The explosion of internet marketing companies like Zillow and Redfin has no doubt changed the face of real estate…a face that quite frankly needed some tweaking. The newest darling, Purple Bricks, has spent a ton of money trying to convince its audience that home sellers have been getting screwed, and they’re parachuting in to save the day. Not so fast.
They, along with Redfin and others, are now trying to launch themselves into the brokerage arena by offering home sellers a low flat fee to list their home…1%, $3200, and other price points.
This is not new stuff, folks…it’s been around for decades. Don’t be fooled by clever marketing tactics…home sellers have always been able to negotiate the rates they pay, and they still can. In fact, the law dictates such.
What these internet marketers are NOT telling consumers is that they’ll be paying well above that 1% fee, because that 1% fee is just to “list” the home. They don’t disclose in their marketing that there will be other fees, bringing them right back in line with what the average agent would otherwise charge them. But why settle for “average?”
Real estate commissions, by law, are negotiable…and they should be. There is no one-size-fits-all, and there is no “standard fee.” Every single transaction is unique. The seller that has prepared their property for market, and has set a price that will command heavy traffic, should pay less than a home seller whose property will require a great deal more effort.
In addition to that, home sellers should consider “the value” of the service provided. A good agent will normally be able to offset their fee through effective marketing and negotiations, increasing the offer prices as well as reducing the expenses for the seller. At the end of the day, only one thing matters…your bottom line. If I charge you more but give you more, isn’t that a great value?
Consider the following comparison:
Seller Mike finds an agent to sell his home for a 1% listing fee, and a 3% broker co-op fee (what is offered to the broker community to entice them to bring a buyer)
Because that listing agent only received a 1% fee, very little was done to market the home, and it took nearly 3 months to sell.
Seller-paid closing costs=9030 (3% buyer credit)
Total commission=10,320 (4%)
Seller’s net before loan payoff=238,650
Seller Jan was a little more savvy, She understood that using an experienced agent would provide better results.
Her agent spent more money in advertising, held more open houses, and paid for a professional photographer as well as a digital floor plan.
She actually paid more to list her home, but let’s see what her bottom line looked like:
Seller-paid closing costs=1,500 (rejected the 3% credit)
Total commission=16,860 (6%)
Seller’s net before loan payoff=262,640
Seller Jan, who paid $6,540 MORE in commission than Seller Mike, actually took more to the bottom line than Mike did…$23,990 more.
Same list price, but two different agents. The point is, find an agent that can deliver, and don’t just focus on the commission paid…it could cost you dearly.
In this case, Jan’s 6% turned out to be better than Mike’s 4%…almost $24,000 better.
The final point to make here is how well your agent will manage the transition process. Are they assisting you with the relocation, and are they able to balance the two subsequent escrows in a way that takes stress out of the equation? You can’t put a price on that.