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How We Do It...
(FIGURING OUT YOUR REBATE)
To understand how we can afford to give you 60% of our commission (which is 1.5% of the 2.5% commission we receive from the seller) you need to understand where the commission comes from in the first place. You also need to know how we get paid as your buyer’s agent vs. how the competition and other real estate agents get paid.
When you’re selling a home, you hire a listing agent. When you’re buying a home, you work with a buyer’s agent. The seller of the home pays all the commissions. The home seller pays the listing agent and the buyer’s agent. Buyers NEVER pay a commission!
When I bring you to see a home, I am acting as a buyer’s agent. The listing agent agrees to pay a percentage of their earned commission (paid by the seller) to the buyer’s agent whobringsthe home buyer to the home seller. That’s how buyer’s agents get paid. They are paid by the listing agent. That’s why buyer’s agents bring home buying clients to see homes!
In my local area of Northern Illinois, listing agents in most cases agree to pay buyer’s agents up to 2.5% of the listing agent’s earned commission. So now we know that when you purchase a home using me as your buyer’s agent, I will be paid a commission of 2.5% of the home’s selling price.
Working as a real estate agent for New Market Realty, Inc., I pay my company/broker $90.00 a month to work for the company (it’s called a desk fee), and only $100 per transaction (home sold). This allows me the financial latitude to offer homebuyers 60% of my commission back to them as a rebate, and still make a nice commission for myself!
Example: A homebuyer purchases a home using me as their buyer’s agent for $250,000. As the buyer’s agent, I will earn $6,250 in commission from this sale.
Here’s the math: 2.5% (my buyer’s agent commission) x $250,000 (the homes selling price) equals $6,250 total commission. Out of my $6,250 commission check, I pay my company/broker $100 per transaction (home sold), and my desk fee of $90.00 for a total cost of $190. After expenses I am left with $6,060. ($6,250 - $190 = $6,060)
Now for the home buyer’s rebate: I give my home buying clients a rebate of 1.5%, which is taken from my 2.5% commission. I keep1% while my homebuyer’s get 1.5%!
So, as the home buyer, you get 1.5% of the home’s selling price, which in this example is $250,000.
The Math: 1.5% x $250,000 = $3750 (your buyer’s rebate!)
I get the rest, which is $2,310.
The Math: $6,060 (my commission, after expenses) - $3750 (your buyer’s rebate) = $2,310.
In review we have:
The Home Buyer makes $3,750
The Buyer’s Agent (me) makes $2,310
The Broker makes $190 (Don’t feel too bad for the broker; he’s still making plenty!)
Why other real estate agents can't do it:
Other real estate companies charge their agents anywhere from 30% to as much as 50% of their sales commission on each transaction (home sold) . That kind of bite doesn't leave them much (if any) room to offer homebuyers any type of rebate!
Let’s look at how the competition is paid:
Let’s take another look at our $250,000 home purchase.
Example: A homebuyer purchases a $250,000 home. The SELLER pays a sales commission (in most cases) of 2.5% to the broker/owner of ABC Real Estate Company.
The Math: 2.5% x $250,000 = $6,250 total commission paid.
Out of that $6,250 sales commission the agent’s costs are the following: They pay their company/broker (ABC Real Estate Co.) 30% of their commission.
The Math: 30% (agents commission) x $6,250 (total commission) = $1,875
And what do they give you, the homebuyer? ZERO, ZIP, NADA! (meaning no rebate) If your lucky, maybe a potted plant or a gift certificate for $10 off your next meal at KFC!
The agent’s net on this $250,000 transaction? $4,375
The Math: $6,250 (total commission paid), minus $1,875 (company/brokers commission) equals $4,375 (agents net commission).
Now, if they tried to give you, the homebuyer, the same rebate of 1.5% of the homes selling price, (which in our example would be $3,750) the agent’s net commission would only be $625!
The Math: Your rebate, $3,750, minus the agent’s commission, $4,750, equals $625. Not much to write home about! And that’s why they don't offer rebates!
Most real estate companies, because of the commission structure their agents work under, simply can't afford to give homebuyers any type of rebate.
As for real estate agents that keep 100% of their commissions, pay the desk fee to the company/broker, and don’t offer rebates? Well, I'll let you, the homebuying public, be the judge of that one!
And watch out for this trick!
Some real estate companies that offer rebates (if you can find one) will require that you not only buy your next home through them, you must also sell your existing home through them in order to qualify for a rebate!
At New Market Realty, Inc. you only have to buy to receive our exclusive 1.5% homebuyer’s rebate!
I know this may sound easy for some of you and may not make much sense for others, but the bottom line is this: You will always receive 1.5% of your new home’s selling price, paid back to you in the form of a buyer’s rebate, when you buy through New Market Realty! If you have any questions about the New Market Realty buyer’s rebate, please feel free to call Bill Brynelsen at 815-575-1601.
