions and work together on a rate that both parties feel is fair for the services being requested".
For more established real estate agents, the initial costs of building their networks have likely been absorbed over the years, but there are still maintenance costs to consider. Team members, fees, additional office space and other costs associated with running and growing a business. "As there might not be as much 'start-up' equity required, the ongoing maintenance of running a business has to be taken into consideration and it still boils down to each individual situation", says Brest.
The average real estate agent, based on reported numbers according to the National Association of REALTORs (NAR) and the Canadian Real Estate Association (CREA) is in the range of $25,000-$50,000. Top agents likely earn more, but it's a bi-product of experience, networks and ongoing commitment to the real estate industry.
If you'd like further information about this topic, please contact Andrew Brest at 905-978-2995 or email him at firstname.lastname@example.org.
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