Find Your Listings

How real estate agents get paid

When a seller enters into a listing contract with his or her real estate broker, binding obligations are formed for both parties. If the broker finds a ready, willing, and able buyer; then the seller is obligated to pay the brokerage a commission that was agreed upon when the contract was drafted. What many seller's don't realize is that the agreement involves more than just the seller and his real estate agent. When sellers write a check out for their brokerage fees, they are not paying their real estate agent directly. Only the real estate broker (not a real estate agent) can enter into a listing contract with the seller. The seller pays the brokerage, and the broker pays the real estate agent only a portion of the brokerage fee. The amount that each real estate agent receives as compensation for his or her labor depends on his or her experience and performance. New agents may receive as little as 30% of the total amount the seller gives the brokerage firm. Not only is it important to know the difference between a broker and an agent, home sellers should also take note of the fact that there are listing agents and selling agents. Generally, there is a listing real estate agent and a selling real estate agent who work for a broker that pays them their commission. Sellers who turn to brokerages will have a listing agent assigned to represent them throughout their home sale process. Listing agents are the licensed real estate agents that take on a fiduciary duty to protect the interests of their clients (i.e. the home seller). Their job is to list and market the seller's property as soon as possible at the highest possible price. A listing contract involves a written agreement authorizing the broker to perform on behalf of the seller's interests. On the other hand, selling agents (which are often buyer's agents) bring to the seller a "ready, willing and able" buyer. If the selling agent is under a contract with the buyer and is representing the buyer, then the seller should not be required to pay any more than a listing fee to his or her brokerage and its listing agent. Depending on what type of contract you enter into (and depending on who the selling agent is representing), the home seller may not have to pay the selling agent any commission. In other words, if the seller has not entered into a contract with the selling agent (i.e. buyer's agent) then he or she is not obligated to pay them any commission.

Types of listing contracts

Exclusive right to sell:

If you choose to go with this type of contract, you are agreeing to pay a commission to your broker even if you find a buyer for your property on your own. In other words, you are obligated to pay your broker a commission no matter who finds a buyer for your property. Furthermore, you will not be able to list the property with any other broker until the contract expires with the property unsold. Of all the different types of listing contracts, this one is the most popular among brokerage companies. This is because it gives the broker an exclusive right to sell the property. The broker is sealing its commission for representing the seller. Ideally, under this type of contract, the broker will be more motivated to invest its time and effort into marketing your home because it will have the assurance of knowing that it will receive commission once a ready, willing and able buyer is found. The seller will be paying for both the listing and selling broker fees, no matter who finds the buyer for the property.

Exclusive Agency Listing

If you enter into an exclusive agency listing contract, you are only able to list your property with one brokerage until the listing contract expires so long as the property remains unsold. The seller is obligated to pay his or her broker a commission if the property is sold to a buyer that was found by the brokerage. In the written agreement, the seller is required to pay a commission only if the broker is the one that finds a buyer. If the seller is able to find a buyer himself, then he will not have to pay his broker. Typically, the seller pays the broker only a isting commission. This type of contract allows the seller to participate in finding a homebuyer on their own while the agent lists the property as well. Generally, this type of contract is not favored by brokerage companies because there is not much incentive for agents and their company to spend money and time marketing your home. In the case that you find a buyer for your property on your own, they will not receive any commission for their efforts. Agents would be taking large risks in investing their time and money in marketing your property under these agreements. Also, this type of contract makes it easy for sellers and buyers to act unethically. Buyers and sellers may try to get out of paying commission to the real estate agent in order to lower the home sale price even if it was the agent's labor that brought them together in the first place. It is difficult to find an agent who will be willing to enter into an exclusive agency listing agreement, and if you do, the agent will probably do little for your property.

Open listing: (open agency)

An open listing allows the seller to enter into multiple agreements with more than just one brokerage company. The seller will only have to pay commission to the brokerage that brings a ready, willing and able buyer to purchase his or her property. This is a non-exclusive contract, that give the seller the right to terminate any one of his or her open listing agreement at any point in time. The agent does not have a fiduciary duty to the seller to put in any effort on the seller's behalf either. This allows the seller to choose the first broker to bring forth a buyer. Another benefit to the seller, is that he or she will probably pay only a selling broker's commission (not the listing agent's fees), which is usually about one-half of typical fees. If the seller is able to find a buyer herself, the owner will not owe anybody any commission.

How to determine the right listing price

It takes a certain amount of instinct and common sense to determine how much a homebuyer may be willing to pay for your property, but a great deal of objective research is also required when determining the best price for your home. Keep in mind that the buyer does not care about how many memories you have stored in your home, or how much your home cost when you first bought it. Buyers base their decisions on the actual market value of your home. Sellers can get an idea as to what a the market value would be for their home through a comparative market analysis, which is conducted by researching the prices of similar properties that were recently sold in the neighborhood. Most homebuyers use the listing price of properties as a determining factor for which homes they would like to view and consider for purchase, so the home's price is a critical factor that determines how long your home will stay on the market unsold. It is important for you to determine what the true market value of your home is before you decide to list it.

Also, consider the market conditions of your neighborhood. Look to see if the homes are selling quickly or if they are sitting on the market unsold. Even the weather may play a factor in regards to what your home price should be. Will you be selling your home in the springtime when it's the prime home-buying season, or will it be listed for sale in the winter's snow. Determining whether it is a buyer's market or a seller's market is a good starting point in your process of setting a listing price. If properties that are similar to your own are lingering on the market with a sparse presence of interested homebuyers, you may need to consider a price that is lower than what you are comfortable with. By overpricing your home, you may just end up helping out your neighbors sell their more tenably priced homes. Also, keep in mind that there are buyers out there who have been looking for homes for weeks already, and they are now just waiting to see if any new listings with a better price pop up. An experienced realtor may come in handy if this is your first time selling your home. However, if you are planning on selling your property on your own, you might want to consider subtracting the cost of paying a commission for a real estate broker from your listing price. In most cases, home sellers who hire real estate agents pay about 6% of the home sale price as commission.

Showcasing your home for sale

Exterior: Curb appeal

Many home sellers focus their attention on the interior of their homes and pay less attention to the details of its exterior. However, the outside of the home is the first thing that a buyer will see. Thus, it is the outside of the home that triggers the formation of their judgments as to whether or not your home is right for them. Various aspects of the home's exterior such as its landscaping, driveway, windows, screen door, etc. have an impact on the buyers' opinions of the property. People will start developing their opinions within a matter of minutes of first coming into contact with the property, so it makes a difference if your home is gleaming with shiny windows and a pristine entryway as soon as they step out of their car. Plus, many homebuyers like to drive by properties at night in order to get an idea as to what the neighborhood is like at different points of the day as well as to see what the property looks like at night, so it is a good idea to make sure that your light bulbs are all working and turned on when the sun sets. Clean up all the clutter that may be lying around outside and leave it in mint condition.

Interior: Areas that need special attention

Once you are done with the exterior of your home, work your way inside. Some of the biggest challenges you will face are located in your bathrooms and your kitchen. The buyer's predisposition to believe that your bathroom is crawling with your family's germs makes it that much more important for you to present your bathroom to be spic-and-span. Also, keep in mind that your kitchen is the focal point of the entire property. It is where everyone spends most of their time when they are at home. Buyer's will keep this in mind, so seller's should spend some extra time preparing the kitchen by cleaning out their cupboard, pantry, refrigerator, etc.

Why less is more...

As paradoxical as it may seem, less is more when it comes to making your home more memorable for homebuyers. A minimalist interior design is something you should strive for when showcasing your home, so remove all unnecessary clutter and keep them in storage or at a friend's house (if necessary). One of your main goals is to make your home look larger than it really is. Also, air out your home in order to remove any noxious smells. Too much cleaning supplies may end up giving homebuyers a headache. Another important tip that realtors will give you is to let go of any emotional attachments you have with your home, and remove all family portraits. As cold as this may sound, take heed of this advice because buyers should be presented with as little distractions as possible. Make it easy for them to envision themselves living in your home. Family portraits may cause a roadblock for the buyer's imagination. Provide them with an opportunity (during their short visit) to picture themselves making a home out of your house. Allow them to conjure up as many of their own personal touches as they can as they walk through your house. Along those lines, it is probably not a good idea to be present during the open house or private showing. By being present, you may unintentionally cause homebuyers to feel as though they are invading your private space. Homebuyers should be able to freely express their impressions of the property in order for the selling agent to market your home more effectively. It is more difficult for buyers to imagine themselves living in a home when the owner is still waking around in it.