In the second instalment of the VREP Short, Matt and Adam answer some common questions about how Real Estate commissions work in Vancouver. How do Buyers’ agents get paid? Is there a standard commission percentage? Is there a disadvantage to using a discount brokerage? Have a listen and find out!
Adam: Okay Matt, VREP Short #2
Adam: And welcome back.
Matt: Yeah, we’re talking about realtors’ fees today.
Adam: We are talking about realtors’ fees in Vancouver and why are we talking about this?
Matt: Well, this actually, it was born, the idea was born in your car.
Adam: It was born in my car, yeah, also like one of us, one of the Scalena boys, not in my car but in a car somewhere. I’m not sure. I think that’s how the story goes.
Matt: Yeah. Well, we’ll save that one for VREP Short #3.
Adam: So Matt, so here’s the idea. I got thinking about this the other day. I was out with a buyer that I have been working with for a couple of months and we’re going to see a few places and she turns to me and says, “How much do I owe you for this?”
Matt: What did you say?
Adam: I’m only $500.00 an hour. No, that’s not true. The reality is that she doesn’t owe me anything. We’re free! As buyers’ agents, we’re free.
Matt: That’s right. That’s right.
Adam: She was happy to hear that. She couldn’t believe it. So you know, how do buyers’ agents get paid?
Matt: Well, what happens is is that the seller, when we actually purchase a property, pays the buyers’ commission.
Adam: Okay, so in other words, the sellers’ agent goes in, meets with Mr. or Mrs. Seller, says, “I’m going to market your property here’s what I charge.” They charge a certain amount and then they split that with the successful buyers’ agent.
Matt: That’s exactly correct. Usually it is about, basically about half, sometimes a little less.
Adam and Matt: Sometimes a little more.
Adam: Right. So first of all, what is the standard commission?
Matt: So in B.C., there is no standard commission. I can tell you what we charge. We charge 7% on the first 100,000.00 and 2.5% on the balance when we list your property and we offer half of that to the successful buyers’ agent.
Adam: Have you seen that number? Did we just pull that out of a hat or
Adam: Where did that come from?
Matt: No, it’s fairly common. That’s a fairly common commission structure.
Adam: Okay, so we’ve seen that before.
Matt: There are a variety of others though. Some charge a flat fee that’s significantly less.
Matt: Some charge a slightly lower percentage, some charge a little bit higher. It’s really dependent, of course, on what level of service you provide.
Adam: Okay, okay. So maybe in thinking about levels of service and what you provide so if maybe my fees are lower I might not include the same thing.
Matt: Don’t expect very much.
Adam: Because you pay for what you get is basically what you are saying.
Matt: That’s correct, yeah.
Adam: Okay, so maybe we should talk a little bit about what’s included in our fees and some of the inclusions that we see, you know, around the lower mainland.
Matt: Yeah, for sure. I mean, you can, at a flat fee, you might get your property listed and not much more. On the other hand with us, what are some of the things we include, Adam?
Adam: Well, you know, I mean, we always have a video of the property. We always have amazing photography.
Matt: Professional photography
Adam: We do a floor plan. Professional photography, a floor plan, we have custom feature sheets, we do a staging consult. You know the list goes on. And that’s not even talking about actually the marketing costs to make sure that we get maximum exposure to the property.
Matt: Yeah and we’ve talked about that before. Maximum exposure and the property looking good in that marketing material is three-quarters of the battle.
Adam: Right. So, in other words, then when you are hiring a realtor you can go with different pay structures. There’s different commission fees out there, right?
Matt: Absolutely. You pay for what you get.
Adam: But you need to keep in mind you pay for what you get. So you need to understand you know if you are getting a lower price point on a listing you might have to incur some costs in other areas.
Matt: Yeah, exactly true.
Adam: If you want the same service. If you want the same marketing.
Matt: Exactly. So, yeah, the two take aways here…one… on the buy side, real estate fees are paid by the seller. You do not pay your realtor.
Matt: If you don’t buy, the realtor does not get paid. That’s the risk the realtors run.
Adam: On the sell side, when you meet with sellers’ agents you ask them what they charge. Don’t expect a standard fee across the board. There might be some typical fees but understand that whatever you pay it should be reflected in not only in the service they provide but also in the marketing materials that they produce and the exposure that they get your property.
Matt: Have a good week guys. We’ll see you on Wednesday.
Adam: Take care.
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This is the Vancouver real Estate Podcast. Short.