Compared to 4.0% a home seller who pays a 6.0% commission will pay 50% more money from their equity. Saving that equity is now a choice.
For a market to be free there must be a choice on both sides of the transaction. Do we have a free market real estate service economy? Maybe.
Real estate representation is a licensed service. The standard of performance is the same for every real estate licensee. There is no choice as to which legal obligations a licensee will perform. There is a minimum standard though, and we expect some licensees to rise above the minimum to be a choice of higher-skilled service for the consumer.
What about the price? As long as the consumer is willing to pay *6.0% broker fees the market will be dominated by firms that choose to offer the same real estate licensed service for the same 6.0% price. Eventually either the consumer will demand a range of prices for the legally obligated services or licensees will choose to structure their business model to be profitable and sustainable at an alternative fee.
Essential Real Estate, LLC was created in 2019 in Madison to be a free market choice for home sellers who want to keep more of their home equity by spending less on broker fees. These are the numbers.
When the fee of choice tends to be 6.0% of the sale price the regressive nature of the “tax on value” hits those who can least afford the fee the hardest.
$400,000 Value. $300,000 mortgage. $100,000 equity $400,000 x 6.0% = $24,000. $24,000 is 24% of the equity.
$400,000 x 4% = $16,000 $16,000 is 16% of equity.
To pay a 6.0% commission the home seller will pay 50% more money compared to a 4.0% commission.
50% more, in this scenario, is $8,000. By moving that $8,000 back into the hands of the seller the difference is impressive:
The $8,000 is a 33.3% reduction in the price of the commission. The $8,000 is a 10.5% increase in retained equity. The $8,000 applied to the next down payment will reduce a monthly payment on a 30-year mortgage at 4.1% by $39. $39 per month is $468 per year $468 per year for 30 years is $14,040.00
Finally, home owners have a choice to pay less in selling commission and keep more of their home equity. Essential Real Estate has set the market free.
Listing fee: $499 at signing. Commission of 4.0% or less due at closing. We will show you how to make that 4.0% less.
We believe 4.0% is a fair real estate broker fee when the median time on the market is 9 days.
Acquisition. The question is never, What don’t you wantfor Christmas? This is the season of receiving. It’s an important season in American culture. The American is an acquisitive creature.
To live in a material acquisitive world Americans become adept at trading as little as possible for as much as possible. And we expect it. A tried and true method to acquire more for less is sell the sizzle. A handy example of selling the sizzle is an appealing ad for the incredible shrinking fast food hamburger. When you buy the burger that looked so good in the advertisement the burger you are handed has less meat, smaller buns, 1 pickle not 2. Less substance. More price will continue until one day we hand over $10.00 and the person at the counter will show us a picture of a burger with everything on it. And we’ll be satisfied.
Why would we expect anything more? To fund a lifestyle at a level one has become accustomed to, there needs to be more revenue and less cost. Selling sizzle instead of steak when you can get the same price for sizzle is going to keep happening until the consumer quits buying less for more. Or a business flips the script and provides more for less, and stays in business.
The new generation is more inquisitive than acquisitive. Maybe because they have more choices at their finger tips and more information they are more likely to ask why where we and our parents were quick to ask how much.
Patrick and I designed our company, Essential Real Estate to be a healthy choice for people who want all of the service at a fair and reasonable price. People who want substance. Essential Real Estate set fees at 33% of the price the market will bear. And we did that because we believe this is true, “Help enough other people get what they want in life, and you’ll get everything you want in life.” Simply put, you can make a profit charging a fair price and leaving more for the customer. We don’t need to acquire more of your home-equity.
Real estate transactions are governed by transaction law. The service a real estate firm is paid to provide is the service they’re licensed to practice at a high standard. The transaction is substance. Our expertise is in the essential real estate service our license expects us to provide expertly. When knowing nuances of the real estate transaction is not your thing, the smoke from the sizzle might cover your substance deficiencies…until someone gets burned.
The six percent, more, or less broker fee is a choice businesses are free to charge. In the next decade the consumer will demand and receive more choices. They businesses that deliver those choices will be built less on the acquisitive model and more on solution at a fair price for expert service model. Essential Real Estate is that choice today.
We believe 4.0% or less is a fair fee when the median time on the market is 9 days.
“What;s your fee?” That’s the easy question to answer. “Have you ever charged less?” That’s the critical question home sellers must ask to know if the answer to the first question is sincered.
Real estate broker commissions are not all the same. Rates vary even among agents in the same firm. Even if the agent makes a convincing defense against a commission concession you can still negotiate a lower fee. Agents are confident in their answer to questions like “Is your fee negotiable?” It’s such a common question Google will give you about 127,000,000 connections about answering. It’s the next question that Google has no answer for. The truth is in the pause.
The topic of a recent company meeting at a local firm was the book Never Split the Difference. Negotiating is the skill the book aims at improving. Nothing of the strategy the author proposed came close to misrepresentation. Honesty. Trust. A sincere commitment to see the other person as deserving of your consideration are clearly part of the strategy presented. Here’s how well the book impressed this firm.
A dozen or so agents around the table, including the owners and leaders, were confident to the point of enthusiastic as they shared their prepared responses to the question, Is your fee negotiable? The quick quips were right out of 1970 sales training. “NO. Nope. Can’t do it. Company policy.” To a person, everyone knows there is no such company policy. Based on every agent’s past history any version of NO is not the truth. And yet the seasoned agents were proud of their answer and the unseasoned agents were impressed. I was not.
I asked this next question and their silence told me the answer I just heard was bullshit. The decisive question was simply, “Have you or your firm ever charged less?”
This conversation turned out to be a defining moment in my career. When deception is encouraged by the owners the culture is poisoned and the future is determined. Building something better is easier when the status quo can’t honestly answer a simple question about their fees. So I did.
There is no question, broker commission fees have not been reduced by the presence of the internet even though the buying habits and methods of consumers has changed substantially. Apparently the broker fee is immune to market pressures or the market pressures are to not pressures at all.
It’s not collusion that keeps fees as they are. I believe inflexible fees are the norm because real estate business owners are committed to doing today what worked in the past. Few leaders get to the top when most members want to be followers of leaders who are taking them right where they are and no where near their discomfort zone. The obvious choice in this environment is to be the change. As I see the world, it’s not important to be a leader. It is essential to see wrong and try to right it. Leadership is overrated. Look around. There are effective leaders behind every crime against humanity. The bigger challenge is to be a wise follower and a committed instrument of change.
I started looking at the broker fee problem from the point of view of the home owner. This is what I saw: The conversation about commission tends to be related to a percentage of the purchase price. It occurred to me that this focus on purchase price minimizes the problem and distracts attention from the real problem, which is, real estate fees are paid by the seller from their home equity, not from the purchase price. As a percentage of purchase price the cost is a single digit. As a percentage of the only real money in the transaction, the equity, this cost becomes a double digit problem. A typical American with $70,000 in home equity is probably going to pay 20, 30, 40, and even 50% of their equity in real estate commissions.
Go ahead, ask Essential Real Estate the questions you want to ask. “What’s your fee.” Answer. $499.00 at the time we sign the contract, plus one percent of the purchase price as our Success Fee at the time of closing. We suggest you offer at least another one percent to cooperating broker who procures the buyer. More than that is up to you. ”
Be sure to ask us the second question. Have you or your firm ever charged less? The answer is, Of course. Our clients set the fee they’re prepared to paywithin the range of fees we’re offering.
When starting a business relationship on honesty and keeping more of your home equity in your hands is your thing call me. 608-332-8331.
Real estate companies are fueled by real estate commissions. Those commissions are paid from other people’s money, specifically their home-equity. Where does that money go?
Texas Instruments calculators. If you had one in 1988 you were on the cutting edge of real estate technology. If you could operate it for anything more than multiplying a number by 7.0% you were likely trying to pre-qualify people. Eventually, you turned them over to a mortgage lender who knew how to use the machine.
Thirty years ago we booked air travel, rental cars, and hotels through a travel agent. We got our messages on pink paper notes, folded lengthwise and inserted into a lazy Susan-type message holder with slots for everyone. There they would remain until we returned to the office…which we did most every day.
The travel agents are real estate agents now, and they get their messages in an instant without needing to set foot in an office. Do we book our trips ourselves because the agents left, or did the agents leave because we book ourselves? Either way, when we miss our connection we have no one to blame but ourselves.
The end of this first decade of the 21st Century is near. This black electronic apple on my desk is a calculator, computer, cordless phone, radio, and television. Oh, yes. It’s also a movie production studio. I pay $100 a month for this gadget. And with it, I can spend more money and every store in the world is open 24/7.
Real estate commissions are no bargain. Despite the fact that the typical buyer spends three to six months researching and discovering the market without intentionally contacting a realtor, according to Zillow, the typical broker commission is 6.0% of the purchase price. How is it that a travel agent, who’s service was required far more often, is out of business while real estate agents are everywhere and their fee has gone down 14% while the average house price grew 108%. If you have the TI-68 please tell me if 6% of $383,000 is more money today than 7% of $135,000 adjusted for inflation.
Real estate companies are fueled by real estate commissions. Those commissions are paid from other people’s money, specifically their home-equity. I haven’t seen an ad for a house for sale in any media forever. Online sure. I’m a REALTOR and when I search for real estate outside of the home I use Zillow.com. I like the Zestimate. Last time I looked, the cost of placing a property on Zillow and a thousand other websites is between zero and zero.
Where does the money go? Billions and billions of home equity dollars are paid as real estate commissions. Some of it is absolutely earned. Maybe someone could analyze the cash flow to see what is spent on essential service and what is misspent on the lifestyle enhancements of other people?
Essential real estate services are listed in Chapter 452 of the Wisconsin Statutes. Nothing in the law obligates the licensee to spend money on more than annual fees. Extravagant expenses are not required to be a highly-skilled, effective real estate agent.
Do you think a real estate company can be profitable and sustained by investing in delivering essential services and charging unselfish fees?