False beliefs about agency fees cost home sellers thousands

Would you promise to pay a “going rate” for something you haven’t seen? Of course not. But, homeowners selling their houses do just that with buyer agent commissions. And, the cost to the owners is staggering. 

Properties offered for sale on the REALTORS multiple listing service may include an offer of compensation to a broker who procures a buyer. More than 2,413 single-family homes in the City of Madison sold this year in the RASCW MLS. Only 174 of those sales included a cooperating broker fee offer, paid by the seller, at anything less than three percent of the purchase price. Once published, the owner is locked into paying that amount, regardless of the terms of the offers. In seventy-two percent of the sales, the owners committed to pay a 3.0% commission from the start…without seeing an Offer. Please, somebody, tell me why.  

The Cost of the 3.0% Buyer Broker Fee Myth

Owners need to know a costly myth about cooperating agents has always been out there, and it survives today. The legend says agents working with buyers won’t show your property unless their compensation is 3.0% or greater. Illogical concepts should die quickly, and yet this one doesn’t. If there was ever a time when a real estate agent could hide listed properties from buyers, those days are long gone. Zillow and similar consumer-friendly sites display homes for sale regardless of the commission the seller offers to pay. The person who offers ZERO percent before seeing an offer will have their house seen on the internet by the same people who see the neighbor’s 3.0% compensation promised place. Does anyone want to challenge that?

Too Few Homes. Many Buyers. 

Markets like this will end one day. When the market turns to favor the buyer, home sellers won’t be able to control negotiations like they can today. Clients of Essential Real Estate learn the facts as we expose the myths. More of our clients offer less than 3.0% commission to the buyer agent and wait until they see an offer to negotiate on the commission. A typical seller offers 2.0%, and because they receive competing offers, they usually pay only 2.0%. Competition and short supply have a way of making anything look better than nothing. 

Discuss this topic with agents

Questions often asked by home sellers have little to do with developing a strategy for increasing the Net proceeds for the seller. That’s too bad; the reason a home is for sale is all about the net proceeds. Increasing your net can be accomplished by increasing the price (provided someone will pay that price) or decreasing expenses. In this market, it’s possible to get higher prices and cut costs. 

If you promise to pay any amount before you see what you’re getting, there is a good chance you’re going to pay more than something is worth. Doesn’t it make sense that an offer of $2,000 below your bottom line on your $400,000 house is a lot more attractive if the fee is 1.0% less? We can do that math without a calculator. 

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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