Is Real Estate Commission Fair to the Home Seller?

The real estate industry has been one in the spotlight over the last couple of years. This is primarily due to the passage of the National Association of Realtors (NAR) reformed real estate act. Under the new act, Realtors will need to pay a minimum of six percent of the full market value of the property they list. However, the six percent is not where the real estate broker gets his or her cut. According to the new act, the buyer pays nothing at all; the home seller pays the real estate commission. Is this fair to the home seller? 

Who Should Pay the Six Percent Real Estate Commission Fee?

According to many experts, the six percent is not a percentage that anyone should be paying. If the home seller does not have a lot of money to leverage, it can be hard for them to come up with the money to list their home for six percent and get a return on investment. On the flip side, a discount real estate broker can list a home for six percent and get a return of ten percent. This means they are making money on the sale. For the broker, this is a better option than having to buy the home and rehab it from top to bottom. On top of the profit, they will also get a discount for negotiating the price.

Is the Six Percent Real Estate Commission Fee Fair to Those Involved in the Process?

The problem comes when you realize that the real estate industry is spending thousands of dollars on advertising. When an agent spends so much money on advertising, does this mean that the real estate agent is fair in how they split the commission? Is it fair to the buyer who found the home through a real estate agent and paid for the listing? These are questions that should be addressed when looking at the six percent fee.

Some say no, that this is not fair to the home seller because they were already outbid. They say the six percent is not reasonable because it is still an upfront cost for the listing. However, home sellers have a point. Real estate agents spend a lot of time listing homes and trying to get their home listed for six percent. It is very likely that these homes did not sell for six percent because they were purchased at the listed price and, therefore, there was no profit made by the real estate agent.

Is the Real Estate Industry Ethical?

The real estate industry has many complaints about its lack of ethics in dealing with home buyers and there are a lot of things to consider in real estate. These ethical problems are often highlighted in real estate marketing literature. However, many real estate agents use ethical methods in their marketing. A real estate agent might say, “I will give my home away for free if I get enough buyers interested in it.” This is an example of an unethical method, but it is one that most agents would not do.

If the real estate agent has not become the trusted agent that they used to be, then they have not built up the brand image that they need to attract new buyers and, therefore, do not deserve six percent of their commission. It is the buyer who pays the realtor’s commission. They do not pay the realtor for negotiating the contract or marketing the home. Therefore, they have no reason to receive anything above six percent.

Conclusion

If you have doubts about real estate commission amounts, there are many websites where you can get real estate prices for homes in your area. Look for a site that has the latest listings and one that does not list brokers by location. The information provided on these sites will be unbiased and you will have a better idea of what your home would be worth if you were to sell. The answer to whether or not real estate commission is fair to the home seller can only be answered if the agent uses ethical methods and does not try to market the house for sale for the highest commission possible. If the real estate agent does this, then they may not be able to justify charging a six percent commission.