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Commission on selling Land

Posted by onlygirlsmom (My Page) on
Thu, Apr 9, 09 at 19:57

Hi-
My DH and I are looking to put our 3 acre parcel of land on the market. I was speaking with a friend of ours who is a realtor and she said that the commission is closer to 10% on land b/c it's more work. Why is selling a parcel of land more work and how does that merit 10%? She also said that if the commission were too low (ie: 5-6%) a realtor wouldn't even try and sell it. We're in MI where the market sucks. Why would a realtor forgo selling a property b/c the commission weren't high enough -I would think they'd be happy with just getting a sale (and I thought 6% was pretty much the norm in re: to commission)
thanks!


Follow-Up Postings:

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RE: Commission on selling Land

In my area the commission for land is the same as houses. 6%.

I see no difference between the amount of work except there is no inspection for land like you'd do with a house.


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RE: Commission on selling Land

We have always paid 10%. The reason is that it is just as hard if not harder to sell raw land and the price has only been around 20% of the cost of the average home.


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RE: Commission on selling Land

In my area, commission on land and mobile homes is usually in the 10% range also. Land is just a PITA, getting maps, drainage info, septic info, well test, topography on each piece of land you show before someone even makes an offer is just a headache for very little money. Land prices are usually much lower than home prices. This is usually why the commissions are higher. The paycheck has to be worth the work. How much is the land you're selling. 10% might sound like a lot of money, but if you're talking 50k for three acres, you're looking at $5000 for someone to market it, sell it, and close it.(then don't forget this usually gets split 4 ways).


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RE: Commission on selling Land

10% is highway robbery. Don't let anyone try to kid you that raw land is harder to sell than any other property. In fact, I'm here to tell you it is a much easier than any other property.

How can I say that, because I have sold several small tracts via a FSBO type service that cost me less than 1% for a full MLS listing. Put in a few good pictures, and a good write up with a good description of the tract and area and you are all set.

Put up a sign with an info tube filled with your write up and info. and you will not believe the response you can get.

More reasons that selling land is easier are: there are no lock boxes, no showing appointments, no homeowners leaving the house, etc. If some calls are based on an add(craiglist is great...even the realtors are using it) or your MLS listing you can simply fax or email a map to the property and tell the interested party to have a look around(I have never meet anyone at any of my lots that I have sold). The land and the area will either sell itself or it won't. Remember you have all ready included info about the town, civic association, restrictions, schools, etc. in your write up. You don't need a marketing staff to do that do you?

Selling land may be a PITA for some but don't let them fool you. Getting all of the maps, etc. are all matters of public record and most of these high dollar marketing types either pay an $8.00 clerk or a document service to get the info, and most have never set foot in the public records dept. Look in the phonebook or call you public records office and ask them if they know of companies that provide that service. I have been to several city/county records dept.s and usually the personel are more than willing to help you get the required info.

As far as closing, it too is no big deal. Just find a title company that is willing to work with FBSO. They can provide you the contracts, and all the documentation requirements for closing, again no big mystery.

I googled MI FSBO and I got 226,000 hits, so I know it is possible in your state.

I almost forgot...pricing, again not a big deal. If you don't have a good handle on the market you can always get your own appraisal. A lot of the FSBO services will provide comps. included with their fees.

Remember...in this day an time the old 6% and 10% commision games are long gone. Everyone wants to belly up to the trough and try and get a piece of you. Per linda117:"(then don't forget this usally gets split 4 ways)" like that's your problem.

FSBO is not that hard and you can really do it if you choose to. If FSBO is not for you, stick to your guns and have them look you in the eye and explain how land sales are harder than a other transaction and justify a 10% commission. I have yet to have anyone do it! Just decide on what you feel is a reasonable fee for your situaiton and shop around.

Well enough of my rant!LOL I'm sure I have stepped on some toes, but that's my story and I am sticking to it!

Good Luck!


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RE: Commission on selling Land

A 10% commission is standard for raw land in my area of New England as well, for all of the reasons Linda stated.

/t


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RE: Commission on selling Land

Per linda117:"(then don't forget this usally gets split 4 ways)" like that's your problem.

Rar, actually it is her problem, because if she isnt offering a competitive salary, (commission) NO ONE WILL SHOW THE LAND! This is a business, people are out there to make a living. Who in the world would do all that work, wait months for a closing for a few hundred dollars?

It all depends on the price of the land. Obviously something that would be in the 300k range could probably be listed as a 6% commission, but something for 20k would not.

If you think 10% on land is highway robbery, what in the world do you think commission on rentals are? They are 50% (half a months rent)


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RE: Commission on selling Land

I think part of rar1's point was that noone has to show the land! I agree that it seems ridiculous for a piece of land to warrant a higher comission rate. Yes, a parcel of land may take longer to sell due to the fact that there aren't that many buyers out there but "longer to sell"does not necessarly equate to "more work." I would definitely look at alternative listing options.


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RE: Commission on selling Land

I purchased an out-of-state piece of raw ground about 5 years ago. When I saw it on the MLS I called the listing agent. She didn't know a thing about the land. We emailed her a list of questions about the property and her answer was "I'll find out." Simple things that she should have known. We had to see the property ourselves because she didn't "quite know" where it was located! The only time I saw her was when she showed up at my lawyer's office to collect her commission.


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RE: Commission on selling Land

50% commission on rentals is better than credit cards, pawn shops and check cashing companies get and I consider those crooks!

I'm not saying that realtors don't deserve to make a living, but I am still waiting for some to prove to me that raw land sales require more effort and cost more to market than other properties. Especially when raw land do not require any formal showings.

In this day and age of the internet,email, etc. the traditional marketing of real estate has gone by the wayside. Look at all of the properties(residential, commercial, and raw land) on craigslist, and FSBO websites. Like I said on my previous post, even some realtors are using craigslist to post their properties.

6% and 10% have become the "standards" only because WE the consumer have allowed it to happen. I have yet to see a cost/benefit analyst that these fees are truely worth the cost.

If it truely cost that much, how could all the FSBO type companies survive,and make a profit, with listing costs as low as $200 in the OP's state?

Having said that, realtors can and do provide a good service, but at 6%, 10%, or 50% I don't think so.


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RE: Commission on selling Land

thanks for the information! Although I am still perplexed as to how selling land is more difficult than selling a house -I think it's b/c the realtor's want to make up the money for not having as big of an initial sale tag. We have already had the perk test done and had a drive put in. It's in a cul de sac and not on a main road so just sticking a sign at the edge of the property is not really a great option. I think it needs to be on an MLS -just not sure if we'll go the flat fee listing route or with a realtor.

And I must say it "annoys" me when realtors will not even show a property b/c they don't feel the commission is high enough-who are they working for? themselves or the client? a little pet peeve of mine.


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RE: Commission on selling Land

Higher percentages often are offered on lower-priced property to put the property on a more competitive basis, commission-wise, with higher-priced properties.

If you were a Realtor, & you could spend your time working on a $250,000 home sale or a $50,000 land sale, which would you work on?

Rentals/leases are a special area;
if you don't have property management experience, they're a landmine.


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RE: Commission on selling Land

And I must say it "annoys" me when realtors will not even show a property b/c they don't feel the commission is high enough-who are they working for? themselves or the client? a little pet peeve of mine.

Onlygirlsmom, you misunderstood my remark. I am not saying that agents are choosing which pieces to show based on commission, im saying that most agents choose not to show small parcels of land because the paycheck isnt worth the time. Sylvia hit it on the head. I as an agent choose which clients I want to work with. She is absolutely right. Agents are in the business to make money. Showing a piece of land where you're only going to make a few hundred dollars isnt even on the bottom of my list. Frankly, I'd rather spend the saturday with my family. Thats why the commissions are higher on land, the prices are lower, the paycheck has to be worth someones time.(just like any other job)


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RE: Commission on selling Land

I am not saying that agents are choosing which pieces to show based on commission, im saying that most agents choose not to show small parcels of land because the paycheck isnt worth the time. and Agents are in the business to make money. Showing a piece of land where you're only going to make a few hundred dollars isnt even on the bottom of my list.

These 2 statements relate to efficiency or really lack there of! It is simple economics 101if you can sell 10 widgets can make the same net profit as selling one widget then your processes are more efficient. This is why discount brokers and FSBO services are become more and more common place. Their business model is one of efficiency and large numbers of clients.

Speaking of clients, Im sure you would agree that customer satisfaction, referrals, and repeat business rule. Commission sales are a numbers game so you have to be very efficient and have a large number of clients and potential clients in your "pipeline". So why would you turn down a low dollar/low commission transaction and basically turn away potential long term clients and their potential long term referrals? I dont get it. Their referral or repeat business could get you your next Million $ sale. Dont get me wrong, I not saying realtors should lose money, family or personal time, I saying some realtors should look at ways to become streamlined and efficient.

Times must be very good for Silva and Linda, because the attitude expressed by the statement, I as an agent choose which clients I want to work with. She is absolutely right., borders dangerously on edge of arrogance. You certainly have that right, but so do your potential clients! I think this attitude is another reason discount brokers are doing so well. As a buying client, I would never give my repeat business or referral to any agent that would not give me info or show me a property I found on MLS and I was interested in. In fact, I have used that very reason to terminate contracts with Brokers/Agents that acted that way.

To the OP shop around and find an option you feel is best for your situation. One option that I have used with great success is FSBO using a flat fee MLS listing offering a certain percentage (usually 25-50% of the total "standard" rate) for a participating selling broker.
I have also had success with not offering any participating fees. It really depends on your market.

Good Luck!


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RE: Commission on selling Land

As a buying client, I would never give my repeat business or referral to any agent that would not give me info or show me a property

It wouldnt be repeat business if the agent didnt give you the info or show you the property in the first place would it? You seem to be under the impression that agents have this land information at their finger tips. They dont, the only thing they have for land is the MLS listing. The rest of it takes time and research to get. It simply is not worth the time on small parcels. Getting back to the original question on this post...the reason the commission is higher on land is because the prices are usually that much lower and no one wants to work for months on something and make a few hundred dollars. 10% is not alot of money on a 50K piece of land.

I'm not sure why you think its arrogance, It simply is a choice on which business the agent chooses to do with their time and what is cost effective. It simply is not cost effective to show small parcels of land to make a few hundred dollars when you can be showing homes even in a lower price range.

By the way, Discount Brokers in my area fail. The business plan just doesnt work. Foxtons, Help U Sell which are two of the bigger ones, made it a year or two, and then disappeared. People were unhappy with the services. Why? because you dont get anything for nothing, you get what you pay for.


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RE: Commission on selling Land

interesting conversation here.

Please don't get me wrong -this is not meant as a put down to realtors -but I still do not get how selling land merits more time.
When my husband and I bought this land -I don't think the realtor ever went out there once w/ us -maybe once-after we were sure we were ready to make an offer. We made the calls to the county in re: to perk tests, type of waste system that would be needed etc (it was a new development and there weren't any other houses at the time to base our septic system off of and the seller of the parcels was not the most integrity filled guy so we wanted to check all bases ourselves before believing anything that came out of his mouth)
In re: to this parcel - I don't expect a realtor to "show" this land -it's land -how much is there to show? and we don't expect them to even advertise. We'll probably end up going w/ a realtor who is willing to negotiate with us in re: to commission.

in re: to FSBO/flat fee -our current home is listed w/ a flat fee broker. We have been very happy w/ the service he has given us. When we listed we were planning on building on the land so we didn't really need to realtor to find us our next house. We are now looking to move out of the area entirely so a local realtor wouldn't be much help in finding us a new home either. Although where ever we end up we'll probably use a regular realtor b/c the new area will most likely be one we're not familiar with.


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RE: Commission on selling Land

Having been a only land/ranch selling RE agent some years ago, I would take a listing that was paying less than $1k in total commission. Today I would have to increase that amount due to the rise in expenses.
At that time there were listings where I had to charge above 15% to get to that $1k. Sure, it's a numbers game, but land buyers are probably less than 3% of the total buyers in the RE market and listing times are probably in multiples of the residential market.
I would not compare the residential with the land RE market.


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RE: Commission selling Land

Should read:
"I would NOT take a listing that was paying less than $1k..."


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RE: Commission on selling Land

Experienced Realtors, like experienced practitioners of any job/career/profession, usually have way too much experience to be arrogant.

& I didn't say that land sales take more time;
I said that the sales prices are lower than the prices of homes, & that sellers of land often offer higher Realtor fees to offset those low prices.

& those corporate sellers I referred to in another post who routinely add verbiage to their listing agreements stating that Realtor fees are based on purchase price less seller concessions?

You'd probably agree that they are all about effective selling & about keeping as much of the sales price as possible, right?

that they aren't likely to give away any of their proceeds of sale to some Realtor?

They routinely offer a higher percentage and/or a "selling agent bonus" to their lowest-priced listings.


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RE: Commission on selling Land

What if your selling a lot for $500k? Should commission be $50k? The reason I ask this is because I am listing my lot for sale tomorrow. Is land in a development with all utilities still considered raw land?


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RE: Commission on selling Land

"Is land in a development with all utilities still considered raw land?"
Yes, "vacant land".

Depending on how high and competitive the listing price is and the chance of a sale within 6 months, I would reduce my commission and offer co-op agents between 3% and 5%.
But a $50k commission could also be an agressive marketing strategy.


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