REALTOR® Magazine-Daily News-Commissions on the Rise as Business Toughens

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Daily Real Estate News | June 11, 2007 | Commissions on the Rise as Business Toughens
Tough times are driving up real estate commissions, according to a review of revenue and cost data by industry publication Real Trends. The average commission rose last year by about one-fifth of a percentage point to just under 5.2 percent, the report says.

What's behind the increase? Properties simply need more marketing muscle to sell, which means that real estate practitioners must work harder and spend more money in order to help the sellers get top dollar. Some agents also are adding services, such as staging or professional photography, to get the listings noticed in markets where inventory is supple.

An example is Jay Coles of RealtyUSA in Orchard Park, N.Y. He heads a five-person sales team in the suburbs of Buffalo, and says his sales volume has risen 40 percent in the past 12 months, despite charging 7 percent commissions.

Cole says his company has a reputation for aggressively marketing homes, primarily via the Internet. He pays Web sites extra to guarantee that his customers’ homes will pop up prominently on REALTOR.com, Homes.com, HarmonHomes.com, and RealtyUSA.com.

In other parts of the country, higher co-op splits attract interest. In a market flooded with unsold listings, a 3 percent co-op split "is always going to attract more attention than 2 percent. We call [inadequate splits] `getting eliminated at the office,'" says Jane Fairweather, who heads a sales team for Coldwell Banker in Maryland.

Source: Washington Post Writers Group, Kenneth Harney (06/08/2007)