Every month I can get several phone calls asking “What do you charge for a real estate commission?” Not I would like to discuss the services you provide to list my home, what experience do you have, etc…..
So what your really saying as a home seller when you ask “what do you charge for a real estate commission?” is that you want to net the most proceeds out of the sale of your home. Of course who doesn’t!!
What I want to do with this article is show you that a low listing commission does not translate to more money in your pocket. It can even lead to less proceeds or even worse no proceeds.
When You Ask “What Do You Charge for a Real Estate Commission?”
Making your decision on which real estate agent to hire based solely on what an agent charges for commission is penny wise and pound foolish.
Lets take a look at three stand alone condominiums in Methuen MA for sale on the same street, in the same complex, at the same time. Realistically, these units were almost identical and should have sold with-in thousands of each other. There could not be a better real life example of why a lower real estate commission does not necessarily lead to higher net profits.
The illustration below shows the listing sheets of two units that were in the MLS and the deed of the for sale by owner.
Which Real Estate Agent Would You Hire?
Lets look at the dollar and cents here.
Take my listing. Say I charged 6% for a listing commission. Compare it to “their” listing. Let’s assume they charged 4%.
My Listing at a 6% commission ($21,600) with a sale price of $360,000 the seller netted $338,400.00
Their listing at a 4% commission ($13,800) with a sale price of $345,000 the seller netted $331,200.00
The higher sales commission netted the seller $7200 more and that is paying AN EXTRA 2% in commission!! If the difference is between a 4% versus 5% commission you are now talking a difference of over $10,000. What could you do with an extra $10k in your pocket?
Now take the FSBO which has a O% commission. The seller paid nothing in real estate commissions and netted $323,000. The For Sale By Owner lost between $8,200 to a $22,600 in net proceeds depening on whether you pay a real estate commission of 4, 5 or 6%. Would you rather pay less commission or net more money in your pocket?
Note: For Sale By Owners, nationally fsbo home sell for 13% less than homes listed with a real estate agent.
A Home Unsold
Here is another example of why first asking ” What do you charge for a real estate commission?” is not in your best interest.
The above listing was listed with another agent for almost 4 months. No results in a great market. I listed it and immediately went way over asking in 10 days. I shouldn’t have to do the math here. I have example after example of expired listings unsold after being on the market for 4-6 months.
I am not going to go into great detail but the difference is about how the home is marketed. Marketing starts with great real estate photos. Theirs only had one! Is your listing agent a list and pray agent or do they have a well defined marketing plan?
Really does it matter what you pay for a real estate commission (with in reason of course) if its the difference between getting your house sold or not?
What Should You Focus On Rather Than the Real Estate Commission
First I highly recommend interviewing 3 or 4 agents. I am going to highlight four things to pay attention to when you interview an agent. These of course are not the only four things to consider when hiring an, agent but some of the more important points to consider.
Of course Every seller wants to sell their home fast and for top dollar but worrying about the real estate commission first is the wrong way of going about it.
Don’t hire a yes man for a real estate agent and there are plenty of them. A yes man will tell you what you want to hear. They are adept at listening for what you want to hear and then giving it to you. There goal is to get you to sign the contract, they will deal with everything later.
As a listing agent it is my job to tell you the cold hard facts and not sugar coat it. You are contracting with me to do a job, which is to sell your home for the most amount of money, the least amount of time, with the least amount of hassle.
You did not hire me to be your friend and agree with every decision you made about your home, or compliment your highly personalized decor or tell you no you don’t have to repair you roof. I am not going to ignore your 200 piece snow baby collection in the foyer, the fucsia accent wall in the family room, or say that the price you want that is 100k over fair market value is attainable. I will nicely, show you how and why we need to re- adjust a few things to obtain the best price for you.
What you need from me is a plan that works and for me to help you execute the plan.
A top notch listing agent will have a very cohesive and comprehensive marketing plan that they will go over with you. They will talk about preparing your home, guide you on how to price your home properly, take professional photographs of your home, and leverage the internet to find potential home buyers.
An agent who charges a larger commission usually pays for more marketing. Note that the homes that sold for the most money above also sold the quickest. That is because a real estate marketing plan is about exposing your home to the right the most amount of buyers. And not just any buyer but the right buyers.
I use professional home stager’s and photographers to get your house ready for the market. I spend thousand on the internet every year. Does it cost me more yes. But it nets you more money.
More marketing equals more exposure which equals offers!
I hate to say it but experience matters when it comes to real estate. From listing a home, negotiating offers, knowing how to counsel a client, handle buyer requests after a home inspection, experience makes a huge difference. An experienced agent will have 100’s of transactions behind them to draw on.
I am not talking about the number of years in the business. You can have someone 5 years in the business that has closed 100 transaction vs an agent 20 years in the business that closed less than a 100. Experience comes with the real estate transactions closed.
Also hire a full-time agent and not a part-time agent to list your home. A part-time agent will not have the experience nor the time to get your home sold.
I have found a good listing agent is about providing you with data to make good decisions. They will provide you data about how the market is doing, why they are suggesting a certain price on your home and more.
They need to do more than tell you…. they need to show you. And, it needs to be communicated in a manner you understand. Ultimately the decision is yours based on the information you have receive.
I want to start off by saying that there is no set commission a real estate agent will charge to list your home. And, yes real estate commissions can be negotiable. You have every right to be concerned about the commission you pay.
As you can see from the example above, paying the lowest real estate commission does not necessarily mean you will make the most amount of money on the sale of your home. Make the decision now are you going to hire an agent based on their marketing plan and experience or the commission they charge?
Not to say, with all things being equal between agents, you shouldn’t consider the commission. But to unilaterally hire an agent because they had the lowest real estate commission will lead to disappointment. And a lot of sellers do!
Don’t be a penny wise and pound foolish home seller. If you want to net the most amount of money for your home there are more important aspects to consider than what you pay for a real estate commission.
Other Listing Agent Resources:
- USNews- 9 Mistakes When Hiring a Listing Agent
- Anita Clark- Why You Should Hire A Listing Agent to Sell Your Home
- Dan Barcelon- When to Fire Your Listing Agent
- Paul Sian- Tips for Choosing the Right Listing Agent
- Xavier DeBuck- Why Do Agents Knowingly Take Overpriced Listings
What Do You Charge for A Real Estate Commission- The Penny Wise Pound Foolish Home Seller, was provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell or buy a home give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford