Offer Less Than 3.0% Commission. Let the buyer agent decide if it's enough. Then you decide.

Selling a home has costs. Title Insurance, transfer fee, deed, overnight, warranty, extra fees, and real estate commissions, credits, and concessions for the buyer can easily exceed $20,000 for even a $200,000 sale price. After deducting those costs from your equity, what’s left is yours to keep. 

And therein lies the first problem. If your gross equity (before deducting expenses) is $40,000 after you pay everyone in line, you will spend 50% of your capital on fees. Maybe you’re left with enough money for a down payment on another house.

It’s Not The Price That Matters

The price of an offer is a distraction. Fall in love with a price, and you’re at risk of overlooking expenses. I say it’s best, to begin with your eye on your equity. It is your equity that you’re using to accept the Offer. If you want that Offer, it will cost you this much of your equity. When you see how much equity you have to spend to get an offer, you’ll be a lot more careful to avoid the distraction of a big purchase price. Sprinkled throughout the contract are fees and costs. There is an assumption that the Seller will pay those bills but know this: they’re all negotiable. 

Reduce The Fees

When you get down to the last few thousand dollars of difference between your price and the Offer you’re negotiating, look at the fees. 

The first place to look is the Broker fee. Essential Real Estate, LLC created a modern and logical fee to leave more of your equity in your hands. $499 plus 1.0% of the purchase price is our Success Fee. Over that, you’re welcome to offer any amount you desire to a buyer agent to bring a buyer.  

There is no standard fee paid to buyer agents.

You may hear that the standard commission split is 3.0% to buyer agents.

That’s a myth and misleading. It is indeed typical for a buyer agent to expect a 3.0% offer of commission to bring a buyer. It’s accurate and easily verified that most home sellers pay 3.0% to a buyer agent. It’s so true; it’s not even close. Listen carefully; you may offer any amount to a buyer agent to participate in selling your home through the MLS. Come closer, regardless of what you offer to pay to a buyer agent; you can expect the Offer you receive will include a provision where the buyer says, I don’t want what you’re offering. I want 3.0%, and when that happens, negotiate or agree. When in competition, some brokers may believe it is better to take what less than they expected to help their clients get their Offer accepted. 

Buyer Agents Show Homes Regardless of the Fee Offered

I don’t feel this myth of blackballing on account of commission even merits a conversation. It’s unethical and, in some instances, will be illegal. It’s not happening. And I know it’s not because Realtors do not control the access to available properties and buyers. List your house for $300,000 and offer 3.0% commission or offer 2.5% or 2.0% or 1% and you will see the same buyers come to your home. There is no evidence to show homeowners providing less than 3.0% get fewer showings or that showings increase when changed from less than 3.0% to 3.0%. 

The Odds That An Agent Will Accept Less Than 3.0%

Clients of Essential Real Estate are told facts and given options to propose any amount they desire to a buyer agent. They will sign a contract to pay a Success Fee of $499 and 1.0% to Essential RE and an amount of their choice to the buyer agent. We presented four offers to one client. Three of the four agents rejected the 2.5% the Seller offered and required the Seller to pay their firm 3.0% plua $295. One agent accepted the 2.5% the Seller had offered. Half of 1% is $1,000 for every $200,000 of price. That will buy a lot of pandemic TP.  Based on limited research, the odds are 1 in 4 and that’s enough.

Hold That Thought

Consider holding your commitment on a top-dollar fee you are willing to pay an agent who represents the buyer. Keep your negotiating options open. If you’re offering 2.0% and the agent wants 3.0%, you get to decide. Consider your options. When you hold to think about paying the 3.0% and look at everything on the table, you’ll make a smart decision. You can always go up. 

Summary:

  • You pay a fee to accept an offer. It’s the Buyer Agent Fee
  • All offers are not worth the same
  • To increase your Net after the sale expenses, offer less commission upfront
  • No real estate licensee decides to show a house to a client based on the fee offered from the Seller or listing Firm
    • If anyone disagrees, please share the evidence
  • Price is one consideration; expenses and costs and terms can be more important
  • Increasing the purchase price to increase your Net has a risk you won’t have when you lower your costs

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. Essential real estate services are specified in real estate license law. Those services are worth professional fees. Paying professional fee rates for administrative services is a choice when an alternative exists. We are that alternative. Old business model commission rates are taxing the home equity of American home sellers. Essential Real Estate LLC was created so our clients keep more of their home equity, spend less on broker fees, and receive skilled representation in negotiating purchase agreements.

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