Thursday, September 23, 2010
Go it alone or use a REALTOR®?
The fact is, most people who try to sell their own home end up using a REALTOR® in the end anyway. Before anybody decides to fly solo through this complex, time consuming and financially perilous process, they should consider these questions.
Will you really “save” the real estate commission?
When buyers see a home for sale ‘by the owner’, they see a bargain. They imagine the REALTOR'S® fee going into their pocket, not yours.
Are you familiar with real estate law?
Complicated and ever-changing real estate law governs nearly every phase of selling your home. One misstep, and an entire deal can fall through, or worse, result in a lawsuit.
How many potential buyers will you reach?
Selling a home takes more than just hanging a “For Sale” sign. How will you promote your home? Will you write your own ads? How will you use the Internet, knowing that you’ll have no access to the cooperative service available through the Multiple Listing Service®. MLS® and the corresponding web site www.REALTOR.ca have changed the way people search for homes, and it’s hard to court buyers without it.
Do you have the time?
Promoting a home is a full time job, and you may already have one. Will you be able to take calls at any time? How about screening the callers to figure out if they’re suitable candidates? Not everybody who calls is even suitable to walk through your home, but how do you tell?
Do you know the market well enough to get the most for your home?
Lacking years of experience, the average do-it-yourselfer is merely guessing at their listing price. Often they set the price too low and miss out on thousands of dollars, or they price their home too high and drive away willing buyers.
Do you have the negotiation skills to keep a deal on track?
When an offer comes in, emotions can run high with so much money on the line. This is why direct seller-to-buyer deals often end in disaster. REALTORS® keep it professional and are indispensable when it comes to bargaining with buyers.
Wednesday, September 22, 2010
Realtor Commissions and Where they Go
The public often has the misconception that Realtor Fees are extremely high and have no idea where the funds go that they pay out as commission. The following will outline where the commission paid on the sale of your home goes.
First off, the commission is typically split between two Brokerages (the Buyers Agent and the Sellers Agent), then, internally between the Brokerage and the Agent involved in the transaction. This of course is depending on what sort of split there is between the Agent and the company that he or she works for, or has their licence held by as an independent contractor. After this split, Revenue Canada now gets involved. As an Agent (contractor) to the brokerage, we are responsible for all of our own taxes and deductions.
So you can see, using an example only: If you pay 7 percent on the first 100k and 3% on the balance, as a Seller, and if the split is 50% to each corporation, using an example of $300,000 as the sale price. that would be total commission, plus GST equaling $13,000. Yes, I agree that looks like a big number.
Divide the $13,000. by two Brokerages and that equals $6,500 to each Brokerage. Now if the Agent is on say a 60 / 40 split with the Broker that means that $3,900 goes to the Agent and $2,600 to the Broker. Now, out of the Agents portion of $3900 they have to pay the government for personal taxes and deductions. Out of this they also must pay for office rent, their car, maintenance, insurance, gasoline, annual licensing fees (which are large), annual training, and all their related office expenses including but not limited to: a computer, a fax machine, a photocopier, a printer (often more than one), cell phones, data plans, mobile internet sticks, pagers, laptops, software, digital cameras, virtual tours, marketing materials, MLS Fees, postage, advertising, web sites, paper, printer ink, toner cartridges, admin staff, and answering services, etc. All of this and I haven't fed my family or paid my mortgage yet.
Usually you pay no money to a Realtor up front, so the agent fields all the expenses from his/her own pocket, often over a period of months, until such time as a pay cheque arrives, often many months after the purchase or sale has closed. For example: you buy or sell a house in April with an August possession date.The agent can look forward to getting paid sometime in September, and must budget accordingly.
I hope this gives you a better understanding of where the Fees charged by Realtor's go
Chris
First off, the commission is typically split between two Brokerages (the Buyers Agent and the Sellers Agent), then, internally between the Brokerage and the Agent involved in the transaction. This of course is depending on what sort of split there is between the Agent and the company that he or she works for, or has their licence held by as an independent contractor. After this split, Revenue Canada now gets involved. As an Agent (contractor) to the brokerage, we are responsible for all of our own taxes and deductions.
So you can see, using an example only: If you pay 7 percent on the first 100k and 3% on the balance, as a Seller, and if the split is 50% to each corporation, using an example of $300,000 as the sale price. that would be total commission, plus GST equaling $13,000. Yes, I agree that looks like a big number.
Divide the $13,000. by two Brokerages and that equals $6,500 to each Brokerage. Now if the Agent is on say a 60 / 40 split with the Broker that means that $3,900 goes to the Agent and $2,600 to the Broker. Now, out of the Agents portion of $3900 they have to pay the government for personal taxes and deductions. Out of this they also must pay for office rent, their car, maintenance, insurance, gasoline, annual licensing fees (which are large), annual training, and all their related office expenses including but not limited to: a computer, a fax machine, a photocopier, a printer (often more than one), cell phones, data plans, mobile internet sticks, pagers, laptops, software, digital cameras, virtual tours, marketing materials, MLS Fees, postage, advertising, web sites, paper, printer ink, toner cartridges, admin staff, and answering services, etc. All of this and I haven't fed my family or paid my mortgage yet.
Usually you pay no money to a Realtor up front, so the agent fields all the expenses from his/her own pocket, often over a period of months, until such time as a pay cheque arrives, often many months after the purchase or sale has closed. For example: you buy or sell a house in April with an August possession date.The agent can look forward to getting paid sometime in September, and must budget accordingly.
I hope this gives you a better understanding of where the Fees charged by Realtor's go
Chris
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