NOTE: The information below is based on the "traditional" real estate model. By "traditional," I mean the one-size-fits-all model of real estate. The all or none package of real estate services! There are changes coming to the Kokomo area - Real Estate Consulting! Once you have read about commission based real estate services below, I want you to visit my Real Estate Consulting page and my blog to find out how you might benefit from a different approach to real estate services.

The number one concern REALTORS hear from sellers is, "Your commission is too high". You are right, the fee is high. The fee is high because a listing agreement is really an insurance policy. It's a guarantee that if your home doesn't sell you don't pay anything. The fee is high, because it has to cover the risks involved for the REALTOR. See, what happens is the REALTOR takes all the risks ' with their time, their money, their expertise, etc. The REALTOR makes a substantial investment in you and your home. The REALTOR spends their money and their time and the only way they can recoup their investment and make a living is for your house to sell.

Think of a REALTOR'S service fee as a contingency fee ' you pay nothing unless you get results. That means if there is no sale, there is no pay! There are very few professions that get paid on a contingency fee basis. In fact, the only other profession that comes to mind is law. Lawyers sometimes work on a contingency basis on such things as personal injury cases - they do all the work and get paid only if they win the case. If they don't win they get nothing.

Think of all the professions you come in contact with on a daily basis. Very few are paid on a contingency basis. Your doctor is paid per visit, per test, per operation, etc. ' with no guaranteed results. A plumber will not even go to your house without a service fee. You may get a contractor to give you a free estimate, but they won't do anything until they have money in their pocket. You pay your accountant to help you save as much as possible on taxes, but again there is no guaranteed and you still pay the fee. Think of your own job. Are you paid based only on results at the end of perhaps 60 days or 90 days or more or maybe not at all because you didn't get the results you needed to get paid?

Now, let me take a moment to explain a little about the REALTOR'S service fee. Most people believe that REALTORS put seven percent or more into their pockets from every house they help clients buy or sell. That could not be farther from the truth!

First, the service fee is usually split between the listing and selling companies or brokers. Then each broker splits the amount they receive with the agent who actually listed or sold the home. From the portion that the agent gets, they have to pay other fees to the broker as well as their own expenses for advertising, signage, transportation, professional dues, continuous education, etc., etc., etc.

The chart below will give you an idea of how the service fee is split among brokers and agents. Each half of the pie chart represents one-half of the service fee. The left half of the chart shows the portion of the fee going to Broker B and how that is subsequently split among the franchise, the broker and the agent.

As you can see from the chart, most agents make less than one percent of the sales price or purchase price of a property - after splits, expenses and taxes.

So the next time you hear a comment about how high REALTOR service fees are, try to remember, the price is high because all the risk is on the REALTOR. There is no pay until the property is sold, and nothing is paid for services rendered.

And please, don't forget that REALTORS earn their money by helping clients maximize value when they sell their house and minimize costs when purchasing a home. REALTORS save time for buyers and sellers during a transaction, reduce their liability and much, much more.

Now, don't forget to visit my Real Estate Consulting page and my blog to find out how you might benefit from a different approach to real estate services.