Agent is Valuable Resource

By John M. Lee

Do you ever wonder where the commission money goes in a real estate transaction? With prices so high in our area, it is a significant amount of money.

When a seller signs a listing agreement, he or she agrees to a commission rate with the listing broker, which is typically 5-6 percent in this area. That commission generally gets split evenly between the seller’s and buyer’s brokers, and then the brokers split their commissions with their agencies.

So, for a home with a sales price of $1 million at a 5 percent commission, the total commission would be $50,000, with $25,000 going to the seller’s broker and $25,000 going to the buyer’s broker. Then those amounts get divided up again according to the agent’s split with their offices.

In general, newer agents are at a lower split and more tenured agents have a higher split. This traditional brokerage model also relies on the agents obtaining their own leads, clients and business. Both the buyers’ and the sellers’ agents contribute to the real estate transaction process.

Most people think real estate commissions are really high – they are!

It seems to some people that taking a real estate agent out of the equation may cut costs and save the seller money. However, a good agent is vital to the process: facilitating negotiations, managing paperwork and maximizing the chances for the sale of the home through repair work, staging, professional photography, virtual tours and other marketing activities.

When a real estate agent represents a buyer, he or she brings a wealth of knowledge and experience to the process and increases the chance of a successful search and purchase.

Likewise, when an agent represents a seller, that ensures the seller’s best interests are met, obtaining top dollar for the home, avoiding costly lawsuits and litigation, and making sure that all governmental requirements are fulfilled.

While an agent’s job on the surface looks easy, it is not.

There is a lot of behind the  scenes work, such as doing research, looking for homes, refining values, meeting with contractors and inspectors, finding the right lender, resolving title and escrow issues, understanding all of the paperwork, negotiating the best values for buyers and sellers, and countless other tasks.

Agents ensure the process moves along smoothly, providing expertise, advice, counseling and guidance along the way. After all, a home purchase is normally a person’s largest purchase in life.

There are other less expensive ways to sell a home. Some companies offer a commission rebate back to buyers and sellers. Some offer limited services and the owner has to do more of the work. Others just list the property on the Multiple Listing Service (MLS). Sometimes owners sell the home themselves.

I would just be careful of these companies as one mistake can cost you lots more than the regular commission that would have been paid. Also, good agents are excellent negotiators and should be able to negotiate for a better price for you.

Lastly, you might ask what about all those internet companies offering valuation models and taking listings at reduced commissions. All I have to say is be very careful. Here is one example. If you Google 1531 46th Ave., you will find that it is a four-bedroom, two-bath home with 1,402 square feet. You will also find that it is currently listed at a jaw dropping $4 million!

Well, I can tell you that no single-family home in the Outer Sunset has sold for even close to this amount. But what is even worst is that the website’s estimate for the home is $4.1 million. This is just plain wrong.

Yes, real estate commissions are high. But good real estate agents can help you buy or sell properties and make the process smooth and exciting for everyone involved!

John M. Lee is a broker with Pacific Union specializing in the Richmond and Sunset districts. For real estate questions, call (415) 447-6231 or email johnlee@isellsf.com.