Commissions

 

In any discussion regarding the sale of a house the matter of real estate commissions arise. The “commission” could be considered a professional fee such as would be paid to a lawyer, an accountant or other professional advisor, albeit with one important distinction: real estate fees are only paid on a contingency basis which means the successful and satisfactory conclusion of the sales transaction. To put it simply: no sale, no charge.

How are fees distributed?

In many cases there are four parties involved in the sale of a house. There is the seller’s agent and the buyer’s agent and each agent must be affiliated with a brokerage, in my case, Sutton Group.  Each party must be paid.

When are fees paid?

All fees are held in trust until the successful closing of the transaction. The buyer has taken possession, owns the property, and is free to move in. Only then are fees released to the entitled parties. This is usually long after the agents’ service has been rendered. Typically, a house might list a few weeks after the  initial meeting between seller and agent, and the house might sell after, say, 30 days on the market and close sixty days after that. To illustrate, the initial meeting could take place in January, the house lists in February, sells in March and closes in May. Only then would the agent be compensated.

What if the house doesn’t sell or a sale falls through?

In that event, and it happens but rarely, no fees are paid and the agent is out-of-pocket for time and money invested in marketing the house. Sales can fail if conditions are not met, such as financing falling through or other events beyond anyone’s control. The seller or buyer may be entitled to retain a deposit or pursue other compensation but the agent will not be entitled to a fee.

Are commissions negotiable?

Yes, fees could be reduced all the way to zero if the seller wants to do it all themselves: research the marketplace, market the property, show the property themselves, negotiate the offer, but the savings could be illusionary. A savvy buyer would expect to pay less and a buyer’s agent would probably not show the property without compensation and so on.  There is also the security aspect of the transaction, not just in terms of having total strangers coming through the home but the seller not knowing the prospective buyer’s ability to close the transaction.

I will discuss the various aspects of selling and buying a home in upcoming weeks but in the meantime, if you have any questions please email me at ckidd@trebnet.com or call 416-505-7513.