In some instances sellers are led to believe that commissions are either fixed, set by the Real Estate Commission, set by the local Real Estate Board, or controlled externally. This is false !
The law of the land prohibits fixed commissions being set by any organization, including national, state and local governing agencies. Collusion by or between brokerages to set fixed commission rates is illegal. Individual brokerages may set commission rates as they see fit. That means that an agent may state that his or her company will not permit listings being taken at less than a certain rate, for example 7 %. That is permissible and legal. The difficulty arises when a seller is led to believe that “outside†agencies control commission rates and therefore the agent or company can not accept a listing at a rate lower than that
set by said outside agency. The public should understand, unequivocally, that commission rates are NEGOTIABLE and are not set by any party other than the individual brokerage. Other practices which are less than forthright are commission rates preprinted in a listing agreement which are in fact higher than what the brokerage normally charges, for example 7 %. If a seller questions that rate the agent may adopts a lower rate and the seller may have been led to conclude that he or she got a better deal. This is neither illegal nor unethical but it is unquestionably deceptive. At times you as a seller, in considering listing with a broker who charges less, may be told that no one will sell your property at that rate of commission. This is designed to uphold and reinforce the higher commission rates which some brokerages espouse. Agents and brokers may attempt to justify higher commission rates by stating that they are a “full service†broker and that another broker is a “discount†broker. If you are subjected to this line of reasoning ask what constitutes full service and what constitutes discount brokerage-specifically. You will most likely find that the individual who advanced this line of reasoning may have great difficulty explaining the difference or justifying the differential in commission rates ! Another interesting aspect of commission rates is where you are encouraged to pay a substantially higher commission with the rationalization that agents will be trying harder to sell your property because of the higher rate. While it
is true that money is a motivator the list price of the property will have to be realistic and not pie in the sky because of the higher rate. One local brokerage, urged higher commissions, by stating that listings with lofty commission rates, sell at full price more often.(Believe that if you will !) They also disseminated information to their sales force to tell cooperating agents that all of the play in the price was in the commission, in order encourage full price offers. You have to be naive to swallow that. In summary, commissions are totally negotiable and they are not fixed by any government entity, nor by any private entity. Any advice or statements to the contrary may be violations of the law. Larry Trunk, Inc. engages in commission negotiation.
The preceding article is subjective and represents the professional opinion of the author / real estate broker, Larry Trunk
