“How much are you going to cut your commission?”
I get this question a lot. My answer is simple. The explanation is a bit lengthier but it is information every home seller should know. Sadly, I find that no one has taken the time to explain it. This lack of knowledge usually ends up costing them thousands of dollars and they don’t even know it!!!
First you need to ask yourself: What is most important to you...saving on the broker's fee or walking away from the sale with the most money in your pocket?
For argument’s sake, let’s assume a sale price of $400,000.
You can shop around and find a realtor to take the listing at a reduced rate. Even though rates are negotiable by law, you probably won't find anyone to take the listing for less than 4%.
You could try one of those “sell-your-home-yourself-with-our-help” outfits, but you may end up doing most of the work yourself. (I get a lot of listings from homeowners who are frustrated with the level of service (or lack of it) they got from discount brokerages.)
You also must understand that the broker's fees (at approximately 6%) are built into the market value of any home because virtually all homes are sold through real estate companies. As a matter of fact, most (about 80%) "For Sale by Owner" attempts fail and the seller winds up listing with an agent. If he does get an offer, it is almost always about 6% less than he is asking because the buyer of a for-sale-by-owner property expects to realize the savings himself ...he is not willing to just "give it" to the seller. As it turns out, by eventually using a realtor, the seller usually ends up with thousands MORE in his pocket than he would have selling it himself, not to mention the cost of his time.
Home prices are a function of supply and demand. All things being equal, the only way to drive up the price of a home is to increase the demand. One way that is accomplished is by a comprehensive marketing plan that gets the information about a listed home to the largest possible audience. The more people that see the information, the more likely that someone will offer full price (or more!).
Now, how does this apply to you? Remember we set the imaginary price of your home at $400,000. According to the local board (The California Desert Association of Realtors: responsible for the local Multiple Listing Service and tracking the performance of all agents in the area) the average agent …and there are about 5000 agents here in the desert!… sells his listings at 97.2% of asking price and it takes him about 62 days on average to secure an acceptable offer...62 days of people walking through your home at all hours, interruptions etc....
Now, with a comprehensive marketing plan...targeted advertising, virtual tours, Talking House coverage, 24 hour Toll free Information Line, etc. etc, the home is more likely to sell for asking price or above, and in a much shorter time.
I want to compare the numbers for you. I have left out the standard closing costs and settlement fees in these examples so as not to confuse the issue...they generally run anywhere from 1%-2% and would be the same for all examples here. I have also not included any mortgage payoff. Both of those items would be subtracted from the bottom line and are not controlled by the agent.
1: Average Realtor:
At a sell price of $388,800 (97.2% of $400,000) and at 5% broker's fee ($19,440), you will have $369,360 in your pocket. (Less closing and settlement costs and any mortgage payoff)
If you can talk him down to 4% ($15,552) you will end up with $373,248. (Less closing and settlement costs and any mortgage payoff)
2: Full service Realtor with complete marketing plan:
At an asking price of $400,000 my personal statistics for the past several years show that my listings sell on average for 100.95% of asking price in an average of 17 days.
Applying those numbers we have a sell price of $403.800. Subtracting $24,228 for my fee, leaves $379,572! (Less closing and settlement costs and any mortgage payoff )
That's $6,324 MORE than the guy who took the listing at 4% and $10,212 MORE than the 5% guy!!
Which scenario makes more sense??
These scenarios are made to stress a point only and are by no means a guarantee of performance...(the lawyers make me say that)...but using lawyers as an example, if you were in serious trouble and needed a legal professional, would you choose him by how low his fee was or would you want someone with an outstanding track record for performance? For most people, their home is their biggest and most important possession. Selecting a real estate professional to handle the sale of this valuable asset is not as easy as just asking who will cut his fee the most.
Sorry for being long winded. I hope this makes sense and has been of some help.
For more information or to get a demonstration using the figures for your home, please call Randy Smith with RE/MAX Real Estate Consultants at (760) 408-8369 fill out the response form and I'll be happy to go over all the figures with you.
