Information about real estate purchase agreements, the thousands of contingencies, and how real estate transactions and negotiations work is the key to reducing home sales and acquisition costs.
In some ways, the information problem has improved. It wasn’t so long ago when REALTORS held all of the information on homes for sale, sales prices, and market statistics. Today, anyone with a smartphone has access to more real estate sales data than any previous generation. Access to the data that once was confidential and privileged for the eyes of REALTORS-only allows consumers to be more intelligent, savvier, and wiser.
Better informed consumers struggle less with negotiating decisions. They make commitments based on facts and data. Emotions will always play a role in negotiations. Having information helps temper the emotion or offset disappointment when emotions overrule logic.
If consumers had a better understanding of how the commission sharing among members of a multiple listing service works, they would not concede their ability to negotiate commission quickly. Left to believe it is to their benefit to promise to pay the highest commission rate to a buyer’s broker before seeing any offers, home sellers lock themselves into commitments that increase their selling costs by thousands of dollars.
Commit to paying less and reserve the right to pay more.
Since January 2020, Essential Real Estate brokers have compiled evidence to prove that home sellers spend more home equity than necessary to sell their homes in this red-hot market. Our clients see how the commission-sharing component of the MLS works. We show them how to commit to paying less to a buyer’s broker and reserve the right to spend more AFTER they see the offers.
An easy example is the $400,000 home sale. When our clients sign their listing contract with us, they may agree to pay a buyer’s agent 2% of the sales price to work against them on behalf of the buyer. That’s a peculiar concept, but that’s how it is today. The Seller agrees to pay X% for a broker to represent the buyer to gain an advantage over the Seller. The typical X% is 3.0%. But for our clients, the X% is 2.0%.
By promising to pay something, but not the top rate, our clients have room to negotiate to pay more depending on the quality of the offers they have to consider. An offer may be so good that a seller is willing to pay $4,000.00 more to accept it. The Seller will know how good the offer is once they see it and can compare the offer to their choices on the table.
What makes an offer better than another? It’s not the price that matters most; it’s the net. And the net is the result of contingencies, credits, costs, and price offered for the property.
Besides knowledge of the commission sharing process, homeowners will be in a better position to squander less equity when they learn how the contingencies work.