Home Selling in 48009>Question Details

Nitin, Real Estate Pro in Canton, MI

Which option is better ? Give agent more commission or reduce the price ?

Asked by Nitin, Canton, MI Sun Aug 10, 2008

I have a house to sell and the price is $400k. I have 2 options :

1. Hire agent 1 at 4% commission and list the house at $392k
2. Hire agent 2 at 6% commission and list the house at $400k

Both agent 1 and agent 2 says they will pass 3% to buyer agent.

In both options, i end up having $376k in my pocket.

What do you guys think is better ?

Help the community by answering this question:

Answers

48
You call it "negotiating". You guys have no idea what the term "negotiate" means. Visit a foreign country (india or china) and the street vendors will teach you what it means.
~~~~~~~~~
John, I lived for 2.5 years in Israel, negotiating with the vendors at the Shuq. I do have some idea what the street vendors would teach. I don't know why you seem to think you're the only one who's ever visited a foreign country. And I didn't just "visit", I lived there for 2.5 years, so does that mean I know how to negotiate better than you?

Negotiating in the Jerusalem Market, (or India or China) is not the same as negotiating for a house. I think you'd agree that while some of the principles may be the same, there are great differences too.

It appears, John, from your responses, that you're not really interested in a true answer to your question, you merely wanted to begin a debate. It seems you'd already made up your mind before posting your question. So option 1, 2 or 3... you'll end up with $376,000 in your pocket.

Good for you. Please come back and let us know how it turns out.
4 votes Thank Flag Link Mon Aug 11, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
Presuming that the marketing plans of both agents are equal, the lower listing price is always a better choice. A lower listing price will potentially attract more viewers, which could turn into more buyers.

Of course, that's a huge presumption. It's not a very reasonable presumption, that an agent, or agency, with only 1% to work with for marketing, expenses and profit, will be able to spread the word as effectively as an agent, or agency, with 2-3% to spend on the same things.
4 votes Thank Flag Link Sun Aug 10, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
Why is John answering his own question? I think John should go FSBO, he seems to know more about it than everyone else.
3 votes Thank Flag Link Sun Aug 10, 2008
"What advertising you guys are talking about in this internet time ? Both agents are going to take pictures of the house, put a board outside and list it in the local MLS. The listing automatically appears on other websites using IDX. "
~~~~~~~~~~~
Are both agents members of Realtor.com? That's the largest, most visited site for home-hunters. Membership in Realtor.com costs thousands per year. Membership is important, because without it, while your listing will appear on Realtor.com your agent won't be able to modify the listing, or add photos with a membership.

Yes, both agents will likely take photos. Will they take good ones, or will they just use that crappy little 4-year old digital that they got for their birthday? It costs money to hire a professional photographer. Will they lighten, crop and sharpen the photos.. Photoshop costs money too.

Will both agents do virtual tours? Those cost money. Will both agents create color brochures as leave-behinds for agents and viewers at your home? Will they produce those same color brochures, and send them out the 100 top agents in your region who have sold homes like yours in the last 6 months?

Will they run any print ads? Will then send out direct mail-post cards... (Just Listed, Now Open) to the 100, 300, 500 nearest properties in the area? Will they conduct broker's tours... when they do will they entice other agents by offering food, or starbucks cards, or gas cards to get them in the door? Will they conduct Open Houses?

Will they advertise on other internet sites... (coldwellbanker.com, coldwellbankeronline.com, CNN.com, Truila, Zillow, Openhouses.com) while some of those are free, or relatively free they take time and effort, and that can mean money. IDX doesn't cover all of them... and sometimes when it does, it takes the bare minimum, and can't be modified (ie: 3br/1.1bath ranch $235,000).

There are plenty of other avenues to advertise, both on the internet and elsewhere that hopefully will bring more eyeballs to your listing. Interview agents, and see what they bring to the table. If you don't agree that they offer an advantage over a lower commission agent, then by all means use the lower commission agent. You'd be a fool not to.

But don't be myopic and look solely at the commission. Consider the entire package, and then make an educated decision.
3 votes Thank Flag Link Sun Aug 10, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
Maybe you should request the zoning be changed to general business and open a massage parlor that stays open 'til 2 am. I don't think they have any of those in Birmingham, so their is probaly a pent up demand.
2 votes Thank Flag Link Tue Aug 19, 2008
In my market,Bay and Walton counties Florida a price reduction causes the property to sell faster. As realtors we would like to have more commission however it is in the best interest of our sellers to reduce the price.
2 votes Thank Flag Link Sun Aug 10, 2008
John,
This is a common concer, one that we hear often.

By increasing the commission you are paying the agent more.

By dropping the price you are hopefully attracting more buyers.

When our customers ask us this question, our advice is to decreasr the price or sweeten the pot by adding something that will appeal to buyers.....years golf membership, a years HOA fees, tennis membership, closing costs, home warranty etc. etc.

Attracting buyers is what will sell the home no paying agents more.
2 votes Thank Flag Link Sun Aug 10, 2008
"What advertising you guys are talking about in this internet time ? Both agents are going to take pictures of the house, put a board outside and list it in the local MLS. The listing automatically appears on other websites using IDX. "
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Which agent is using featured listings on trulia and Realtor.com. Is neither one offering a VT? Does either agent offer to use craigslist with a link to a zillow listing, and delete and re-post every week? Are they going to use the plus version of postlets as well? Have either promised open houses or a broker tour. I assume they both are providing brochures with a box with a promise to keep it supplied. They both I am sure, will follow up religiously with clients and buyer agents who have previously viewed your house, should there be reductions in price. Just a few things to consider.
2 votes Thank Flag Link Sun Aug 10, 2008
In this market I think buyers are looking more at value/price of a property before purchasing it. Buyers want more for their money. With that being said, I believe it would be beneficial to lower the price not MORE commission.
2 votes Thank Flag Link Sun Aug 10, 2008
Eric

You knew what you meant ,and probably most realtors knew what you meant.
~~~~~~~~~~~~
I had no idea what he was talking about. In fact, he explained it and I still don't.
1 vote Thank Flag Link Tue Aug 19, 2008
You call it "negotiating". You guys have no idea what the term "negotiate" means.
~~~~~~~~~~~~~
Good luck with your FSBO John! There's no doubt it will be an interesting experience for the buyer who tries to come to an agreement face to face with you. You remind me of the FSBO I once bought a house from. I swore I would never buy from a FSBO again and always use an agent after that! You're going to need all the luck we can offer you.
1 vote Thank Flag Link Mon Aug 11, 2008
Listing agent negotiating on my behalf ? When the offer comes in, the job of listing agent is to pass it to me. It is upto me to accept it, reject it or make a counter. How is he going to negotiate on my behalf ?
~~~~~~~~~~~~
In your case probably by telling you to take few deep breaths and actually consider the offer that comes in rather than blowing it right out of the water.
1 vote Thank Flag Link Sun Aug 10, 2008
What advertising you guys are talking about in this internet time ?
~~~~~~~~~~~
Promoting the listing with the agent community is part of the marketing. If the other agents don't see/don't like the house, they won't bring buyers. Although the internet gives us customers, they rarely like the house they originally call about. As with print, most times a person is attracted to something about the photo or the wording of the ad. When they actually see the house or see the neighborhood, most times it doesn't live up to what they thought it would be. After we get them as a customer we show them other homes. Our major "sale" of our listings is to the other agents.

John, you base the price of your house on what it will sell for, not on what you'll get in your pocket.
1 vote Thank Flag Link Sun Aug 10, 2008
John,

There is a difference between advertising, and marketing. Would you find value in...

1. Having a rider on your sign and various postings directing a potentially interested buyer to text message a certain code to a certain number to receive data, photos, a URL, and more right to their cell phone? This allowing the Agent to track who is actually inquiring on the house.

2. Not only a virtual tour, but a 3D floor plan that is robust and capable of allowing users / potential Buyers to drag and drop THEIR furniture onto your floor plan to see if things fit?

3. An Agent who knows the stats of what the profile is of the likely purchaser of your home, and target them with high-quality, direct mailing pieces?

If you don't find value in things of this nature ... marketing ... then yes, opt for the Agent only charging you 4%. In-fact, try to even get them lower if you don't want any services and simply an MLS entry with some photos. You seem to have it figured out, so I wish you the best in your choice.
Web Reference: http://www.DoorToDreams.com
1 vote Thank Flag Link Sun Aug 10, 2008
John

Don pretty much said it all as far as I am concerned. The one thing that is assumed, but not mentioned is that the agreed upon marketing plan is spelled out in the listing agreement. Along with that, consequences for the agent if he/she doesn't follow through with it.
1 vote Thank Flag Link Sun Aug 10, 2008
Given those two choices, and assuming Agent 1 says he/she can do a good, professional job on the lower commission, go with Agent 1. Starting off with the lower price should attract more potential buyers. However, have both provide a detailed marketing plan, and discuss any differences/variations with them...especially with Agent 1, if Agent 1's proposal is less comprehensive.

Have both also provide a CMA to make sure what the "right" price is. If, for instance, the comps come back at $420,000, then you would want to revisit your scenario. Similarly, if the comps suggest a price around $395,000, then perhaps the scenario with Agent 2 just won't work.

Hope that helps.
1 vote Thank Flag Link Sun Aug 10, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Hi John agent 2 will have much more money for advertising, which they will need in this maket. But have them price it at $399,900. Just make sure your price is the same as others like it, otherwise it really won't matter. Honestly buyers looking at $392 will also be looking at $400 so let them make an offer.

Last month 8100 people did a search for birminham michigan homes for sale, so make sure the agent you hire gives you FULL internet exposure. That way you can capture some of those buyers.

Just as a note - I just came back from showing homes to a buyer and they looked from $350 - $400. If the home is nice and compares well it will sell. The list price only gets them in the door, the offer comes once they decide it meets their needs.

Good luck.
1 vote Thank Flag Link Sun Aug 10, 2008
1. Hire agent 1 at 4% commission and list the house at $392k
1 vote Thank Flag Link Sun Aug 10, 2008
I recommend looking beyond your selling expenses especially given the yield on both options 1 and 2 are the same. In my opinion, the bottom line depends on the property being offered at the right price based on a thorough comparative market analysis rather than math related to selling expenses. Today, the real estate landscape is different not only because it is a nearly national buyer's market, but also due to the fact that the majority of future buyers are searching online. In addition to price, seriously review both of the written marketing plans and the exposure given your property.. Remember, it is not about listing, it is all about putting a sold sign in front of your property. I encourage you to ask questions about days on market of similar properties, focus on price reseached from a six month comparative market analysis, review marketing plans and strategy for print and online exposure, determine if staging, virtual tours, professional photography are part of the marketing plan and certainly ask questions. In this market, sellers need to make informed choices. I hope you can expand your decision beyond the costs of selling your home. Good luck, Emily Medvec
Web Reference: http://www.emilymedvec.com
1 vote Thank Flag Link Sun Aug 10, 2008
Do your homework. Find out which agent is more talented. Who is going to work harder for you?
0 votes Thank Flag Link Wed Jan 28, 2009
"I see your point. "
~~~~~~~~~~~~~~~

Eric,

Thank you for that, and for clarifying the differences in the way deductions are handled in the two types of properties when they are needed and applicable.
0 votes Thank Flag Link Wed Aug 20, 2008
Without knowing any details on your specific transaction, here is my opinion:
If agent 1 is paying the selling side (buyer's agent) 3% commission, that leaves them only 1%. With the cost of doing business, that sounds like a discount broker to me. Discount brokers do not provide the service that full service brokerages provide. That includes advertising as well as attending to the actual contract process.
Agent #2 sounds like a full service broker. A full service broker provides the best advertising and complete servicing of the contract process through closing. Full service agents work. Hard. For you.
If selling your house for the best possible price in the least amount of time is important to you, choose the full service agent. If you are just experimenting to see if you can get an offer on your house and don't really care if it sells, you could go with the discount guy.
Either way, the buyer is being represented by a full service agent who will be promoting and protecting their client's best interests.
0 votes Thank Flag Link Wed Aug 20, 2008
Short term or long term, capital gains is capital gains. The only difference is in the rate that they are taxed. They are both taxed. Do the gains fall within the exemptions? Yes or no - it's that simple. Does commissions affect the potential gains - yes they do as they reduce the taxable debt when all calculations are complete.

As for differentiating investment property from personal or second residence, the paragraph you quoted actually refers to personal residence and not investment. With investment income property, repairs are deductible but generally not improvements. With personal residence, it is reversed. Improvements are deductible but not repairs - UNLESS as stated in the paragraph you qouted - they are performed within 90 days of the sale of the home and for the purpose of making the home more marketable and therefore valuable.

I see your point. I just wanted to clarify investment vs personal residence, and repair vs improvement and how they differ. In the end, whatever the property value is, these factors will come into play to affect the bottom line BEFORE applying the Cap Gain exemption. In either case, commissions as stated, affect that bottom line regarding the sale value itself - irrespective of any other income and loss from any other source.
0 votes Thank Flag Link Wed Aug 20, 2008
Eric

Assuming in all three scenarios the house sold for full price and John ended up with 376k, I will agree that #2 would be better. This only because John has done his part in holding up property values for the neighborhood.

Instead of beating a dead horse. I will just post a paragraph from the link you provided earlier that basically confirms what I had posted earlier.

"Capital Gains Exclusion: Home buying investors' best tax shelter comes from provisions in the Taxpayer Relief Act of 1997 which allows married taxpayers who file jointly to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. The amount is halved for those filing single or separately. You can use the benefit as often as you qualify."

If you go over the stated amounts above, or are selling something other than your principal residence then from the same link this paragraph would apply.

"Selling Costs and Capital Improvements: When you sell your home, you can reduce your taxable capital gain by the amount of your selling costs, which include real estate commissions, title insurance, legal fees, advertising and inspection fees. Cost typically stemming from decorating or repairs -- painting, wallpapering, planting flowers, maintenance, and the like -- are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable.
Selling costs are deducted from your gain. Gain is your home's selling price, minus deductible closing costs, minus selling costs, minus your tax basis in the property. Your basis is the original purchase price, plus the cost of capital improvements, minus any depreciation."

Can we all agree on this?
0 votes Thank Flag Link Wed Aug 20, 2008
The question was "what do you guys think is better?" and the parameters were as stated above, and I will include the 3rd FSBO option because it is a viable option. Assuming a net of approximately $376K, the house will sell at the price established. Nothing else withstanding. Based on this criteria alone, the seller receives his net $376K, and takes the benefit of reducing gain at varying rates per option expressed. Cap gains exemptions aside - I have no way of knowing how long John has held the house or how much he paid - I am not concerned at this point with Cap Gains. This deduction comes after the fact - the house first has to sell at whatever price. As I said earlier - a loss is a loss and a gain is a gain - AND THEN the exemption can come into play.

Based on the facts/criteria alone provided, I stand by my answer. And no, this is not about a FSBO vs Realtor debate. And this is not about the concept that paying more commissions means you will get more advertising. One would hope you get what you pay for but that is not always the case.

You are not a bad example of whether you would have been better off with a Realtor, you are a good example of a Realtor not selling his value and worth and thus you feel the way you do. In the example, the amount of marketing John would have recieved is inconsequential because in the scenarios proposed, the house would sell. This was a question of Realtors being able to sell their value. From what I've heard - not. Some easily said go FSBO. Some easily said go with the cheaper deal (though the house would sell in either scenario regardless). So what then is the value. Again, after-the-fact exemptions aside and based solely on information provided. The option that pays the greater commission is in MHO, the better option. This is not to say this will always be the case. When you get to analyzing your personal position and ALL other tangent factors, the better option may differ. But that was not discussed as a matter of the question posed and therefore, factors I can't base my opinion on. There are truly too many variables that will play into the final numbers and benefits. Again, checking with a CPA on all the specific factors that will affect one's sale and gain/loss is important, if not a necessity - actually before a house goes up for sale. Especially if one is approaching that exemption limit. But that is not what is proposed here. its about selling value - the vlaue of the Realtor. Not just what they will "do" for you but in what other ways, might their consultation and knowledge help you if so.

And no, I'm not a financial adviser, I recommend that people talk to an accountant, however, in so much as real estate is concerned, I try to remain aware of whatever benefits my sellers may benefit from if at all possible.

How much of his knowledge, awareness, AND value did your Realtor sell you that you selected him among many? That is a rhetorical question, it is just something you may wish to ponder for yourself. There is no one absolute way that is right when you factor in all the variables and based only on what was provided ...
0 votes Thank Flag Link Tue Aug 19, 2008
Eric

I would be a very, very bad example to see if I would have been better off with a Realtor. I had one for three months before he basically delisted me while I was away on vacation. I sold in the following three months for almost 20k more than where he was trying to lead me, to an unrepresented buyer. Those three months that I was doing a FSBO included the Thanksgiving, Christmas, and New Year's holiday period. I realize that I was very lucky, and also there wouldn't have been any need to pay a Realtor to get any kind of deduction for any tax consequences or otherwise. This was because it was our primary residence and unfortunately we did not realize more than 500k profit. I don't want to turn this into a go FSBO Realtor bashing thread, because in no way do I feel that everyone should do a FSBO and my Realtor was an exception to the rule, I am sure.

I just found your original post, in my estimation, to be misleading. I am not insinuating you did it purposely, but I can assure you what seems obvious to you in clarity is not necessrily all that clear to me, and probably many others as well.

Thank you JR. I was fairly confident I was not the only one.
0 votes Thank Flag Link Tue Aug 19, 2008
I'd like to turn this back to John and ask - John, after reviewing the discussions - which option do you feel would be best for you given the criteria provided - and why do you feel that way?
0 votes Thank Flag Link Tue Aug 19, 2008
Rockinblu real estate commissions are deductible in the sense that they are added to basis and deducted from total gain before calculating Capital Gain. Gain is ANY gain on the property - not to be confused with the Capital Gain exemption. Follow the link and reference the section regarding Selling Costs and Capital Improvements.

Actually, since you were a lucky FSBO who sold and closed, you may wish to review the entire list and then maybe call your accountant to see if he caught every other deduction you may have missed. Calculate the amount you missed, and then let me know if option 1, 2, or 3 (the FSBO option) would have been the best option for you.
0 votes Thank Flag Link Tue Aug 19, 2008
It is not a matter of commission, but one rather of net. In most cases, a hirer commission equals better marketing, which generally garners a higher price, but not always. There is a difference between brokers and agents. Find out exactly what each is offering. Which agent will net you the highest amount.
0 votes Thank Flag Link Tue Aug 19, 2008
"3-Commissions are a deductible expense. Option #2 increases my deductions by $8,320. "
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Eric

You knew what you meant ,and probably most realtors knew what you meant. I may be in the minority of non-professionals, but I took it to mean you were stating commissions are a deductible expense for John, when in fact in John's case there really weren't any parameters set that would indicate this to be the case. This could possibly lead other sellers to think that "commissions are a deductible expense" in all situations, when that certainly is not the case.
0 votes Thank Flag Link Tue Aug 19, 2008
Lets make it simple. Before you can consider if you have a gain or loss (ordinary income or capital gain) - you have to calculate your gain or loss. That would mean accounting for the basis at the time of sale. As I said, for the purpose of the question originally posed - irrespective of all additional cost and expense beyond the commission, as the commission is added to basis - thereby reducing any potential taxable debt (GAIN) from the sale of the house - option #2 gives the best advantage.

As the question was posed, there was no inference to profit. It was about how much can John get for his house. Did he do improvements that will add to his basis and reduce his "gain"? That information was not provided as a factor to which option was the better option.

Taxable debt (regular income or capital gains) cannot be determined until you have calculated the net gain from the sale of the house - the commission is above the line in this matter as it is a part of the basis calculation and therefore - a reduction in net gain and potential taxable liability. After which, one can determine if it falls within allowable exemptions or not. And to see if it is taxable or not.

In the scenario provided, the commission amount which reduces the potential taxable debt is $24,000. That equates to a $24,000 of additional gain if going the FSBO route, and $8320 more gain if going with option #1.

Once you have determined any gain/loss, you can determine if there is a tax consequence or not - I'd much rather have the money reduce my net gain and therefore reduce my potential tax consequences upfront and not wait until tax time to find out I might owe. Again, a good CPA will be able to help calculate gain or loss - but key here is - it can only be done post sale. When it comes to ones bottom line - there are many other factors aside from just the commission that would affect a personal gain or loss and that is not a part of the question posed. Not inconsequential, just not a parameter provided provided for the question posed. The sale, only within the given parameters - option #2 is still the better option in my opinion.
0 votes Thank Flag Link Tue Aug 19, 2008
Eric

If I interpreted your post correctly, you are basically referring to someone who is selling at a loss or someone who has a capital gains issue. It would not apply to John unless he was selling at a loss, or selling something other than his principle residence at a profit, or if he is married, realizing more than a $500,000 profit on his primary residence. If he is not married it would have to be in excess of $250,000. Am I right in my interpretation?
0 votes Thank Flag Link Tue Aug 19, 2008
To elaborate on the tax deduction angle, commission add to the basis of the property being sold, which then is deducted from the total sale to determine net gain or loss - regardless of the property type (residence vs investment).

When you sell a property, your basis is calculated to determine the amount of gain or loss as deducted from the total sale value. If you sell for a loss - its a loss and a reduction on your income. If you sell for a gain, remember, that gain is only the amount less the calculated basis. Basis is original purchase price, plus commissions, and other certain cost and fees, and reduces the income liability generated by the sale of property.

With this, it becomes a far more specific accounting issue and a CPA should be consulted. While one may easily be exempt from capital gains tax, income is separate. For the purposes of the question posed, without the minutia of this cost vs that cost and how it fits into a bigger picture, #2 is the best way to go in the clients best interest in my opinion.

As for the strategy that is addressed in that link. It is commission based. The commission would have to be, or agreed to be paid, before it can be reduced in lieu of a charitable donation. As a percentage, the lower the actual commission paid, the lower the basis deduction - and the lower the percentage to charity. At this point, you definitely want to talk to an accountant to determine which is best for you as the seller.

A word of caution regarding charitable donations. As there were some down payment assistance programs which hinged on charitable donations and the mortgage mess in the state it is in, these programs are coming under great scrutiny by the Feds. As an agent, I would exercise caution to be certain that any "rebate" buyer incentive, does not also run afoul of any conflicting regulations - RESPA or other. In a word, I love charitable donations but some of these programs may not be all they are cracked up to be. Use caution.
0 votes Thank Flag Link Tue Aug 19, 2008
Bottom line - an extra $320 up front in your pocket, or an extra $8,320 in income deductions?"
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Eric

Please elaborate on the tax deduction angle. It would seem only natural to me that this would only apply if the proceeds from the sale of the house were listed as chargeable income. For instance, in the case of those who "flip" on a regular basis. If a normal non-income generating home sale involving a commission still makes the commission deductible, why would the Realtor's strategy in the link below make any sense. The seller should just take the full deduction for the commission.

http://www.prweb.com/releases/2007/1/prweb496392.htm
0 votes Thank Flag Link Tue Aug 19, 2008
Lets examine the choices first.

Agent #1 will list for $392K @ 4% (1% to list agent, 3% to buyer agent) for a net of $376,320.
Agent #2 will list for $400K @ 6% (3% to list agent, 3% to buyer agent) for a net of $376,000.

From a seller perspective, looking at the bottom line, for an extra whopping $320, why not go with agent #1. However, from an educated seller persepective, choice #2 is the best way to go. The reasons are as folloows.

1-Why would I hire a Realtor who prides his value as low as 1% as compared to the Realtor he hopes to work with as buyer agent (clue: not everyone gets to sell thier own listings or want to as a matter of avoiding potential dual agency issues).
2-To pay 2% more to the agent representing me at the net cost of $320? Deal - providing the services represent the value paid. At $320, its a steal of a deal.
3-Commissions are a deductible expense. Option #2 increases my deductions by $8,320.

Note: This assumes as you did that the home sells for full price. Now to also examine the market - what is the likelyhood that this home will sell at full price? Is it priced THAT WELL? A good qualified Realtor would be able to provide you with appropriate comparables to help you decide on the right price too.

Bottom line - an extra $320 up front in your pocket, or an extra $8,320 in income deductions?

Have fun with your FSBO! (at $376K on a FSBO site, kiss the added deductions goodbye!)
0 votes Thank Flag Link Mon Aug 18, 2008
John...what town is your house in? I have a ton of buyers I'm working with, maybe I can bring one your way.
0 votes Thank Flag Link Mon Aug 11, 2008
Hire agent 3 at 5.99% and list the home at $399k.
0 votes Thank Flag Link Mon Aug 11, 2008
John...based on your other postings on Trulia, I suggest, as Realtor, that you go FSBO. Save some poor unsuspecting Realtor some sanity.
0 votes Thank Flag Link Mon Aug 11, 2008
FSBO. Great idea. So now i have 3 options :

1. Hire agent 1 at 4% commission and list the house at $392k
2. Hire agent 2 at 6% commission and list the house at $400k
3. Sell as FSBO and list the house at $376k on FSBO sites

In all 3 options, i will end up having $376k in my pocket.
0 votes Thank Flag Link Mon Aug 11, 2008
John it's all comes down to time and money. An agent making $12,000 will put in many more hours than one making $3920. The absorption rate in most areas is 10 months, so that requires talking to you alot, talking to tons of buyers, tons of agents, lots of reloading into websites ( not the MLS fed sites), negotiating like someone in your example, then making sure the buyer gets to closing and making sure it does close.

Given the choices which would you take for 10 months of work - $3920 or $12,000? If you choose the lower amount how many hours would you put in?
0 votes Thank Flag Link Sun Aug 10, 2008
Listing agent negotiating on my behalf ? When the offer comes in, the job of listing agent is to pass it to me. It is upto me to accept it, reject it or make a counter. How is he going to negotiate on my behalf ?
~~~~~~~~~~~~
In your case probably by telling you to take few deep breaths and actually consider the offer that comes in rather than blowing it right out of the water.
~~~~~~~~~~~~~~~
You call it "negotiating". You guys have no idea what the term "negotiate" means. Visit a foreign country (india or china) and the street vendors will teach you what it means.
0 votes Thank Flag Link Sun Aug 10, 2008
Unless your home is priced right there is no point in answering this question. Assuming that it's priced right then the following becomes important:

Your question, rephrased, is this: What has more impact on my sale - a listing price that's 2% lower or an $8,000 incentive for my listing agent to make sure my house sells?

I can't answer for all agents, I can only answer for myself. I charge the 3% because I earn it. I use the same floor plan tour that Derek mentioned below. I highly value showing feedback and pay an assistant to help me compile feedback from more than 80% of our showings. I have invested heavily in photography equipment so that I post a large number of superb photos online. And by online I mean over 60 web sites - not just the same old sites that the IDX and Realtor.com provide. I place color, laminated flyers in front of the home and feature books inside. I do much more but you get the idea…

The bottom line is that, since the marketing I just described drastically helps get your home sold, you should be paying your listing agent the full commission. However, if the listing agent is just doing the 3 "P"s - Put in the MLS, Put up a sign and Pray then go with the price reduction.

If you're considering other agents I'd like to interview for the job of selling your home. I think you'll be impressed.
0 votes Thank Flag Link Sun Aug 10, 2008
Listing agent negotiating on my behalf ? When the offer comes in, the job of listing agent is to pass it to me. It is upto me to accept it, reject it or make a counter. How is he going to negotiate on my behalf ?
0 votes Thank Flag Link Sun Aug 10, 2008
John,
Your situation is assuming the home will sell according to each scenario presented. My question is, how effective will an agent be who is willing to work for 1/3 the normal commission? I'd consider a $400,000 house right now in Michigan to be towards the high end of homes. Most agents specializing in thet price range are knowledgeable realtors who (hopefully) place value on their experience and know how to help sell your home. I've got to be skeptical about a salesperson who doesnt value their time and expertise enough to charge a price that is in line with the industry.
The old saying goes,"you get what you pay for" and if it was that easy to sell a house "in this internet time" as you put it, then there wouldnt be as many homes sitting on the market and there wouldnt be real estate agents leaving the industry in droves like there are right now. As a home seller, you want to select the agent with the most know-how that gives you the best chance of selling your home. Bottom line. The rest is just semantics IMHO
0 votes Thank Flag Link Sun Aug 10, 2008
It's simple. If the agent is willing to give up about $8,000 of his own money, what is he going to do for you when it is time to negotiate for you when the offer comes in? In today's marklet, the home needs to be priced right, look right, smell right,etc. And you need an agent to work for you, not just one who wants a listing. Howard Novetsky and Cheryl Feldman - Two for the price of One. Hope to hear from you.248-613-1935
Web Reference: http://www.Housemavens.com
0 votes Thank Flag Link Sun Aug 10, 2008
What advertising you guys are talking about in this internet time ? Both agents are going to take pictures of the house, put a board outside and list it in the local MLS. The listing automatically appears on other websites using IDX.

Although i think buyer agent can affect the sale if their commission is at stake, but buyer agent is still making 3% in this case. $8000 price reduction is a better way to make sure that house gets sold than putting $8000 extra in listing agent's pocket.
0 votes Thank Flag Link Sun Aug 10, 2008
If I want to have an attorney represent me ... I wouldn't automatically select the least expensive

If I want a builder to build for me a house ... I wouldn't automatically select the least expensive

If I want to have a mechanic work on my car ... I wouldn't automatically select the least expensive.

If I want to have an eye surgeon perform lasik surgery ... I wouldn't automatically select the least expensive.

You get my point. Whatever direction you elect to go, I would STRONGLY encourage that you hold the Agent accountable.

What are they going to do for you? How are they going to get the job done? What is not only their marketing strategy, but their understanding and use of the Internet? How will they work, communicate, and interact with the likely savvy and informed consumer in that price range that will purchase your home?

Derek Bauer, Associate Broker / Realtor
Real Estate One - Farmington Hills / West Bloomfield
derek@doortodreams.com
http://www.youtube.com/watch?v=MKXdq0y2_Tw
Web Reference: http://www.DoorToDreams.com
0 votes Thank Flag Link Sun Aug 10, 2008
good morning.....my suggestion is to try for the second scenario.....also..the commission split is important too...perhaps offer the sales agent a half a percent more....it excites agents to show your home if they know they are getting an inch more commission than the rest of the co-op fees are paying in your area.....lastly.if you get an offer in that seems low...you can alway go back and re-negoitate the commission if you feel it necessary.....perhaps even put that in the listing agreement....most all of the realtors that are still selling these days with the tough market conditions...are seasoned professionals and really do earn their commissions....(same with mortgage reps).i hope that helps.bob mcclure- mortgage now- farmington, michigan (248) 974-4444....
0 votes Thank Flag Link Sun Aug 10, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer