Read entire page for real estate secrets!

HOW RESIDENTIAL REAL ESTATE WORKS:

As the son of a real estate broker I grew up with a unique perspective of the real estate industry. Over the years I’ve noticed many significant changes that have specifically impacted the residential real estate business.
To list a few:
Internet (Realtor.com)
Lockbox management systems
Showing services
Mobile phones / laptops

Searching for a home has become very consumer driven.
Potential homebuyers log onto realtor.com and search listings of available homes. Many are set up to receive automated emails from another Realtor. In the past, each office maintained its own list of listings. It was difficult to exchange information or keep updated inventory of another agency’s listings.
Lockboxes make it very easy for buyer’s agents to show listings of another firm. Each home has its own lockbox which can only be accessed by another Realtor.
Showing services, such as Centralized Showing Service (CSS), make appointment setting easy & manageable. Buyer’s agents call a single phone number to show any listings of firms who use CSS. CSS follows instructions input by the listing agent, such as giving a courtesy call to the homeowner or setting an appointment.
Mobile phones & laptops allow agents to work from anywhere, virtually eliminating the need for expensive office space.

TRADITIONAL COMMISSIONS:

As per the Arkansas Real Estate Commission, there is no official commission structure for residential real estate. Each office may set policies but no office may set policy with any other office. Commonly, commissions are based on a percentage of the home’s sale price. Typically these commissions are from 5-10%, with 6% being a very common commission.

Because many people outside of the real estate industry are not aware how this money is divided, I am providing a very common example:

Home’s sales price = $250,000 Gross commission @ 6% = $15,000

Listing broker receives 60% (unwritten rule) = $9,000 (3.6% of home sales price)
Selling broker receives 40% (unwritten rule) = $6,000 (2.4% of home sales price)

Brokers and agents have many different agreements within an office. Some agents receive up to 100% of the broker’s fee while others have completely different agreements. A good number for this example is a 70/30 agent/broker split.

Listing agent receives 70% of $9,000 = $6,300 (broker keeps 30% = $2,700)
Selling agent receives 70% of $6,000 = $4,200 (broker keeps 30% = $1,800)

As of the date of this website’s origination, the federal tax laws regarding gains on your home sale are as follows: Gains up to $250,000 tax-free for a single person, up to $500,000 for married couples. If you are not familiar with this law, take a minute to think about it:
YOU ARE GIVING AWAY TAX FREE MONEY TOWARDS REAL ESTATE COMMISSIONS!!!
(obviously you need to speak with your CPA to see if you meet the specific requirements for tax free gains)
(IRS CODE)


In the commission example, the listing broker pays a 2.4% cooperating broker fee to the buyer's agent.   The $2500.00 listing fee does not include any cooperating broker fees ($paid to buyer's agent).   As a seller, however, you are welcome to specify any cooperating broker fee that you would like to pay.   In order to advertise the listing in the MLS (and Realtor.com), there must be a cooperating broker offering.  The amount or percentage specified is up to you and can be as high or as low as you want.  If you want absolute maximum exposure, I suggest you offer a competitive rate.  

If you are ok with dual agency, I or one of my buyer's agents will show your house.  If she or I represent the buyers in an accepted offer, the only cost to you will be an additional $2500.00 for a total of only $5k.  Now ask yourself,
should it really cost you $15k to sell your house?
I don’t think it should.
In the past, many of these costs were explained by the complications involved in selling a home. However, with such a move towards consumer driven research, many of the costs involved in handling a real estate transaction have dwindled. I would like to pass on those cost savings to you.