It is a very competitive market out there and I believe sellers, at least in the tech-savvy Austin market, need to be as competitive as possible to increase their chances of selling quickly and attracting high offers. A 2005 National Association of Realtors study said that 77% of buyers use the internet to search for a home. In my opinion it is wise for sellers to use an agent who utilizes significant internet tools to market his/her properties. Again, you get what you pay for.
Pros: itâ€™s cheap
Cons: itâ€™s cheap
The trouble with 1% is that when you talk about a commission, your agent isn't just walking away with the entire check. I think that a lot of people who think that 1-3% should be "sufficient" to sell a home don't recognize what is involved and who gets paid what and how much work is involved for each task.
The commission must be split between the listing side (the agent you hire) and the selling side (the agent who brings a buyer.) So, for argument sake, the listing side in your scenario gets 0.5% and the selling side gets the same. That money is then split between the agent and the brokerage. Since its been a slow year, even good agents will be on a 50:50 split with their office - although this varries according to location, office and agent. That leaves listing and selling agent with as little as .25% in thier pockets before taxes and expenses. If your home is worth $500k that leaves each agent with $1250.00.
Do you seriously think that your listing agent can do much of anything in the form of open houses, promotion and advertising for that kind of money? Even on a small co-op I can count on paying about $500 in advertising alone. Flyers and postcards etc. all add up as well. By the time I am done, and when you add in taxes I would be lucky to take home about $500 for what might be six months of work. I can not make a living that way, nor can anyone else.
On the selling side, it's just as difficult. Agents will not be rushing in to show your property. In most parts of the country (not all) we are in a buyers market. Buyers have a TON of choices. When I work with a buyer these days, I can end up showing them upwards of 30-40 properties in a 50 mile range (and our market isn't bad at all.) Just to get to an accepted offer and contract can take months of gasoline, time and shoe leather. The commission on this side is even more unattractive because sales is far more time consuming than listing. Since there are so many homes to show, most agents would tuck your home to the bottom of any list they had and would only show it if the buyer would agree to cover the balence of their commission. Most buyers won't - or would insist that agent expenses be negotiated into the terms of the contract.
If you want to list your home on the MLS but don't want to pay the full fee, you should go with a flat fee service and offer the coop (selling side) a full commission. You won't gain the benefit of the MLS listing if you don't do this. If you go that way , you will have to do all of your own advertising, promotion, showings and open houses. Not to mention negotiations, inspections, preapprovals, contracts etc. You may or may not save any money. Remember that buyers are very savvy these days and they will know that you are selling at a reduced commission and will try to cash in on some of your savings. In most markets, buyers are in the driver's seat and will reduce their offer because you are "saving money" by doing most of it yourself.
*Please note that all discussions of commissions and splits are hypothetical and are for educational purposes only.
As mentioned by Carrie, "You get what you pay for" is one of my favorite sayings by Realtors because of the irony. You could sign a listing agreement with a Realtor for 10% but if they don't sell it, you have PAID them ZERO, thus getting what you paid for. The whole "out of date" and "conflict of interest" commission structure in the Real Estate industry is flawed for the seller, buyer and agents.
On another note, originally many of the discount brokers were geared for the novice to save money. But many quickly realized that their true target was the experienced buyers and sellers. The novices NEED the assistance of a FULL SERVICE agent. Selling a home costs money and takes expertise, there is NO WAY to get around that.
ABC, read through old posts such as "Buy Owner" (disaster), "full service", and "flat rate".
Here are some of the relevant threads:
Cons: You may not.
Pros: You may gain valuable experience in selling real estate on your own.
Cons: You may never want to go there again.
Pros: It can be a workable strategy in a seller's market.
Cons: It could be disastrous in a buyer's market.
(You seriously ask a very good question. I just can't resist simple answers--and wish you well regardless of your listing strategy!)
There is much more to be said about this topic, but my underlying feeling is that you do not necessarily "get what you pay for" when it comes to hiring an agent. You must go through the interview process, follow up with other sellers the agent has worked with and then make your own decision.
btw - i'm not one of those 1% guys. I just don't bother wasting my time talking about service etc bc most people's minds are already made up to save the money no matter what it costs them. To me, I think these people are cheap and it'll show when you have a buyer come into the property. Actual customer statements: 1% realty, oh the seller must owe to much money and i can't get a deal. 1% realty, oh, that seller must be cheap and doesn't want to wheel and deal. Come honey, let's go look at the more expense property, maybe if I use the same realtor, i might be able to get a better price.
Is it enough to say don't go, no but be real brother. You don't want to pay a fair price to market your home. That "cheapness" shows in something else around the property.
You need to think how how much it will cost you every month to have your house sit on the market. If it costs you $2,000 a month between the mortgage interest, the taxes and the maintenance and if it takes 6 months on average to sell a house in your market and price range, then you should consider using the $12,000 anticipated costs as an incentive to realtors to sell your house as fast as possible.
Keep in mind that you don't have to accept any offer that does not satisfy you. Unfortunately, 1 percent realtors won't bring you the traffic that you want.
Worry more about pricing your house so that it will sell than how much you will have to pay a realtor. Remember that you get what you pay for.
Discount Brokers, Cash Back at Closing, If it doesn't sell in 90 days, I'll buy it..... and the list goes on, most are gimics to get someone in and under contract. You get what you pay for a nickle and dime at a time.
Most full time Professional Realtors(r) will help and work with you any way possible, as they are in it for the long term. In my opinion sucessful Real Estate business is based on referrals and repeat clients.
If an agent or company discounts their fee (paycheck) to get your business, how are they going to represent you in the getting the most for the property they are selling.
Speaking of educational, I am linking a draft article by Mark S. Nadel , an attorney/ policy advisor with the federal government in Washington, D.C. He has published articles on public policy issues in law journals at Harvard, Yale, and Stanford, and in the Wall Street Journal. He is a graduate of Amherst College (1978) and Harvard Law School (1981). The author seeks constructive criticism of this draft article, which is being submitted for publication in a law journal. Please send comments to email@example.com
The linked 64 page article analyzes five elements of the traditional residential real estate broker rate
structure. The article suggests that consumers would benefit most from a fee-for-service approach.
Unsure of what you are actually asking here...
Are you looking for seller representation only or seller and buyer representation?
TY to Pam....My intent here is to discuss representation, not specific commission rates.
If a broker is willing to list your home for one percent and the seller agrees to offer 2.5 to 3%, for example to any agent who successfully concludes the sale of the home, sellers can keep 2.5 to 3% more when they sell their home.
Sellers are getting savvy and six percent higher commissions chase them to the discounters and other creative listing brokers.
I have found that charging a full service commission fee to a seller and giving them the option to sell their home themselves for a total of 2 percent commission has earned me a lot of business and referrals. If the seller is the procuring cause of the sale they pay a total of 2 percent commission to my broker. If I or any other selling agent are the procuring cause the sellers pay the agreed upon commission listed in the agreement of sale.
On a recent sale, I agreed to offer the 2 percent commission marketing program to a seller who purchased their $268,000 condo from me. I earned $8,040 from the original sale. Two and one half years later I listed the same condo and agreed to a full service commission, a two percent commission option and agreed not to charge any commission if the other condo owner upstairs purchased his unit during the listing agreement duration. I sold the unit for $425,000 to the owner upstairs. My seller made $157,000 minus closing costs and allowed me to refer him to his Denver real estate agent and then purchased a $650,000 home. I will earn a $4,687 referral fee when the unit closes at the end of this year. So far the life time value of one happy client in a three year period will be approximately $12, 727. I am content with those numbers.
Discounting and creativity can be very disruptive to the large brokers who insist on extremely high commissions that many average home sellers can not afford especially those with no equity. These large companies continue to merge and buy each other out and have the ability to offer pricing based on economies of scale. Their refusal to be flexible in hardball corporate America makes them easy to compete with in the pricing wars.
I work for a company that allows me to custom tailor each listing agreement so that both the seller and the broker have input. I like having the flexibility to be able to help a family that is under water or to reward proactive sellers who want to participate in the process.
Some of the most expensive listing companies that I compete with encourage their sellers to pay top commissions and then keep the listing quiet. We call those real estate agents, secret agents because too many of the buyers world wide will not ever be exposed to the listing. To sell a home for the highest price in the shortest amount of time it makes the most sense to let everyone know the home is for sale. Quiet listings only benefit the real estate broker.
Full service discounters and full service creative menu of service brokers offer the consumer options.
If a real estate broker will list your home for 1 percent and allow you the seller to choose how much commission to offer the selling agent then that flexibility and ability to choose is just one of the pros of giving consumers less expensive choices.
The con is that we realtors won't be able to make as much money.
In my own personal experience with "discount and cheap anything" I'm usually disgusted and mad at myself for thinking I would get something great....for nothing.
PS - my 1% Realtor agent was super nice, and even came over to work on a plumbing issue to ensure the sale went through. Best service on a real estate transaction I have ever had (and I've had a good dozen buy/sells).
Additionally, when all the talk was about trying to get the property market moving, one of the first moves would have been to get rid of these exorbitant fees that make selling a financial hammer-blow. Of course, the idea never even came into the discussion.
If a person feels they have the expertice, time and abilities to sell their home on their own so bit. Some people are successful, others are not. It all depends on the local market.
If a person chooses a discount broker so be it, but make sure you read the fine print. Some have a great lead on and marketing, it's the details and what is not clear that add up quickly to what cost.
If a person chooses an agent so be it, but all agents are not Realtor(s).
If a person chooses a Realtor(r) they are hiring a professional who agrees to abide to a Code of Ethics and Professional Standards. Hopefully they do as they can be held accountable with penalties applied.
Unfortunately all the above noted are my opinion, subject the the market area and the person or agency being hired. Everyone wants to give advice and tell you how it's done.
Talk to a friend, ask for a referral and leave the headaches and details to the full-time Realtor(r) Professional you hire. Most importantly ask questions.
The worst question there is, is the one that doesn't get asked...
1. You'll feel smart for the first 15 of the 765 days that your house sits on the market with no serious buyers.
1. Brokers have the serious clients, and brokers are not going to bring their clients to your 1% listing.
2. If a broker's client finds your 1% listing on their own, the broker will trash talk your listing and make extra sure their client does not buy your property.
The biggest danger of a 1% listing is that you will expect certain things to be done and they will not get done. At least with a FSBO, you know you need to do it yourself.
Finally, you are overpaying. You will get little more than flat fee MLS service but are paying more.
The only pro I feel about 1% realtors is that you are saving more money in your packet and believe me I do understand where the sellers come from with wanting to save as much money as possible.
The #1 con (and my only con)
My thought about 1 percent realtors is that I do not consider it fair to the sellers because lets just give a simple example: everyone in this world is motivated by money no matter what profession you are in, rather you are paid by commission or salary the more money you can get you are going to try to take it "who would not" When someone comes to your home offering 1% you have to stop and thing about what type of marketing is this person going to do for you, how much are they going to pay to market your home to get the most exposure so it does not sit on the market. I personally when I obtain a listing justing on marketing alone I spend $500.00 plus depending on what I am doing or the location I want the best for my sellers if they are allowing me to sell there home (which is very important to them).
I am not against 1% realtors but buying a house is the most expensive investment you will make in your life. Everyone in this world takes there healthy issues seriously and want the best treatment when they are sick when it comes to my home I would want the best representation and want to know that you are working for me and not just tring to get as many listings for the month as possible, not even caring about my needs.
The last thing that I would like to leave saying is no matter who the realtors is or what they are charging for the commission do not be negative about it, interview the realtors and make sure that they have your interest at best and you can connect with them.
The pro's....you will pay them less and save on commission. You will do most of the work.
Will you get the maximum exposure and price?
What you have to realize is that, in every industry, people who work on commissions are naturally enclined to push what benefits them first even if it's not the best or smartest way to operate. But unfortunately it's a fact. It's called greed.
Another fact is that it's salespeople who sell products, not fancy advertising only.... You need to give incentives to those who will contribute the most to the sale of your product. That's what is called sales promotion. Forget the intermediaries and you are history!!! Sure, companies would love to pay as small a commission as possible but there is always someone else who will pay a higher one and salespeople will naturally switch allegiance in a blink.
Please note that the above comments are valid for all industries including the real estate industry.
Melissa Mancini, Realtor, CBR, GRI