2.5%, 3.5%, 5%, 6%, 1%. How is it possible to make sense of real estate commissions?
Lets start with a basic understanding of the MLS SYSTEM. When a client lists their home for sale on the MLS SYSTEM they agree to pay a listing commission to the listing broker and they agree that the listing broker will pay a commission to any co-operating broker.
The power of the MLS SYSTEM is that homes listed on the system can have showings booked by any Realtor not just the Realtor or company that listed the house. Other Realtors will show the property in order to collect the co-operating broker commission. Well over 90% of all homes sold on the MLS SYSTEM are sold with two Realtors involved in the transaction, the Listing Realtor represents the interests of the homeseller and the Co-operating Realtor represents the interests of the homebuyer.
Commission Rates are 100% negotiable. Sellers have to realize that in Durham Region co-operating brokers are offered a 2.5% commission by pretty much all Listing Brokerages and if your Listing Broker chooses to discount the commission offered to the co-operating broker then a HUGE mistake has been made. Why would a co-operating broker show your home to collect a 2% discounted commission if they can get a full 2.5% commission if they sell the house down the street?
The negotiability of the commission rate revolves around the Listing Realtors commission rate. Most Realtors automatically charge a 2.5% commission since that is the rate being offered to the Co-operating Broker. The amount of the Listing Realtors commission should be a reflection of the level of service, advertising support and any Guarantees that will be attached to the listing.
So. If you are thinking of listing your home for sale and you see an ad from a Realtor advertising a 2.5% commission, how much do you think you will pay? Well you will pay 2.5% to the co-operating broker and 2.5% to the listing broker for a total of 5% commission.
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