Commissions: Seller w/$300K home pays $18K commission, Seller w/$1mm home pays $60K. Why?

Is there now or has there ever been any real justification for the structure of the commission?  Any honest agent in the business would have to admit that there are no additional tasks that must be performed.  No additional costs.  In fact most often higher price range buyers and seller are more savvy and require less hand-holding than those in lower price ranges. 
IN your mind, what is the justification? 
IS there a fee cap that should satisfy the agent no matter the cost of the property?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011 - US
We think we've answered this question for you!
  • Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.
 
 

Answers (24)

Profile picture for rockinblu
I had a couple of retirement jobs as an independent contractor being paid in commissions only. On both the higher the sale the more commission. However on one, the most important factors in determining the commission were the customer's credit score, and if the customer would agree to an automatic draft from their checking account, or charge to their credit card. The logic was the more apt the customer was to live up to the agreement, the more the sale was worth.

I liked Debbie's post a lot. I feel things have a way of averaging out. An agent might make a killing on one listing and nada on another. If a consumer  doesn't like the deal, he/she can do it themselves. As Debbie stated there are other options out there. 
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Not that I really want to step into this age old discussion about commissions vs value , etc...but..........the question posed is WHY?

OK - why? Well.........Because this is a commission based business plan most of us work under, based on a % of the sales price, that's why.
Pure and simple.
IMO - No need to justify it.....break it down or claim that a fancy brochure or ads justify it.because that doesn't work.

There are a number of businesses where workers are compensated this way.

Here's the good news - If a consumer doesn't want that.....fortunately, for him or her,  today there are options - they can try a flat fee broker...or.....go ahead and negotiate a lower commisson with a different brokerage........the choices are out there.

Just as an aside.......... I'll tip a server $2.00 for a $10 hamburger..............and $8.00 for a $40.00 steak - did the server work any harder carrying the steak to me than the hamburger?
I'll give the sommelier $10 for that $50 bottle of wine, yet $30 or the $150 bottle - did it take any more effort to pry open the cork on  the more expensive bottle?
I know those are examples of tips, not fees, but they can't really be justified either.

I am just saying..... not everything may have a logical explanation.......and today's sellers have options.

PS the irony in all of this is......having worked with a lot of high end sellers over the years......they don't complain about, or question  the commission as much as the lower priced sellers...that's not to say they don't negotiate commisson, but ..they see it as the cost of doing business.......more grumbling seems to be  voiced on  threads like this.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011

@Whit

LOL!! Are you serious? I just looked at your profile...

Why would your post a question like this? With your background, possibly you know way to much and so everything appears too simple? Or is this just to start a dialog?

I personally treat every transaction the same with a degree of social expectations being different by consumers and clients of their agent, but as the dollar value increases, so does the liability and risk and knowledge. 

If I charge $2K for a mobile home and the same for a $5M dollar home, will the court limit my liability to that dollar amount when I get sue for whatever reason?

The million dollar property has a much smaller pool buyers and many of them have a unique taste that is different from those that are looking for a typical medium priced tract home or mobile home on a permanent foundation.

I took a person around Perris for a couple of weeks to find a mobile home and it was extremely competitive, but we found her one for $57K. I made $1,650 before my broker's cut, my liability was $5,500 if I got sued.

I spent two weeks driving around a couple from six in the morning until midnight, looking at houses from Chula Vista, Downtown San Diego, La Jolla, Del Mar, Laguna Beach, Newport Coast, Newport Beach, Corona, Yorba Linda, Beverly Hills, San Marino, Arcadia, Costa Mesa, Irvine and Palm Springs.

These were Multi-Million Dollar Homes and 90% were shown by appointment only and with the listing agent present.

It was only after locating the second home we placed an offer on that I was able to get an offer accepted, which had two others, all cash like ours, that the job even stated to begin to take some shape.

If this deal would have fallen apart, it would have been a very big hit.

All the knowledge that had to go into play on this transaction could have been pretty expensive if it were not for my background. Especially when a suspected roof issue popped up and another agent said to get a roofer on the roof and check it out by moving tiles around.

A four year old multi-million dollar home and she said to do that... Like I told her, let anyone step foot on that roof and move tiles and you will void the 10 year builder roof warranty.

 

No one wanted to believe me and fought me on it until the builder themselves confirmed it to them, which ticked off a few, but my client's roof warranty remained in effect "after" the builder climbed on the roof to checkout "their" work, and really didn't care what anyone else thought because I wasn't going to be sued and my client was protected..

I can go on and on about this, but I am sure you know exactly what it takes to do one or the other and what is required to make a sale.

 

Spread these two transactions and they pretty much would equal themselves out.

So, I would say I earned my money on both of these examples and both homeowners still sit happily in heir homes to this day.

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
I'm curious if there are any hard statistics which show the efficacy of high end print advertising:
How many million dollar listings are sold through print advertising vs the good ol' mls or other (relatively cheap) internet marketing?

Don't get me wrong, I feel that certain homes are in a category that may benefit from niche marketing (for example, historical) but around my area of NJ, there are plenty of million dollar homes that aren't all that special.
High end advertising is often done more to impress the seller than it is to actually sell a house and unless an agent can prove different, it seems the money could be spent more wisely and efficiently.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Profile picture for Dunes....

I can List and sell Three $300,000 Properties & One $100,000 Property for a Cost of $60,000..Correct?

I'm not seeing the logic in saying/claiming Selling a $1,000,000 Property costs $60,000 because the effort and Marketing costs are equal to what it took to sell any combination of other properties totaling $1,000,000 in value?


and the expectation the public is gonna believe such foolishness lol

Foolish


  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Actually reverse the statement... as a savey client I as an agent had better know my answers and how to help the client out...I have found the lower the price the more the client simply hands over the project not wanting to get involved...

the higher the price of the home, the longer I have to work on the property to get it sold... the more expensive my marketing materials and venues must be used and again for a longer period of time.. and most definatley the higher my liablilty goes...

I have found the percentagae is the most accurate way to gage...
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
No offense taken Robert.  Thank you for your kind words and friendly advice.  I aspire to one day be as wise, experienced and accomplished as you.

But inspite of your well rounded explanation I still cannot understand or fully grasp the vast differentail in the cost of service.  Clearly only a result of my lack of experience, no doubt.  

However, as I embark on my fledgling real estate career, am I to understand that it is perfectly acceptable for me to pay less attention, in fact half as much attention to my $500K clients as I would show to my $1MM clients? 

And with you being so obviously prolific in multi-million dollar experience, when you write a $5MM offer do you only go over half of the contract with your buyer as opposed to the whole contract with your $10MM buyers? 

Does it only require half as much marketing to sell a $200K home as opposed to a $400k home. (Note: of course I'm not suggesting that you would ever stoop to the level of selling in such a meager price range, but I'm just wondering.)  
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011

Interesting that an agent would post a question like this, apparently never had a transaction within the million dollar range.

It has to be a form of farming, but in my opinion, it is backfiring. Exposing inexperience... no offense…

There must be a reason that these very well informed, seasoned, multimillion dollar homeowners list with agents and are paying out the commissions they do. They didn't get where they are today by the seat of their pants.

There is whole list reasons, and many have already been posted here and there really is know reason to educate an agent when there are so many materials out there to help appreciate the work and skill that goes into selling any home at any price.

If your agent is baffled why he is worth the money he is being paid and why others charge so much, suggest they hit the books, because there is much more to real estate beyond getting a license.

An agent is licensed to protect the public interest. Failure to educate themselves is a critical breakdown and exposes their client and others to possible liability. You can pull the trigger five times in Russian Rolette and survive… Maybe… or pull the trigger once and have a bullet to the head.

There is so much more involved in selling a property than just going through the motions. Sign here, sign there, where is my check? YIKES!

In this case, yes, I agree with the original post, because you will have to save up for potential legal cost and a bunch of Rollaides from the panic everytime someone knocks on the door, thinking someone is there to serve you.

Without the education, the world does look a lot simpler.
 
Why do attorneys get paid different levels for he exact same job? A divorce is a divorce, right?

It is all about results...

There is more to flying a plane than just flipping on the ignition...

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Why ?? Good question.
Why does a police officer get paid $35,000 to risk his life everyday ?
Why does a school teacher get paid $30,000 to teach your kids to read ?
Why does a guy who can barely read get paid millions to throw a ball through a metal ring ?
How much money do you make ? Are you worth it ? Do you give your best everyday? Do you earn every dollar ?
Commissions are negotiable. Just like every thing else in life some are worth whatever the seller is willing to pay and some wouldn't be worth 50 cents in an open auction.
Some get paid what they are worth,some less than their worth and some way more than they will ever be worth. 
Why ?? Good Question.  
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011

Lets First break down the $60,000 dollar commission. The buyers agent will receive half of that leaving $30,000for to the list agent. Forget the fancy car,  marketing a million dollar home is expensive. Luxury Magazines charge $1,000 per month just for half a page. Dont forget we also have to include Luxury magazines in other markets. Your buyer may be purchasing a second home from another market. Ever heard of the Rob Report? Its a luxury magazine and not cheap to advertise in thier magazine where the reader has a high net worth. A million dollar home requires a professional photographer to take photos with staged lighting to make the house look its best. Not to mention the hours you spend driving to the property to show the home to prospective buyers since million dollar listings are shown by appointment only. Now with all tha that advertising and time spent arent you worth the 3%? I would certainly say so

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Fee cap? This is a free market society, and there are flat fee brokerages that do just that. That may be the way to go. Each broker is free to charge what they want, otherwise, if there was a cap...that would be illegal wouldn't it? Price fixing.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
Here in San Antonio, a million dollar home can take a year or more to sell. With that in mind, these owners will want their home in high end publications as well, and want them appealing to a national audience.... Price out a few of those ads, spend the money upfront, and you still may not sell the home. One or two of these can really hurt. So the ones you do sell have to count. Hope this helps...
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011

sorry having problems with post

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 06 2011
I LUV the Hick.

Anyway, maybe we should get off this Million Dollar home thing b/c apparently you can't sell one of those without buying yourself a Mercedes Benz.  Who knew? 

Let's use the example of a $400K and a $200K home.

Surely you can sell a $400k home in Buick, right?

Commission offered in each case is $18K.  Which listing do you want?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
Profile picture for the_country_hick
Marcin, "Second of all, it does take a lot more work, effort, and don't forget time to sell a million dollar home that it does to sell a 200/ 300K home. "

I thought if a house was priced right it would sell quickly. Does that means that million plus houses are to expensive so they sit forever?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011

OK Agents: Your rich uncle wants to sell his beach house compound.  There is the Beachfront home worth $5.5MM and the Guest House worth $450K.  Problem is he's got both a niece and a nephew in the real estate biz.  He's going to sell the houses separately and he's giving first choice of listing to you.  But to be somewhat fair he's offering a $250K commission on the Beachfront house and a $45K commission on the Guest house.  In each case he insist you offer a 3% commission to the buyer's agent.
Which listing do you choose?

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
First of all, I think it depends on where you do business.  Here in Chicago I've noticed that lower price homes will have a commission somewhere between 5-6%.  Higher priced homes will have a commission, such as million dollar homes, somewhere between 4-5%. 

Second of all, it does take a lot more work, effort, and don't forget time to sell a million dollar home that it does to sell a 200/ 300K home.  If you're a million dollar home seller chances are you are not selling as many homes as someone who focuses on the 2,3, or 400k range. 

And lastly, perception plays a huge role in whether a seller chooses you or not.  I'm sorry, but if your client is a millionare and you are selling his million dollar home, he wants to see you in that expensive suit and Mercedes Benz.  I know it isn't true for everyone, but for most.  He doesn't want to see you put-putting your million dollar clients in a ten year old Honda Civic.  Reality is, that MOST, not ALL of course, but most million dollar clients, want to see you as a million dollar agent.
 
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
Profile picture for wetdawgs
So, if I understand correctly ( in the opinion of some agents) the sales of the $1,000,000 home are 10 times more effort (including costs of marketing) from the part of the buyer's agent, the listing agent as well as the brokerages? 

The fee structure for real estate agents in several other countries I've investigated is considerably less costly than that in the US.   Perhaps the US agents could investigate and report on why the fee structure works elsewhere for less cost than in the US.  Marketing and hand holding should be considered equal.

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
The reason you may so much more to sell a million dollar home is the agents that typically sell multi million dollar homes spend more money on;

Marketing - mostly themselves but also their homes.

Expensive cars. That Mercedes ain't gonna pay for itself!

Their own multi million dollar homes.

The rest of us who work day to day to sell four (or five or ten) homes to equal one million dollar sale deserve what little we make. Trust me, most real estate agents are not getting rich selling homes.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
Profile picture for Dunes....


If it Costs a Person $18,000 to List and sell a $300,000 Property should it Cost a person $60,000 to sell a Million Dollar Property?

I can List and sell Three $300,000 Properties & One $100,000 Property for a Cost of $60,000..Correct?

I'm not seeing the logic in saying/claiming Selling a $1,000,000 Property costs $60,000 because the effort and Marketing costs are equal to what it took to sell any combination of other properties totaling $1,000,000 in value?

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
I think at some point flat fee may have to be the way to go, the commission structure has too many inherent problems.

Charging a certain amount for each service allows for more choice and eliminates the issues of unfairness between low and high end properties.

I don't think buyers, who are used to not having to deal directly with paying agents and therefore have never given much thought to it, would be willing to pay out of pocket so I am not sure how that would work but I do know that I personally would love not to be dependent on the commission.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
OK.  Let's say you're to be paid $10,000 to list either one of two homes.  House #1 is a $65,000 dump on the side of the road.  House #2 is $1MM home in perfect condition in a highly sought after neighborhood.
Which one do you choose?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
Profile picture for Dunes....
And all that Stuff is worth $42,000?

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
Often the million dollar listing is on the market longer and requires more advertising and sometimes more expensive advertising. Usually million dollar listings are larger and require a virtual tour. Sellers of million (plus) homes are more demanding of their agents. Agents have to be familiar with amenities of a million dollar listing and know how to show and perhaps demonstrate those features. Sometimes the million dollar listings require the listing agents accompany all showings. Negotiations can be more complex. And there are "first time" buyers in the million plus range that require a lot of hand holding.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
February 05 2011
 
Related Questions
Is there data that links home valuation with distance to/ from a cell phone tower installation?
Profile picture for Michael Thacker
Latest answer by Michael Thacker
2 days ago | 1 answers
what the average time from list to close in 98058 area?
Profile picture for Dan Tabit
Latest answer by Dan Tabit
2 days ago | 1 answers
can i pull up info on my house? the value sq feet ext?
Profile picture for Eric Kenneth Hamini
Latest answer by Eric Kenneth Hamini
3 days ago | 3 answers
why are appraisal values so low in harlan ia
Profile picture for Del Beyer
Latest answer by Del Beyer
3 days ago | 1 answers
Be A Good Neighbor

Zillow Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy.