We have heard from other Realtors that home sellers are constantly questioning the commission percentage being asked for when signing a listing agreement. The sellers often ask “why should I pay the same percentage for my $900,000 house that Joe is paying for his $250,000 house. The math looks tough: 6% (an average commission rate) for house A would be $54,000, while for the less expensive house, it would be $15,000. Why should the more expensive home cost more to sell? — That is the gist of the seller question…
The answer is not as straight forward as the question… Think about it: the market for the more expensive property is proportionally smaller, since far fewer buyers can afford such a house as compared to the $250,000 house. This means that to get to those buyers, more effort must be made, and the advertising costs are proportionately higher for the more elite magazines. Also, because the market has fewer buyers, it is likely that the ads will have to run for a more extended period of time, therefore also costing more. There is the expense of professional photography for the more expensive house, and staging costs. Additionally, a successful Realtor will have relatively higher overhead costs, such as this blog, web sites, print marketing materials, mailings, etc. that standard book keeping practices will allocate to the cost of sales for these properties based on marketing dollars. These expenses, and more, are part of the marketing of any house, but they cost more for more expensive properties.
