Listing Your Brooklyn Home For Sale? Watch the Commission Split!
Getting A Better Price For Your Home
In order to sell a home for the highest price possible, it is important that your property be well exposed to potential buyers. Without the highest possible level of exposure, many buyers will not know your home is for sale. It is all about supply and demand. If there are less people looking at your home, the demand goes down and so will your ultimate selling price.
The Right Real Estate Agent
Homeowners list their homes with real estate agents because of the high level of exposure the agent provides, usually resulting in higher sales prices.
Choosing the right real estate agent is complicated because their fees and level of service vary. Agents that do more for the homeowner charge higher fees and are usually worth it. On the other hand, those that charge low fees do less for the home owner. Also, offices that take a low fee often cannot make a profit and survive.
Unfortunately, many agents cannot secure business from homeowners based on their knowledge and skills, so they offer lower prices to attract business. Homeowners should be wary of these so called “discount” offices because given the profit margin they are working on, they cannot afford to do as much to expose the property. Like the old adage says “you get what you pay for.”
In Brooklyn, the vast majority of brokers are members of the Brooklyn New York Multiple Listing Service (MLS). When an agent submits a new listing to the MLS, if any agent other than the listing agent sells the property, the agreed upon commission from the homeowner gets split between those agents and their respective offices. It is important to note that 85% of the deals made with homes listed on MLS actually involve two agents, one being the listing agent and one being the selling agent. This is due to the fact that there are over 2400 agents who are members of the MLS. This is also a testament to the power of the MLS.
Real estate agents and offices can charge any commission and offer any split to cooperating agents they choose. It is illegal for real estate offices to collude and fix commission amounts and/or splits with their competitors.
In recent years, some agents and brokers have changed the way they do business in an attempt to make more money—sometimes to the homeowner's detriment. What some agents are doing is offering a very low commission split to the selling agent. For example... if a property's agreed to commission was 6% and the commission was split 50/50 with the cooperating broker, each office would get 3%. This split would attract all MLS agents to sell the property because they are being offered a strong incentive.
Sometimes an agent reaches an agreement with the property owner to list the property for a discounted commission— let's say 4%. The homeowner figures they will be saving 2% so they are enticed to list with that office. However, in order to stay profitable, many times that office submits the property to MLS offering only 1% to the selling agent, hence the discount they gave to the homeowner is reflected in a lower commission to the selling agent while the listing agent keeps a full 3% for themselves.
Now, imagine you were a real estate agent working with buyers. You see five homes you want to show the buyers—you notice that on two of the listings your reward is 3%, on another two it is 2%, and on the third it is only 1%. Which homes would you show first? Which homes would you show with more enthusiasm? Which home would you choose to not even show?
If an agent is going to offer a low split to cooperating brokers, it basically defeats the purpose and benefit of the MLS. It begs the question, why wouldn't they simply keep the listing to themselves as an office exclusive and then they would not have to split the commission at all? The answer is that most homeowners are aware of the power of the exposure afforded with MLS and want their property to be placed on the MLS. Therefore, the agent places the property with MLS but offers a split so low that most agents would not want to show the property, or at best it would be the last house they would show.
I was recently negotiating a deal and learned that the listing agent was getting a 6% commission but offering only 1% to the selling broker. This is the equivalent of an 84/16 split!
Aside from the total commission awarded to the selling agent, there are several factors that should be considered when listing your home for sale with an agent. The seller should ask the following questions to the agent being considered:
a) Will the property be placed on the Multiple Listing
b) How will the commission be split with selling agents?
c) How will the property be marketed? And—
d) How long is the listing period? (You do not want to lock yourself up to the wrong broker for 5 years.)
If you have any thoughts regarding this blog entry please leave a comment or contact me!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Web Site: www.MitchellFeldman.com and www.MadisonEstates.com
© Copyright by Mitchell Feldman. All Rights Reserved. Republication or redistribution of this material is expressly prohibited without prior written consent by Mitchell Feldman. This information is deemed reliable but not 100% guaranteed. Mitchell Feldman is not at attorney and therefore not able to give legal advice. If you are involved in a real estate transaction and have a question, besides speaking to Mitchell, you should also speak to your attorney.