Before you choose a Real Estate Agent to help you with your next purchase or sale, you should have a good understanding of how Commissions work. There are two sides to commissions. The selling agent's commission (the Real Estate Agent who is working for the Sellers) and the Co-operating Broker's commission (the Real Estate Agent who is working for the Buyers). All commissions in Real Estate are negotiable.
You may have seen some advertisements that state unbelievably low commission rates and you may be wondering what the catch is. After all…nothing in life is free, right?!? The answer is this: You get what you pay for! Paying a cut-rate commission will often get you a sign in the front yard and placement in the Multiple Listing Service®, but little additional effort from your agent.
Realize that agents and real estate companies put up their own funds to market and advertise your home. Marketing and advertising costs money -- the lower the commission, the less incentive for an agent to put up his or her own money to market your home.
Incentive plays a very important role in sales. A "full service" agent earning a full commission will often "drop everything" to handle any challenges that come along - an agent earning a small commission does not have that same incentive.
Incentive is also important to the buyer's agent. Since there are almost always two agents involved in every sale, they split the commission according to the listing agent's instructions. When your listing agent drops his/her commission, they will normally also reduce the commission that will be paid to the buyers' agent. When this happens, you won't find as many agents willing to show your house - they'll be showing houses that offer a customary commission to the buyer's agent.
Finally, negotiating ability is an important skill in a listing agent. Are you willing to put your faith in an agent who can't even negotiate his or her own commission?
