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Are Real Estate Commissions Really Outrageous?

By Noel Peebles
Co-Author For Sale By Owner Home Selling Secrets ebook.

Let's face it; no one likes paying thousands of dollars
to real estate agents, most of whom drive big flashy cars.
But, are real estate commissions really a rip-off, or do
they simply reflect the value and importance of the
transaction that's taking place. I guess, to be fair,
it really depends on the final outcome and what each
property finally sells for. Anyway, it is a subject
that seems to aggravate buyers and sellers alike.

Read on, because here are some points to consider
before hiring an agent or deciding to sell your home
yourself.

The fact is; real estate commissions can vary from state
to state and country to country. The key thing to remember,
however, is that commissions are almost always negotiable.
In some countries the seller (vendor), pays a flat real estate
commission of 3% to 5% and then pays for all marketing costs
on top of that commission fee.

In the USA, real estate commissions vary between 4% to 10%
depending on the type of property, current market conditions,
and the motivation of the seller. Around 6% seems to be the
most typical commission rate. But again, this is usually
negotiable.

Many people wrongly assume the entire real estate commission
goes to one person. Typically in the US, real estate commissions
are divided four ways: the listing agent, the listing agent's
broker, the buyer's agent and the buyer's agent's broker.
Referral fees and franchise fees can also influence the amount
paid and the actual dividing up of the commission.

Why then are real estate commissions so expensive? Well, I'm
not here to justify what agent's and broker's charge, but to
be fair they do have overheads just like any other business.
Their costs include: MLS (Multi Listing Service) fees,
insurance and membership dues which can amount to thousands
of dollars a year for each agent. Then there is the big
expense of running office equipment, computers, cell phones
and vehicles. And, you may have noticed that most agents like
to drive clients around in late model vehicles. Maybe this is
extravagant, or maybe it is just their way of saying
"I'm successful!" And, not forgetting the cost of signs
and advertising which together can amount to a considerable
cost.

So, real estate is a business with many expenses and without
the luxury of a guaranteed weekly paycheck. It is also an
industry that has its ups and downs. Interest rates and
economic confidence are just a couple of factors that can
have a major impact on the real estate market. Most agents
who have been in the industry for some time will have
experienced boom times as well as lean periods.

Frankly; at the end of the day real estate agents are out
there to earn a living just like everyone else. They need
to be competitive in order to survive and prosper. That is
why real estate commissions are almost always negotiable.
The agent's want your business! They want your real estate
commission!

With that said, agent's also want "profitable business."
So, when an agent shows a property to a potential buyer,
one thing they generally look at is how much real estate
commission is being offered. Agents typically will show
homes offering 3% before the ones offering 2.5%.

Trouble is the real estate commission system can work
against sellers. If your home is offering only 2.5% to
the other agents, it may get fewer showings. Your property
will therefore be exposed to fewer potential buyers. As a
result; you will be helping other seller's get their homes
sold first.

Whereas; if a listing agent were to offer 3% to a buyer
agent on a 5.5% or less listing contract, it could produce
a different outcome. This scenario would reduce costs to
you (the seller) along with good marketing incentives for
other agent's.

So, let me summarize and review:

1) The real estate commission is negotiable
2) The commission is usually split amongst several parties
3) The agents are entitled to earn a living
4) Know what the commission split is going to be and how
it may affect you

Finally, don't dismiss the possibility of selling your
home FSBO (for sale by owner). Selling your home yourself
could save you thousands in real estate commissions.
Thousands of others have successfully sold their own homes
- why couldn't you?

© Noel Peebles, Market Leaders ebooks.

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Noel Peebles is author of the best selling ebook
"173 Powerful Ideas, Tips, Tactics And Proven-To-Work
Strategies To Sell Your Own Home."
For details http://www.forsalebyownerguide.com

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