Don’t Be Fooled by 1% Listing Commission Offers

The commissions charged in real estate transactions can confuse buyers and sellers. Allow me to ex-plain how it all works, in case you’re not clear about it.

Typically, the buyer’s agent — also known as the “selling agent” because he/she sells the home — is paid by the listing agent, not the seller. The seller signs a listing agreement for a total commission amount — which might range from 4 to 7 percent — and agrees to pay a portion of that commission to the broker who sells your home. That’s referred to as the “co-op commission” because the selling agent is the “co-operating agent.” Regardless of the total commission charged, it is common in the Denver market for the listing agent to offer 2.8% as the co-op commission, which is specified in the listing agreement.

 

Long before I became a Realtor, the Justice Department ruled that listing commissions are subject to the Sherman Anti-trust Act.  Prior to that, the Denver Board of Realtors, I’ve been told, decreed that listing commissions should be 7%, and buyer’s agents should receive 40% or that listing commission, which computes to 2.8%. Since that Justice Department edict, it is illegal for us to refer to any percentage as  a “standard” listing commission. The co-op commission, I’m told, is not subject to that rule, so it’s okay for me to say that the co-op commission is “typically” 2.8% and for our office policy manual to say that all agents shall offer a 2.8% co-op. Even as listing commissions dropped under competitive pressure, listing agents have been reluctant to reduce the co-op commission out of fear that agents would not show and sell their listings. (I tried offering 2.5% a few years ago, and went back to 2.8% after realizing this was true.)

 

Some discount brokerages will seek to get listings by advertising 1% or a flat fee such as $1,200 as the “listing” commission. The fine print, however, will note that this does not include the co-op commission, which will be another 2.8% — which you’d be wise to agree to. The listing agent may suggest that you offer a smaller co-op commission, such as a flat $3,000, but you may find yourself agreeing to increase the co-op to 2.8% after a week or two with few showings and no offers.

 

Perhaps you, like me, have learned that you get what you pay for in life. That is true, for sure, with Golden Real Estate. Yes, we charge more, but sellers get more in services and benefits with our higher but below-average commission fees. For example, we offer magazine quality HDR photos, narrated video tours (including drone footage), custom web sites for each listing, free use of our moving truck for you and the buyer (including moving boxes and bubble wrap), 24-hour Centralizing Showing Service, and the featuring of your home in the Denver Post and four weekly newspapers next to our "Real Estate Today" column.  The discounters don't offer most of those added services, all of which help to give the widest exposure to your home, producing the most showings, the most offers and the highest price thanks to competitive bidding, which we manage.

 

I welcome your questions and comments. Feel free to call me or email me.

Published Feb. 23, 2017, in the YourHub section of the Denver Post and in four Jefferson County weekly newspapers.