Real estate goes in cycles.  During the heyday of exponential price increases a few years ago, sellers called the shots. It wasn’t unusual to have more offers than what you really wanted. We stopped taking offers on listings once we had ten!

In that environment, it wasn’t unusual to see commissions paid by the seller to the listing agent in the 1 – 1.5% range (plus whatever was to be paid to the buyer’s agent), and many discount brokers jumped into the market with those low commission structures. Brave souls sold their own homes For Sale By Owner (but that’s another topic). It was easy selling a home. Today, in a completely different market, a seller should pay…

…for value.

What’s that mean? I’ve tried to teach my kids the difference between price and value. We all inherently know the difference, but it’s different for all of us. A woman who spends $5,000 for a dress might find that dress to be a great value, because it’s Armani or whatever, and she found it at the Camarillo Premium outlet. Normally, the dress would be $10,000 someplace else. Now that’s not my definition of value, but you get the point.

So how do you define value in the services of a Realtor? How much should you pay? Let’s break it down.

First, above all, seek a consultant you sense you can trust. Do you feel like you’re getting a sales job when you talk to a potential Realtor? Most agents today are starving and need your listing! But a wise consultant will seek to hear your heart, your goals and desires. Your goals and desires may not mesh with today’s marketplace realities, and a good consultant will tell you that. A good consultant may advise you wait, or advise other alternatives.

Generally speaking, this is a GREAT time to be a buyer, not a seller.

Second, there is no set commission. Everything is a variable. Generally, commissions are split between your Realtor and the agent representing your buyer. The marketplace generally will have a range of commission splits which goes up and down. Right now, commissions are tending to the higher side simply because there are so many listings out there.

You should be the one to determine how much commission your Realtor gets, PLUS how much of that commission your Realtor will pay the other agent.

When a buyer’s agent is showing potential homes to a buyer, they shouldn’t be concerned how much commission they’ll earn on that transaction. They have a fiduciary responsibility to their client.

But human nature being what it is, wouldn’t it be easy to put a positive spin on the home paying a higher commission, all things being equal?

A trusted consultant shares all this with you, so that all your decisions are informed decisions. Everyone needs to earn a livelihood, and Realtors are no different.

So be informed, be wise, and you’ll make the right choice.