Selling a home and the related commisions

[Cullenator]

So I know we've had a couple real estate questions 'round here and a few folks in the know have provided some good info.

My wife has tried this line of questioning in a couple of other venues and either been down right ignored or occasionally shouted down but I thought Id give it a go.

In this day and age of lack of much/any physical advertising and near seamless integration via MLS IDX between all of the primary online resources (Realtor.com, Zillow, Trulia, etc.) with the network of regional MLS systems, and many buyers doing their own legwork through those outlets what costs do agents incur to justify the 3% for listing agents and 3% for buyers agents.

Lets leave the buyers agents for later as there is a clear investment of time with showings, inspections, and just shitty buyers.

But when it comes to listing agents I'm struggling to understand their costs.  There is the time element of getting photos, measurements, amenities, and the data entry into their regions MLS but then what?  Maybe an Open House but in markets where houses are going under contract in days or weeks that seems like an unneeded extravagance.  

Further what do they do different for more expensive homes to justify the increased profit for them?  If they take a 350K listing and their 3% comes out to 10.5k what are they doing differently to justify the 21k for a 700k home?

Don't get me wrong.  Im all for paying for value.  I just cant get anyone to explain the value including the agents we've chatted with.  Just a bunch of vague hand waving and question dodging.

 

 

I know there are flat fee services and that 6% is not set in stone but Id love some insight on that traditional approach.

[onmyown]

Mainly it’s a time thing. I know how to sell a how by myself, in fact my city was the number two hot spot in the nation at the beginning of COVID, houses sold over the phone not even looked at within hours, I still hired a realtor.

Ive sol houses on my own before and it just eats up too much time imo. Especially if something falls through or you’re dealing with a bidding war etc. There are also little niche rules of the trade realtors know and can play with during negotiations.
 

I can learn and refresh again too but it is a lot on anyone’s plate to get a house ready to sell and try and buy all at the same time of going back and forth with another realtor with phone calls and staying on your feet with questions etc. Also making sure all the paperwork is in order. 

That said your realtor should earn their money. When I pick up the phone and ask questions, I expect them to spend time explaining what got done today. Or when I’m a buyer and I want to see a house, I want to see it now. Because the hot market requires it. I know you are focusing on just selling, I use a great realtor for both.

Also remember you can haggle percent, especially if you know your house is going to sell very quickly and will need little work. Maybe 2%.

Anyways when I did all this myself, I had a highly complicated sale going and it took me through all the hoops, only for buyers to back out. It was nothing I did wrong but I learned that he I just paid someone I wouldn’t have lost two months of my life and could’ve actually made more just working my job. Although I did get to keep their earnest money.

For me it’s just not worth the time and effort and you risk something going wrong if you can’t go toe to toe with a licensed realtor on their side.

[PanthersATL]

Some agents purposefully advertise lower fees, to attract cost-minded sellers.  But the drawback is they may not do as much "free" work vs those who charge a higher percent.  They may charge extra for each legal contract that gets drawn up, for example.  Or extra for photos.

Often included in the fees would be handling all the legal work, managing the appointments, interacting/marketing with other agents who they know may have potential buyers, taking professional photos, and getting listed in MLS in a timely manner.  There's a lot of behind-the-scenes activities that are not always obvious to the home seller interested in FSBO actions.

At higher home price points, the customer market is usually smaller, so it requires even more delicate advertising/promotional knowledge and activities. 

I've been told that Open Houses are usually not a good thing to have your realtor spend their time on. It's usually a sign that something may be unusual about that home that is preventing an easy sale. Those with actual real estate experience on the Huddle can chime in/correct this particular point in case it's wrong.

Quality photos are KEY. They can *really* showcase a house well vs photos you may take yourself. When we last sold a home, the pro photos were incredible (we were amazed how nice the house looked, and we had lived in it)

Other advice a real estate professional earns their $ on is helping stage a home for viewing. Advising on what can be kept out vs needs to be put in storage/away. The cleaner a house looks, the better.  "Move In Ready" is often a misnomer --- unless it's sparkly obvious.


 

[Cullenator]

Ive bought and sold plenty of homes and done the dance with both flat rate listing agents and commission based agents.

The point of the inquiry is an enumeration of costs not activities.  I regularly justify my consulting fees to my clients with a lot of - oh Ill do this, and I know that, my X years of experience, and my connections, but if pressed on what my actual expenses are they are minuscule (and primarily sunk costs for that matter) in regard to my rate.  But I get paid by the hour.

 

It doesn't address the question where two houses are listed on the same day, one at 350k and one at 700k.  They both receive a single full price bid and close in 45 days from listing.  What expenses did that listing agent incur for the more expensive house to justify double the commission? Both houses took the same level of effort to get them into MLS, get photos, etc.

Edited April 16, 2023 by Cullenator

[GOAT]

yeah it's really just one of those industries where the standard was set, they handle everything and time is money. the time spent for selling such a high dollar product with so many other costs and factors associated with it = the large commissions. don't forget they split this with their agency too in most cases.

the same could be said about lawyers, they get thousands just to make minor edits to document templates and then just send them to the court.

hell people balk at the commission percentage in my industry all the time but it's the industry standard. if we keep lowering it eventually it'll be 0. 

[toldozer]

22 hours ago, Cullenator said:

So I know we've had a couple real estate questions 'round here and a few folks in the know have provided some good info.

My wife has tried this line of questioning in a couple of other venues and either been down right ignored or occasionally shouted down but I thought Id give it a go.

In this day and age of lack of much/any physical advertising and near seamless integration via MLS IDX between all of the primary online resources (Realtor.com, Zillow, Trulia, etc.) with the network of regional MLS systems, and many buyers doing their own legwork through those outlets what costs do agents incur to justify the 3% for listing agents and 3% for buyers agents.

Lets leave the buyers agents for later as there is a clear investment of time with showings, inspections, and just shitty buyers.

But when it comes to listing agents I'm struggling to understand their costs.  There is the time element of getting photos, measurements, amenities, and the data entry into their regions MLS but then what?  Maybe an Open House but in markets where houses are going under contract in days or weeks that seems like an unneeded extravagance.  

Further what do they do different for more expensive homes to justify the increased profit for them?  If they take a 350K listing and their 3% comes out to 10.5k what are they doing differently to justify the 21k for a 700k home?

Don't get me wrong.  Im all for paying for value.  I just cant get anyone to explain the value including the agents we've chatted with.  Just a bunch of vague hand waving and question dodging.

 

 

I know there are flat fee services and that 6% is not set in stone but Id love some insight on that traditional approach.

I usually provide cleaning, professional pictures, sometimes provide repairs cost. Then you also work through negotiations with the buyers agent and help seller work through any potential issues. Commission is always negotiable.  If a house is in a good area and should sell quickly that can be taken into account. If seller seems high maintenance or you get the feeling they're going to need a lot of help take that into account too. When an agent hits you with a % always feel free to come back with what you think is reasonable. Keep in mind the average agent closes 6-8 deals a year so they're going to be hoping for that 3%

[Zaximus]

I mean like others pointed out they know what sells and know the current market.  They crunch the numbers on what to list the property for.  The time of showing the houses and the scheduling.  Then of course the negotiation with the buyers agent which can get involved.  Dealing with inspection and who is paying for what, etc.  You're also paying for expertise and someone that "should" know the legal side of what to do and not to do.  Add in being "on call" for what seems like 24/7 for questions and whatnot.  These are basically contractors so they have to pay their own taxes and often have to pay a good bit for their own insurance.  I'm not a realtor but have family that is and I've spent time with them where their clients (listing or buying) just nonstop call and have questions, freaking out, etc.  I think the money is earned.

[Khyber53]

A good agent is also your representative and takes a protective role for their client in negotiations and legal matters. This is a huge financial event for most homeowners (whether they are buyers and sellers). There are so many legal ramifications in the event that far exceed just a transactional sale of an item that you need someone who is  knowledgeable about all of the proceedings and requirements just to make sure you don't make some kind of dire mistake or that you don't get screwed along the way. 

Everyone complains about commission rates being paid, but that big chunk of money is split generally four ways between the listing and buying agents and the listing and buying brokers. All of these individuals or companies are providing a vital service from contracts, negotiations, listings, tax issues, filings and even escrow of the  downpayments and purchase monies prior to the transaction being completed. 

It is money that is necessary to be spent and in the cases of good Realtors it is money well spent.

[Cullenator]

All valid points and ones Ive largely conceded but there is still this scenario

 

It doesn't address the question where two houses are listed on the same day, one at 350k and one at 700k.  They both receive a single full price bid and close in 45 days from listing.  What expenses did that listing agent incur for the more expensive house to justify double the commission? Both houses took the same level of effort to get them into MLS, get photos, etc.

[toldozer]

6 hours ago, Cullenator said:

All valid points and ones Ive largely conceded but there is still this scenario

 

It doesn't address the question where two houses are listed on the same day, one at 350k and one at 700k.  They both receive a single full price bid and close in 45 days from listing.  What expenses did that listing agent incur for the more expensive house to justify double the commission? Both houses took the same level of effort to get them into MLS, get photos, etc.

Typically more expensive houses don't sell as quickly as less expensive ones. photos cost more (some times virtual tours are done for these properties)   measurements cost more, cleaning cost more. Also most of the time more expensive properties are listed by more experienced agents so you're paying for knowledge.

[LinvilleGorge]

Try to sell your house without one. You'll gonna be fielding calls and emails all day everyday from real estate agents just wanting the listing.

[Cullenator]

Its actually kind of funny, I said initially I'm not against paying for value.  Hell Id pay 5% if I knew what I was getting for that money.  I just want to know what I'm paying for as any informed consumer should, and as I expected no one can (or will) articulate the costs that a listing agent incurs.

 

Again with the simple example of two houses are listed on the same day, one at 350k and one at 700k.  They both receive a single full price bid and close in 45 days from listing.  What expenses did that listing agent incur for the more expensive house to justify double the commission? Both houses took the similar level of effort to get photos, get specs, key into MLS, etc.

 

The closest I got was photos cost more (in this digital age I have a hard time believing that), measurements take longer (that makes a lot of sense), and cleaning costs more (again that makes sense).  But do those justify 21k vs 10k in commission?

 

In the end, I guess I didn't really expect an objective answer.  Real Estate agents have a system to protect and everyone else wants to assume Im looking to get off on the cheap.

Edited April 19, 2023 by Cullenator

[PanthersATL]

10 hours ago, Cullenator said:

The closest I got was photos cost more (in this digital age I have a hard time believing that), measurements take longer (that makes a lot of sense), and cleaning costs more (again that makes sense).  But do those justify 21k vs 10k in commission?

Just because it's digital doesn't mean there's lower cost. There's lighting, minor photoshopping, proper captioning, etc

Check out https://terriblerealestateagentphotos.com/ for reasons why good photos are important -- especially at higher price points.

A lower-priced home may not have the luxury of being able to afford higher-quality photo experiences, especially if professional photos are not included in the agent's fees. 

[PanthersATL]

10 hours ago, Cullenator said:

 I just want to know what I'm paying for as any informed consumer should, and as I expected no one can (or will) articulate the costs that a listing agent incurs.

Again with the simple example of two houses are listed on the same day, one at 350k and one at 700k.  They both receive a single full price bid and close in 45 days from listing.  What expenses did that listing agent incur for the more expensive house to justify double the commission? Both houses took the similar level of effort to get photos, get specs, key into MLS, etc.

There's nothing wrong with interviewing agents and asking what they provide for their fee.  Negotiate from there.

Our last house sale many years ago, the agent we used suggested what we thought was a ridiculous listing price - much higher than anything the neighborhood had seen before (and our home was definitely not the largest or feature-rich).   We thought we had a good idea of what the neighborhood and house layout would take based on our own comp analysis, but we definitely were wrong in hindsight.  Not only did we get offers at that price within 6 hours of the house being listed, there was a week-long minor bidding war that the agent handled all the calls on. 

We were amazed it hit that price point, and if we had gone the FSBO or cheaper agent route (yes, we had talks with other agents before selecting the one we did) instead of listening to our agent, we definitely would have left $ on the table. 

a good agent is motivated to get the highest price they can for a sale.  Or you could go with an agent that just wants to push through as many homes as possible because their lower fee requires volume over quality.  Both can work for you - depends what you're trying to achieve.