Real Estate Commissions: What Are You Paying For

2008-09-17   |, excerpts

Often buyers and sellers of real estate ask the question where does the money for the agents’ commissions come from, and what does it cover? Real estate commissions are usually paid directly by the seller, but both buyers and sellers ultimately pay the commission as a part of the overall transaction. Here is a summary of the general benefits that both buyers and sellers gain from hiring experienced real estate agents:

Tour time: The collective activity of every agent that shows a specific property with the intent to persuade a buyer to take action. Tour time gives both buyers and sellers exposure to the market. If a property is shown three times per week over a period of six months, that amounts to 72 to 144 hours per property of tour time. This includes setting appointments, meeting, driving and showing only; it does not include buyer education and preparation.

Buyer education and coaching: Real estate transactions can’t happen if buyers don’t take action. Both buyers and sellers benefit from buyer education that explores the benefits of homeownership and investing. The collective activity of buyer education—and coaching on how to buy, what to buy and the financial preparation required to buy—is invaluable. The average buyer needs data and coaching every week for a period of six months. This can amount to more than 50 hours of communication per buyer, and this time can double in slow markets in which buyers take longer to make purchasing decisions.

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