Pay less in commission. Wait for the Offer before promising 3.0% to the buyer agent.

There is no hiding a house on the internet.

Maybe this is a true story, perhaps not. There was a Detroit automobile assembly line where the last guy in the assembly line uses a mallet to pound one or two of the doors. An executive from another car manufacturer visited the plant to see how to build an efficient assembly line for her company. The visitor asked, Why is hammering those doors? The plant owner replied, “That’s his job. Doors don’t always shut tight at first. A few bangs with a heavy rubber mallet on each door solves that problem. See how the door fits now?”


Later the fellow from Detroit paid a visit to the other plant to see the assembly line in action. The American noticed the last person in the line did not have a mallet. The man from Detroit turned to his host and said, “We never send a car out with the doors, not snug. You gotta have a mallet-man at the end of the line. Trust me. If you don’t bang the doors shut, they won’t fit right, and you’ll have upset customers.” The host smiled politely and replied, “We too never send a car out with unfit doors. We designed our doors to close snug the first time and every time.”


We will do what we have done until someone asks the magic question, WHY? Once the item is questioned , the solution is often simple and cost-saving. We have one of those costly old ideas and it costs home sellers millions of dollars every year. It’s the belief that you must offer a 3.0% commission to the cooperating or buyer agent. Anything less and agents won’t show your house. I say that idea is a long perpetuated myth unsupported by logic.


There is no hiding of a house on the internet


REALTORS held all of the information about homes for sale thirty years ago. If you wanted to know about new listings, you had to see a REALTOR. If you wanted to see houses, you saw the houses the REALTOR wished to show to you. If an agent was dishonest enough to be unethical and chose homes to show his clients by the price of the fee he would earn, I suppose it was possible to hide homes from would-be buyers. Today that’s not probable, and it’s illegal. Some things changed.


A search of the MLS for homes in any price range in any location will yield maybe a half dozen homes for sale and without offers pending. That’s no crowd where your house can get lost. The searching is not done primarily on the MLS by agents. The searching is in the hands of the consumer on smartphones, tablets, laptops and it’s the home buyer who is doing the searching. Instant new listing notifications get to the hands of buyers within seconds of being entered on the MLS. The chance that a buyer is alerted by an agent to a home they buy is diminishing. So, is there any advantage in offering a 3.0% commission over something more like 2.0%?


The Buyer sees the new listings first
The National Association of Realtors has the facts. It’s highly likely that the home a person wants to make an offer on was discovered by the person and the agent is invited along to do what the agent does. As good as any agent is in getting new listing information to a buyer, the internet is better. A late-night entry of a new listing will be in the smartphone of the public long before the agent has the first cup of coffee. (Of the homes that people buy, I wonder what percent were discovered by the Buyer while wearing PJs? I bet it’s a lot.)
Don’t give away your negotiating leverage
By promising to pay any amount of a fee to a buyer agent before you’ve seen an Offer you are spending money on a mallet-man. This is the reality. The Buyer discovers the house. The Buyer tells the agent. The Buyer decides to make an Offer. The agent writes the Offer. And this is where the buyer agency fee is typically negotiated. Regardless of the fee, you offered to pay to the buyer agent; the Buyer is going to find the house and see the house. Irrespective of the fee you offered to pay the buyer agent likely will reject your Offer (3.0% or less) and negotiate for the seller to pay the buyer agency fee of 3.0% or more directly to the buyer broker at closing. And this is where your opportunity comes.


If it’s in the Offer it’s negotiable


Imagine you offered to pay a buyer agent 1.5%. The Offer, the buyer agent, writes, is at your asking price but requires you pay the buyer broker 3.0% instead of 1.5%. You’re not deciding the buyer broker fee; you’re deciding if the net price after the cost is acceptable to you. If you have no other options double, the commission might be agreeable to you. But when you have options, more than one offer, there is a chance one of the Buyer Agents will concede 1.5% commission is better than coming in second holding out for more commission.

Let’s assume we have two full-price offers on a four hundred thousand dollar sale. The Offer where the seller pays a 3% commission will drop the value of the Offer by $12,000. The other, at the same price where the Buyer Agent accepts your Offer of 1.5% leaves $6,000 in the hands of you, the seller.


The law, the Code of Ethics, and the Internet, and common practice is on your side. Take your advantage while it lasts. Pay only for what you need.

Author: Tom Meyer, Owner-Broker, Essential Real Estate, LLC Madison, WI

The real estate transaction, disclosure, and confidentiality are the business of a Wisconsin licensee. It's in the transaction where the skill of the licensee, and their commitment to the law where the public is protected or placed at risk. What you see REALTORS do to brand themselves and their firms, promote their service, advertise, and process paper do not require a license. I believe negotiations to create and honor a real estate purchase agreement is where the agent has the greatest value in a transaction. Paying professional fee rates for the administrative services is a choice consumers deserve. Old business model driven commission rates are taxing the home equity of American home sellers. Essential Real Estate was created to put more money in the hands of the consumer by eliminating expenses for the firm and charging a fair price for the real real estate service.

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