Nashville Realtor Compensation Guide.
This guide will help Nashville homeowners understand their options when it comes to compensating their Realtor.
In the past 5 years, substantial changes have been made that are revolutionizing the real estate industry. Real estate agents and brokers are becoming more competitive by creating alternative sales approaches that are lowering prices, providing better quality of services and giving consumers more options when selling their home. This competition is key to consumer success because selling or buying a home for most of us is the single largest financial transaction we will ever make.
One of the biggest changes we are seeing is to real estate selling fees or typical Realtor fees for selling a home. It’s not unusual for real estate broker commissions to be a percentage of the home sale price and as home sales prices have been on the rise, so have those average real estate agent fees. The thing you must remember is, most of the time, what sellers pay their real estate broker is calculated into the cost of the home. Therefore, both sellers and buyers are bearing the expense of real estate fees.
To list your home for sale with a real estate agent or broker you typically have a few steps you need to complete. One of the most important steps for a homeowner is to contract with a real estate broker. Here in Tennessee, we refer to this as an Agency Agreement or Listing Agreement. This agreement outlines the duties of all parties. The listing agreement will state that the broker agrees to market and sell the home while the homeowner agrees to compensate the broker, which is usually a percentage commission with an agreed upon rate. The real estate listing agreement goes into details like, how long the real estate professional will have to market and sell the home, how the home will be listed in the multiple listing service, and how the commission will be offered or split with an cooperating broker or buyer’s agent.
The agent who works with the buyer we call them the buyer’s agent or buyer’s broker or co-operative broker. Buyer brokers are the ones who normally show buyer’s homes, get buyers pre-approved, write up offers and assist in fulfilling their terms and conditions of the purchase agreement like inspections and appraisals. On the other hand, listing agents or listing brokers typically compensate buyer brokers in accordance to the terms in the local MLS which were disclosed to and agreed upon by the homeowner through the listing agreement. Hypothetical example is a listing agent charges a 6% commission might offer a co-op broker / agent 3% or half of the listing agents commission. It’s critical to understand, commission rates are not set or standardized. In fact, for brokers or agents to even suggest such could very well be a violation of the Sherman Anti-Trust Act. The other thing to remember is, here in Tennessee, buyer brokers are fiduciaries for the buyer, just as listing brokers are fiduciaries for the seller. These relationships are established in writing through agency agreements and are required by Tennessee law.
For most consumers, the relationships and compensation discussed in the paragraph above is the typical or prevailing real estate transaction however, as discussed earlier, the industry is changing and now, we are seeing more nontraditional business models which are disrupting the industry and bringing increased competition to the market. Here at Liberty House Realty LLC, I offer homeowners a flat fee home listing while still providing full service. This is known as Flat Fee Full-Service Broker. With better quality of service, reduced cost and fees with a full suite of bundled services traditional agents offer, flat fee full-service broker options are making a significant impact on Nashville real estate. It’s been my experience that homeowners are looking to capitalize on reducing their cost while still getting the same full service they expect from traditional agents that charge a percentage commission.
Alternative sales models for listing your home like: Flat Fee Full Service Brokers, Low Fee Real Estate Brokers, MLS Only Brokers, Virtual Office Website Brokers, or even Fee for Service Brokers all come with pros and cons. As consumers, your success with any of these alternative models will greatly depend on your understanding and knowledge of what is being offered and how much it cost. Even with significant information available online, sellers and buyers should always interview at least three different agents across three different brokerages if for no other reason to get a better idea of the industry and the common practices in their market place.