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Working With Agents

Co-Broking - how does it work and is it right for you? Co-broking is a term that gets thrown around a lot in the real estate industry and tends to be a point of confusion for many buyers and sellers.

Co-broking refers to sharing a commission on a property by 2 agents, or possibly by an agent and an owner. For example, if the property is listed by and agent at a commission rate of 6%, but a different agent actually brings the buyer to the table, the 2 agents will split the listing agents commission, typically each getting 3%. A vast majority of listed properties are sold this way so it is an important aspect of the process for both buyers & sellers to clearly understand.

If the property is listed FSBO, and an agent contacts the owner saying he has a buyer for the property, the owner may offer him a co-broke fee. In this case, the seller is more or less acting as the listing agent, and the agent is acting as the selling agent. The selling agent gets the 3%, and the seller gets 3%. Actually the seller is just saving that 3%.

Deciding on whether to use this method of selling or depends on several factors. If you have already factored in a 2-3% price difference on the house for negotiating purposes, and the selling agents gets you a full price offer, you end up with the same amount of money in your pocket. If however, the agent has to reduce the price significantly to sell, you will end up getting far less than you anticipated after you have had to pay him the 3% on a reduced selling price.

In addition you will want to look at how much equity you have in your home. If you have to pay a fee to a broker will you be able to satisfy your current loan and still get what you need from the proceeds of the sale?

If the seller doesn't want to pay a broker a percentage of the selling price, but he is willing to pay him for bringing a buyer he can offer the broker a flat fee listing. In this instance, the seller offers a straight fee, for example $2000 to the broker. The fee paid to the broker is not a percentage, or determined in any way, by the selling price of the home.

Make sure you have all the facts and understand clearly the conditions of your contract with the co-broking party. Remember, real estate commissions are always negotiable and depend on what the seller and or buyer have agreed to pay.

Copyright© 2008 FSBO Publishing Group, Inc., All rights reserved. This material may not be republished without written permission.