- Joined
- Jan 29, 2008
- Messages
- 1,025
Hello,
There have been a few negative posts lately about the value realtors provide, and I want to start this thread by saying - not here. There are other threads for that if you want, but I`d like this to be about the method commission is calculated by, not the total amount.
Lets say I`m selling a condo, which is worth approximately $200,000. At 7/3 commission structure, my total commission would be 7,000 on the first 100k and 3,000 on the next 100k, for a total of $10,000. Fair enough.
Now, I could also choose to sell as a FSBO, but I`ll probably have to discount my price, and do a bunch of work. But I could do it. In fact, if I was willing to sell my condo for $150,000 I`m sure I could find someone to buy it in about 2 days. So most of the value TO ME (the seller) from using a realtor comes from the price difference in the sales price from $150k to $200k.
But my realtor doesn`t have the same strong financial incentive to sell the place for more money. At 200k, the commission is 10,000, and at 150k, their commission is 8,500.
But what if the commission was calculated differently.
0% on the first 150k
20% on everything over that
At a 200k sale, that works out to the exact same 10,000 commission. If the realtor does a great job, and gets full list price of (say) 205,000, the commission goes up at a much faster rate, because the realtor is getting 20% of the extra value they`ve created, not just 3%.
I understand their may be issues with this, for example the buyers agent probably shouldn`t get paid way more for a higher purchase price, and there would probably need to be a minimum commission.
How would you as an investor feel about this as an alternative model? How about the realtors out there? Seems to me it might allow the really good realtors to make more money.
Any thoughts? Fire Away! If this idea is no good, tell me why, I can take it!
Michael
There have been a few negative posts lately about the value realtors provide, and I want to start this thread by saying - not here. There are other threads for that if you want, but I`d like this to be about the method commission is calculated by, not the total amount.
Lets say I`m selling a condo, which is worth approximately $200,000. At 7/3 commission structure, my total commission would be 7,000 on the first 100k and 3,000 on the next 100k, for a total of $10,000. Fair enough.
Now, I could also choose to sell as a FSBO, but I`ll probably have to discount my price, and do a bunch of work. But I could do it. In fact, if I was willing to sell my condo for $150,000 I`m sure I could find someone to buy it in about 2 days. So most of the value TO ME (the seller) from using a realtor comes from the price difference in the sales price from $150k to $200k.
But my realtor doesn`t have the same strong financial incentive to sell the place for more money. At 200k, the commission is 10,000, and at 150k, their commission is 8,500.
But what if the commission was calculated differently.
0% on the first 150k
20% on everything over that
At a 200k sale, that works out to the exact same 10,000 commission. If the realtor does a great job, and gets full list price of (say) 205,000, the commission goes up at a much faster rate, because the realtor is getting 20% of the extra value they`ve created, not just 3%.
I understand their may be issues with this, for example the buyers agent probably shouldn`t get paid way more for a higher purchase price, and there would probably need to be a minimum commission.
How would you as an investor feel about this as an alternative model? How about the realtors out there? Seems to me it might allow the really good realtors to make more money.
Any thoughts? Fire Away! If this idea is no good, tell me why, I can take it!
Michael