Selling a home

Things that all home sellers should know:

  • You do NOT need to sign an agreement with your chosen brokerage that mandates that the buyer’s brokerage receive a commission!
  • You do NOT need to agree to pay your broker a 6% commission!

In case you don’t know how it usually works:

  1. Sellers choose a brokerage to list their home on the MLS (multiple listing service). The brokerage usually has the seller sign an exclusive agency agreement, which means that only that brokerage can represent the seller, and the brokerage gets a commission, usually 6% on the sale price no matter who ultimately finds the buyer (even if the seller ends up finding their own buyer).
    • This agreement also stipulates that the 6% commission be split between the seller’s brokerage and the buyer’s brokerage. Usually this is split 50-50 (i.e., each brokerage gets 3%) or the seller’s brokerage gets 3.5% and the buyer’s brokerage gets 2.5%.
  2. The brokerage assigns a real estate agent (i.e., sales agent) to be the seller’s point-of-contact and guide them through the transaction. (However, the brokerage is responsible for ensuring everything is done correctly.)
  3. After the sale, 6% of the sales price automatically goes to the seller’s brokerage, which gets split with the buyer’s brokerage. Then, the commission each brokerage receives is split with the real estate agents for the seller and buyer.

This is just one of many examples of how the real estate industry maintains its grip, forcing sellers to pay a hefty commission and preventing ordinary people from being able to purchase a home without an agent.

Fortunately, alternative methods are becoming increasingly available. They’re not prevalent yet, but I’m optimistic that the future will have good options for both buyers and sellers. Homie is one example of a new marketplace, but currently it only operates in Arizona, Colorado, Nevada, and Utah.

If you do end up using a traditional brokerage, before signing an agreement with them, you can:

  • Negotiate the commission that you’ll pay them, including the commission that would be paid to the buyer’s brokerage
  • Negotiate the terms of the agreement; for example, if you find a buyer yourself, you won’t owe the brokerage a commission (you can ask for an exclusive agency listing or open listing)