Do I need a REALTOR®
to sell my property?
While all REALTORS® are real estate licensees, not all real estate licensees are REALTORS®. Those who join the REALTOR® Association, pledge to abide by a standard code of ethics.
First, let’s see what that commission is all about.
Traditionally, the buyer pays nothing. Normally, it is the
seller who pays the commission, which might be some percentage of
the sale price. But what is the standard commission?
There is none. You can negotiate the commission rate. Yet, like
anything else, ask yourself what you are paying for. You might
discover that it is to your advantage to choose a broker who charges
a higher commission, because he is giving you more, in advertising
and services.
And exactly where does the commission
go? For demonstration purposes, let’s create an imaginary
listing. Let’s say our imaginary broker lists a $150,000 house at 6%
commission = $9,000.
While the listing broker sets the commission, it does not mean the
broker gets to keep all the commission. If the agent plans to
list your house on a multiple listing service, he or she will need
to offer a portion of the commission to the buyer’s agent. How
else would the buyer’s agent get paid?
In our imaginary listing, the broker will offer ½ the commission to
the buyer’s broker. That leaves $4,500. The broker and
agent divides that portion of commission. If an office is a
50/50 office, the $4,500 is now divided again, between the agent
(the person you know as your real estate agent), and the broker (the
entity that your agent works under.) From the broker’s share
of $2,250 goes to pay various expenses, such as advertising.
In some offices, the broker regularly advertises in several local
papers and publications, along with radio ads. Other expenses
might include items such as rent, insurance, phone, office supplies,
signs, and other operating costs associated with running a business.
Of the $2,250 that is the agent’s
share, from that might come the agent’s monthly MLS dues,
insurance, lock box fees, personal business expenses, such as cell
phone and automobile, and additional advertising or other expenses
associated with selling the property. Whatever is left from
the $2,250 is the paycheck for doing a job.
But what exactly does the job entail? The job begins when we
do a CMA, or comparative Market Analysis on your property. We look
at all the comparable homes that have recently sold, and then at the
comparable homes that are currently on the market. This might
take several hours, for the research will often involve a site
inspection. It is also necessary to keep abreast on the
estimates used by local appraisers. It is important to note
that the CMA is NOT an appraisal. From the results of the CMA,
the seller can make an informed decision on the selling price for
the property.
Just because an agent provides a CMA, does not mean he or she is
guaranteed a listing. Often, sellers are simply fishing, and have no
intention of listing their home when they request a CMA.
Therefore, an agent can spend hours each month performing CMAs,
where there will be no compensation for the time spent.
After the CMA, the agent must prepare the home for marketing.
This includes measuring rooms, inventorying the features of the
property, taking photographs and completing the paperwork to submit
the listing to MLS. The agent will give the seller different
documents to prepare, for their ultimate protection. In our area,
one of these documents is the Seller’s Property Disclosure,
along with the lead paint disclosure, swimming pool addendum, and
other necessary forms.
Submitting the house to MLS is essential, for it exposes your house
to hundreds of potential buyers. In our town there are over
800 agents. Once your house is placed on MLS, agents who have
buyers looking for a house with your features, will be exposed to
your property.
The REALTOR® will normally put up a for sale sign, design flyers, or
possibly arrange for an open house.
A listing agent’s job is to get the most for their seller’s
property. It is not necessarily the job of the listing agent to
personally find a buyer for the property. It is his or her job
to best market the property to agents who have buyers.
Sellers need agents to help them realistically evaluate their
property, by way of a CMA. I have seen FSBOs adversely affected by
not having this service – two different ways.
The first occurred when the seller grossly under-priced his
property. In the early 2000's the prices in our area skyrocketed.
One elderly couple, who had lived in the area for years, was
extremely proud of themselves, for they managed to sell their home,
in less than a week, without the services or expense of a pesky
REALTOR®. Yet what they weren’t aware of, was that while they
saved several thousand in commissions, they undersold their house by
over $50,000. It was no wonder the house sold so quickly! I’ve
always wonder about the shock they must have experienced, when
escrow closed, and they finally realized how much it would cost to
replace what they just sold.
The second is the over optimistic seller. The value of our
home is often an emotional thing. The Smiths down the street sell
their house for X, and we just KNOW ours is much better, so we put
ours on the market, and up the price. Yet, what we don’t realize, is
that the Smith’s house was ten years younger, 900 square feet
larger, and had a swimming pool and extensive landscaping in the
back yard. And even if we do manage to find a naïve buyer, who is
willing to pay for the overpriced house, the deal falls apart when
the appraisal is done, and the bank refuses to lend on your
property.
Now if you are really sneaky, you can solve this problem by getting
an unsuspecting REALTOR® to give you a CMA, and then sell your house
by owner. Of course, this means your house won’t be listed on
the local MLS, excluding hundreds of potential buyers. You
will need to be constantly on call, for there will be no lock box,
to let in the potential buyers while you are at the beach for the
weekend or at work during the day. And when that buyer is
ready to make an offer, do you have a contract to fill out?
But the real question, do you understand the contract? Have you
disclosed everything that is necessary, to avoid any potential
lawsuit? And since your buyers are most likely not working with a
REALTOR®, have they been qualified, are they already working with a
lender?
Those are just some of the reasons I believe it is in the best
interest for a home buyer…or home seller, to work with a REALTOR®.
Now what about those new “deals” that have popped up on the
internet? “Save commission, pay a $450 flat fee and get placed on
your local MLS.” Well, if you look closer, you’ll find you do
pay some commission – it is for the buyer’s agent. Which
means, the only thing you get from the listing agent is placement on
the MLS. Maybe he will put up a sign and lock box, yet, what
incentive does he have to advertise or market your house? Do you
think he will actively promote it or even fight for the highest sell
price? After all, that agent will get the fee if you sell your
house or not. At least with a traditional listing
agreement, the seller is not out any money if the house does not
sell. After all, the “listing agent” in this case is only taking a
portion of that fee, since the person running the service is getting
a cut. Just remember, you do get what you pay for.
I believe that type of arrangement appeals to those who do not
understand what the listing agent does. Recently we had a listing
that was a bit unusual, and had a limited market. Had this
seller opted to use this service, I have no doubt he would have been
out the $450 fee, and still not sold his house. We
aggressively marketed the property, held several open houses, sent
regular emails to other agents, reminding them of this property, and
kept the flyers stocked on the sign. We created an internet
listing on the property, and our broker ran weekly ads promoting the
house. When the offers came in, we worked to get our seller the best
price, and the most financially solid buyer.
Buyers and sellers benefit from the services of a REALTOR®,
providing them with safeguards and protection. For buyers, it makes
the process more efficient, providing them the opportunity to find
the best property for their needs. For sellers, it helps them
efficiently find qualified buyers for their property. When
negotiating a commission, sellers should find out what services they
are getting. They may decide a cut-rate commission, is cutting
out some services they need, and want.
Other Links of interest
http://www.havasumagazine.com/RE/FHALoans.htm
http://www.havasumagazine.com/RE/conventionalloans.htm
http://www.havasumagazine.com/RE/Buying.htm
http://www.havasumagazine.com/RE/Selling.htm
http://www.havasumagazine.com/RE/loans.htm
http://www.havasumagazine.com/RE/VALoans.htm
http://www.havasumagazine.com/RE/FAQ.htm
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