Your home has a market value of $400,000. The traditional method of pricing the real estate broker’s fee to sell your property is multiplying your sale price by a percentage factor. Redfin reports the factor is typically 5% to 6%. In Wisconsin and Virginia, according to List With Clever is 5.85% and 5.3%, respectively. The two states straddle the National Average of 5.45%.
Even at 6.0%, the factor appears relatively small compared to the sale price. Losing six cents of a dollar isn’t going to change a person’s lifestyle. Here is the formula used: $400,000 X 6.0% = $24,000
You pay selling fees from your equity, not your sale price. We sell our homes to release our home equity for use on our next life plan. When we apply the product of 6.0% of the sale price to available home equity, we see how the lack of choice in fees might be crippling on some home sellers. A typical American might have $100,000 of net equity after paying off the mortgage(s) and closing costs on a $400,000 home. Twenty-four thousand dollars is 24% of the cash available to use for their next life plan. Spending 24% of your savings on one service could easily be life-altering.
Do consumers have a choice in service and fees? Is it a choice when your pool of options is 3,000 practitioners who charge the same price? Today’s consumer of real estate service is more informed when they enter the market than any consumer in the country’s history. They demand a higher level of essential real estate service and are right to expect more at competitive prices. So, where are the alternative real estate models?
The emerging models. Essential Real Estate, LLC emerged in the Madison, WI market late last year to solve the problem of spending excessive amounts of home equity on real estate service. Home owners who sell for $300,000 with Essential are spending a lot less on commissions and keeping more of their home equity for their next move. The average Essential Real Estate clients pays about 3.4% in total commission. (1.0% plus $499 to Essential, and about 2.0% to buyer agents.) Our service isn’t for everyone. But it is for anyone who prefers to keep an extra $10,000* or so of their home equity and spend less on broker fees.
*$300,000 sale price at 6.0% commission compared to the same price at 3.0% commission plus $499.