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We will be discussing the elephant in the room…agent commissions!

This video is called REALTOR HATERS!!!

We will be discussing the elephant in the room…agent commissions!

This is something that makes many sellers and agents uncomfortable.  Why? Because there is often a significant amount of money at stake and the seller isn’t sure if the service they’re receiving is worth it.  To be honest, I think many other agents wonder if their service is truly worth it as well.

These feelings bring uneasiness, skepticism and trust issues into the relationship.  Not good!

So let’s discuss it!

Question – So what is a typical real estate agent’s commission on a listing?  

Typically it’s 6%.  That’s what we charge as well.  There are agents that charge 6.5% and others that charge varying degrees less however the most common is 6%. So if you’re selling a $200,000 home that’s $12,000 in commission.  That’s a lot of money!

Question – Does all that money go to the seller’s agent?

No, typically the 6% is split between the seller’s agent and the buyer’s agent that brings the buyer.  


Question – So does that mean if I list my home for sale by owner I could potentially save that 6%?

The answer to this is probably somewhere in the middle…maybe.  If your home is listed FSBO then you certainly aren’t required to pay any sort of commission.  

However, what’s typical in FSBO is that the owner will still pay a commission to an agent that brings a buyer to the table.  The VAST majority of buyers are working with a real estate agent and if there is no incentive for an agent they typically won’t show your house.  

So in this situation, an agent brings a buyer to you and you agree to their typical 3% commission then you are saving the 3% you would typically pay the seller’s agent.


Question – I’ve seen stats thrown around from other real estate agents that the typical house is sold for money and faster than a FSBO…is that true?

If you look at stats such as this one then the answer is yes:

FSBOs accounted for 7% of home sales in 2017. The typical FSBO home sold for $200,000 compared to $265,500 for agent-assisted home sales.

The problem is that, typically, a lot of the FSBO sales are less expensive homes (mobile homes, manufactured homes, condos and single-family homes in rural areas) which skew the numbers quite a bit.  

I do believe (maybe I’m biased) that a good real estate agent does sell a home for more money and quicker than a FSBO (all things being equal).  However, I don’t believe it’s a 34% difference.

So if I’m considering listing my house with an agent…it sounds like they need to justify that 3% not necessarily the 6%.  What sort of things should a good agent provide to earn that commission?

I think, like most professions, someone who is good at their job should be at least 1% better than someone from the public with no experience.  So if we can agree on this than a listing agent should be able to get you at least 1% more listing with them.  

So now we’re looking at justifying 2%.  

A good agent will market your home.  This can range from 0.25% to 0.50% of their commission.  If we factor in the cost if you the seller were to get it on a MLS only service it will probably be 0.25% to 0.50% range.  

So now we’re looking at justifying roughly 1-1.5%.

You have to consider the time you have available here.  If you have a job do you want another job? People will be wanting to look at your house and unless you’re OK with letting them in everytime than you would need a lockbox.  You would also need to follow up with agents that showed the house to get feedback. Quite a bit of paperwork, scheduling and negotiating is involved as well.

So let’s say all these features of an agents job is worth 1%.  Well, then we’ve either completely justified the transaction or are extremely close (0.5%).

These numbers are just to give you an idea of what you SHOULD be paying for when hiring an agent.  Again, the key is finding a great agent that will work for YOU and your goals.  


Who should consider trying to list their home For Sale By Owner?

I think if you know the person you’re selling the home to (say a friend or relative) and don’t anticipate any challenges then FSBO could be a good option.  

In some cases, if you don’t have any equity in the house or have outstanding debts that prevent you from sparing any expense FSBO might be the way to go.

In either case, I would encourage you to still give us a call (or another agent you trust) so we can go over your options.  We will never try to persuade you one way or the other…we listen and give you the best options and let you decide.  

That’s It!  I hope we were able to shed some light on the commission debate.  At the end of the day, you need to do what’s best for you and your family.  If we can be of help great but either way we wish you the best of luck!

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