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Raising the Rate:  New Ways Agents are Getting Higher Commissions 

by Liz Ganshirt

International Commissions

International markets show a vast range in the commissions that agents receive. In 2014’s hottest market, Dubai, property values are quite high. Agents typically make 2 percent – a smaller portion of a very big pot. According to ArabianBusiness.com, the total amount of real estate transactions in Dubai in 2013 exceeded $64.2 billion, compared to roughly $987 billion in the U.S. (according to the National Association of Realtors, and not including new construction sales). The market is heavily regulated with a centralized listing system tracking all transactions. No individual or company is permitted to work in a real estate brokerage unless they are officially registered with the Real Estate Regulatory Agency, or RERA.

In China, the government sets a cap on the commission payment and requires both sides share the commission. The National Association of Realtors reports that each region has its own commission rate, which is usually lower than 3.5 percent of the sales price paid by both sides; the buyer pays half the commission, and the seller pays the other half, although a buyer alone could be asked to cover the commission during a heated market.

Conversely, JapanPropertyCentral.com reports that Tokyo’s apartment market appears to be shifting to benefit sellers. Commissions are 6 percent, split between the buyer’s and seller’s agents.

In Brazil, agent fees are between 3 percent and 8 percent, with the buyer paying more of the commission. In the United Kingdom, London remains the hottest market; agents receive between 2 percent and 3.5 percent, and the client must pay 17.5 percent of the commission as a tax called “VAT.” In France, sales are stagnant, except in Paris. GlobalPropertyGuide.com reports that transaction costs in France can range from 8.4 percent to 29.4 percent. New properties have the highest costs because of the 19.6 percent VAT, but this is slightly offset by a lower registration fee, and agent fees range from 3 percent to 10 percent typically split between buyer and seller.

Agent commissions in the U.S. are about 6 percent on average for seller agents, but then 2.5 or 3 percent is typically shared with buyer agents.

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Comments

  • Gary Lucido says:

    I looked up the history on that Mokena listing. They originally priced it at $1.175 MM back in 2008 and then $850K in 2010/ 2011. So no great miracle that the house ultimately sold when listed for $795K. Now, granted, it was listed in late 2012 at $800K but the market is much stronger now. I just don’t believe that the agent makes that much difference unless you are comparing to those agents that are unresponsive and use crappy photos.

    Another issue I have is the belief that a higher co-op makes a difference. If it is true then those buyer agents aren’t acting in the best interests of their clients are they?

  • Mike LaFido says:

    Gary, I can appreciate your response “Does a higher co-op make a difference?” It’s been my experience it does (from both research and experience on the listing side). The flip side of the coin (offering 2% or less to buyers broker) has a negative impact (from both research and experience on the listing side) on both the days on market and the list/sale %.
    As far as the marketing being much stronger…that is such a general statement. The market in Mokena for 750k plus homes is worse than last year. Feel free to check out the data from Info Sparks. This particular homes
    11.3 months of inventory. 7+ is a buyers market (up from 9.2 last year)
    Homes are selling for 91.7% of original asking price (down 95.4% last year).

  • Anthony says:

    Great feed back Mike! I looked into both, and I too agree that you need to have full research to make an opinion. Thanks!

  • Gary Lucido says:

    So all those buyer’s agents that are being influenced by higher or lower co-op commissions are doing a disservice to their clients by steering them to properties that will make them more money. Right?

  • Earl Ruthman says:

    I believe almost 100% of realtors will do what is best for their clients (seller and buyers). The only issue i have when i am looking at the coop commission if it is notably low is that it may indicate dealing with a difficult person (seller or agent). But that being said wouldn’t impact showing or making an offer on that property.

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