(Once again, THIS is the single most popular post on the Set Fee Blog. Every day, dozens of people find their way onto this site searching for guidance on what to pay their REALTOR. I’ve freshened this up a bit – added a little more detail – and want to post it again. I only hope this helps some people hang on to more of their hard earned equity.)
I check my stats and other metrics for The Set Fee Blog fairly regularly. It helps me to know what’s drawing visitors and what’s not. It’s also helpful to see what search strings people are using to find me on the web.
Today, I had the following as a search string:
“What Percentage Do Real Estate Agents Charge?”
Ok, so it’s not that unusual. In fact I’ve seen it in the results for this blog before. But today it just jarred me:
What a sad, stupid and unfortunate question!
Seventy plus years of REALTOR double-talk has trained the public to expect to pay a percentage of the sale price of their house to an agent when it sells . . . and that makes no sense whatsoever.
What does a percentage of you home’s value have to do with getting it sold? Nothing!
Think about it:
Here you are in your $350,000 house. Thankfully, you are not upside down. You have roughly $60,000 in equity. So you decide to sell, and list with ABC Realty**, who charges you (and every seller with whom they work) 6%*. When your house sells (for full price), that’s a commission of $21,000!
I’ll give you a moment to catch your breath . . . before I point out that that may be 6% of the sales price, but it’s 35% of your equity!
Meanwhile, your neighbor down the street also wants to sell, but his home is smaller. It’s only worth $250,000. He also lists with ABC and agrees to pay their 6% Commission. When the house sells for full price, the homeowner is going to pay $15,000 — still high, but not nearly as high as your $21,000 commission.
Now, here’s the question of the day: What did YOU get for the extra $6,000 you paid to sell your house through ABC?
More Open Houses?
A better Sign?
Oh, maybe your agent worked $6,000 harder! Yeah, right.
What you got for the extra $6,000 you paid is this:
In almost every case it takes no more time, effort, energy, money or marketing to sell a properly priced $350,000 house than it does a properly priced $250,000 house. There are some situations in some areas where a market niche, say, luxury homes, might take a little more time and might require additional or specialized marketing. But these situations are rare . . . and $6,000 extra dollars to sell your $350,000 house? That’s absurd.
It makes no sense today, made no sense yesterday, and will never make any sense at all.
Please don’t take this to mean that your percentage based real estate friend is a bad person. The percentage model is so deeply ingrained in the ordinary real estate world that today’s practitioners don’t even question it. It is all they know. And the truth is, if they were to abandon it in favor of something that makes sense (i.e. Set Fee Pricing), their business model would collapse. They operate in a world where so many people get a cut of the big commission you pay that changing direction in favor of something better would be impossible.
Smart Brokers – by the way, ‘Smart’ is a synonym for ‘Help-U-Sell’– Smart Brokers charge a set fee. Everyone pretty much pays the same thing no matter what the sale price is. It’s logical. The Broker works very hard to determine his or her hard costs of carrying a listing, then adds a reasonable profit to it, and . . . that’s it: the Set Fee the office charges everyone.
Here’s a little bit of scripting I actually heard in a REALTOR seminar some years ago. It’s what an agent is supposed to say when a potential seller is shocked by the high percentage based commission.
“I know it seems like a lot, Mr. & Mrs. Seller, but think about it for a moment. We’re getting 6%, yes, that’s true; but YOU’RE getting 94%! I think you’ll agree our commission is actually a bargain!”
I hope next time you need to sell, you’ll do the right thing and call a Help-U-Sell set fee broker. You’ll save a bundle (the set fee is usually thousands of dollars less than whatever percentage based commission you’re being quoted). And you’ll have the satisfaction of knowing that, finally, for the first time in your real estate life, you haven’t been taken to the cleaners!
*Commissions, whether set fee or percentage based, are always negotiable. They are not set by law or REALTOR rule. They are set individually by office Brokers. Price fixing occurs when different Brokers get together and agree to charge the same thing. That’s highly illegal. Different Help-U-Sell offices charge different Set Fees, because the carrying costs of marketing a listing vary from market to market, as do the number of days it takes a properly priced listing to sell.
**The “ÄBC Realty” referred to in this blog is fictitious and is used only for illustrative purposes. Any resemblance between it and any other “ABC Realty”, is purely coincidental.