Are you a discount broker?

Q: Are you a discount broker?

A: No. "Discount broker" is a misnomer. For there to be "discount brokers" there would have to be a set brokerage fee, or commission, throughout the real estate brokerage business. But there is no set fee; therefore, there's no fee to "discount."

If there were a universal fee, such as 6 percent, brokers would be in violation of fair trade practice. It would be essentially the same thing as price fixing. That would be unlawful. Brokergage fees, usually called commissions, are negotiable. They are not set in stone.

A typical fee is 6 percent for most properties, but that's not a requirement for doing business. Why 6 percent? Brokers know that they often must share a commission 50-50 with a second company. Within each company the broker deducts a small percentage of his share of the commission to cover operating costs. What's left is again split between the broker and the agent who listed or sold the property. By the time the commission is sliced and diced, there's not much left to compensate the two brokers and two agents.

In cases where the broker gets to keep the entire 6 percent commission, he or she still must pay operating costs and share the commission with an agent (unless the broker listed and sold the property himself/herself). If the brokerage is a franchise, the broker's operating costs include a franchise fee. In addition, he or she has all the expenses of a business operation. Somebody has to pay for it all.

On very large sales the commission may be less than 6 percent. Also, when agents work with building contractors to list and sell new houses, the commission usually is reduced. There are other reasons why sellers and real estate agents may agree to less than 6 percent commissions.

The important point is: Real estate commissions are negotiable. Since we don't begin with a set commission we don't "discount" the commission. However, we may agree on a lower commission when, for example, the seller will be performing some of the usual services of a real estate agent. By agreement, the agent will provide less than full service, and will be paid a lower commission.

Michael Dixon Realty always negotiates commissions and offers a menu of services ranging from full service to partial. You're the customer. You know what you want.