What do we mean when we refer to 1% Commission in the real estate industry. It can have different meanings depending on which agent you talk to. It is important to remember that not all 1 percent real estate agents are created equal. It is important to understand what level of service you will get for the commission. In other words, what kind of value are you getting for the amount of commission you are paying.
Explanation Of Real Estate Commission
When a property is listed, the seller agrees to a set commission. Traditionally it has been 5% to 6% depending on the market area. This is where the confusion happens with uninformed public and the media. They actually believe that one agent gets all that commission. They reality is that the commission is shared between the listing agent, the listing brokerage, the buyer agent, and the buyer brokerage. Usually, 2.5% will go to the listing brokerage and the other 2.5% will go to the buyer brokerage. They will then pay the agents from that amount.
1 Percent Commission
If an agent decides to offer a discount to his client, it will reduce the total commission. An agent may choose to discount the listing and buying portion, or they may just discount their commission without reducing the buyer commission. It all depends on the wording which people get confused about all the time. An agent will offer 1% commission with an understanding that the cooperating buyer brokerage will get their 2.5%. In reality, you would be paying 3.5% total commission which can be explained as 1% commission to the listing brokerage and 2.5% to the buyer brokerage. Its important to understand the marketing that you find in your mailbox. When an agent offers 1% commission, you are not necessarily saving 4% when comparing to a 5% full service agent. The difference is closer to 3.5% versus 5% commission which is still a lot of savings in commission.
1 Percent Total Commission
There are exceptions to the above. There is a way to pay 1 percent total commission. Even though it is advertised alot in Mississauga and the surrounding GTA, it doesnt always happen. In fact, it is quite uncommon. You will see flyers websites with “1% Total Commission” or “Total Commission As Low As 1%”. How can this be possible? If you dont offer a 2.5% cooperating buyer commission, doesn’t that mean that no one will show the home? It is definately possible. If a listing agent, brings their own buyer, then they dont have to pay the 2.5% to the buyer brokerage. This can result in savings to the seller. Again, this is very uncommon especially for an agent without a marketing budget. In order for this to occur, your listing would need alot of exposure. If this is very uncommon, then why do all these agents advertise it. The answer is very simple. They just want to get the listing.
Best Option For Sellers Who Want To Save On Commission
You might be thinking that we are trying to convince you to avoid agents offering 1 percent commission. Not true. It depends on the type of agent you list with. For example, an agent from a discount brokerage offering 1 percent or an inexperienced agent offering 1 percent would not be as effective as an agent from a full service top brand brokerage. Basically, you want a traditional full service agent, working with a top brand reputable brokerage, with experience, offering 1 percent commission. They will have the resources to effectively market and sell your home. You will get savings from paying lower commission as well as getting top dollar for your home.