All About Why It's Worth It to Give Your Agent The Full Commission Amount
- Grace Swersey with New World Title and Escrow
- Jun 28, 2016
- 3 min read
Prior to working for New World Title and Escrow, I worked at a real estate brokerage. During that time, I got to know many agents from various backgrounds who operated in ranging jurisdictions and had completely different client bases. However, one of the biggest causes of concern that I repeatedly heard was that their clients were asking them to charge a lower commission. Now, while this seems like it would be beneficial to their client, this is actually not a best case scenario for any party involved and here's why--
In most cases, a real estate agent must first split any incoming commission with his/her brokerage. After that, a real estate agent's commission breaks down into three equally important sections for any real estate agent.
The first third of that commission goes to the IRS. If you aren't aware already, most (if not all) real estate agents work as 1099 employees, which means that they are self-employed. Thus, at the end of each tax cycle, they are responsible for paying all taxes incurred as a result of the commission they earned.
The second of the three parts goes to what they need to do to ensure that they and their family are taken care of. This includes groceries, mortgages, college tuition-- all the expenses that one would expect to have to pay because life happens and it's expensive for everyone.
The last part of that commission goes into marketing your property. That means, yes, the agent spends his/her own money to ensure that any brochures, fliers, and signs that your property needs to get sold comes out of his/her own pocket (this is for listings). For buyers, this third percent covers the hours of research that your agent is doing to find you the right home, the time that they spend writing up legally sound contracts and supporting documents for you, and the time that they spend ushering you to every home that you want to see--whether it is the one you decide to buy or not. Not to mention that, regardless of what side of the transaction you are on, the agent has to do large amounts of market research to ensure that you are getting everything you want.
Out of these three, if you ask an agent to cut a portion of these funds out and give them back to you, which third do you think they are going to have to skimp on? Just sit on that one for a moment.
In addition, think about it this way-- On a scale of 1-10, how insulted would you be if all of a sudden your boss asked you to do your job for free or for less money? Would you still want to work for/with that person? If so, do you think that you would give them your highest quality work? Yeah, probably not. Because, as I said before, life is expensive and people need to earn money to make a living.
I know that it is tempting to ask your real estate agent to take a cut, especially if they are just the nicest person or maybe you are the nice one. In any case, in real estate, as with any industry, you will find that more often than not, you get what you pay for. Just something to keep in mind next time you are looking to buy or sell your home.
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