Tag Archives: equity

Essential Real Estate. A Free Market Choice by the Numbers.

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.

OR

$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.

* The Internet Didn’t Shrink the 6.0% commission

Essential Real Estate v. Anybody: Compare Your Equity Savings Here

Let’s keep it simple. In 1963 residential real estate commissions were typically 7.0% of the purchase price. Today, Zillow says they’re about 6.0%.

Commission down 14%. Zillow says the Median Home Value is up to $285,000. Census.gov shows the median value was $17,000. Is it possible the broker fee was about $1,200 in the summer of ’63? It’s $17,100 today.

We pay 100% of our broker fees from our Home Equity. Home Equity is savings earned. If the median home seller has a typical home equity of $50,000, broker commission is going to consume 34.0% of their equity.

And that’s just the cost of fees. We haven’t looked at the costs of under representation and negotiating flaws.

Essential Real Estate is created with an aim to increase your home equity savings by 33%. They surpass that with real estate contract law knowledge and skills.