ARE REAL ESTATE AGENT COMMISSIONS TOO HIGH?
When choosing a doctor to perform open-heart surgery on you, how do you go about choosing the doctor? What if the cheapest option explained that their reason for being affordable is that you will need to do most of the procedure yourself – much like some low-cost real estate operators do. They will provide you with all the tools and equipment you need, as well as a video tutorial, but will need you to perform some of the open-heart surgery on your own. Would you do it?
While selling your home is not life threatening, it is still one of the weightiest financial decisions you’ll ever make and one that will have an enormous impact on your life. You are free to choose the route of low-commission operators or the private sale alternative, but you need to understand that you do so at your own risk of having your property remain on the market for longer and selling at much less than your asking price…
Don’t think in terms of billable hours
In order to justify the commission amount, many sellers make the mistake of trying to create a list of itemised billing tasks completed by their real estate agent. What they fail to realise is that ultimately, sellers are not paying for 45 hours a week with 50 marketing emails to be sent and 10 viewings to be held each month. Instead, they are paying to have their home sell as close to full value as possible. If a real estate professional was able to achieve this on the very first day the property is listed, it does not make his/her service any less valuable. Quite oppositely in fact, many sellers might even be happy to pay a higher commission rate if an agent could promise to deliver a sale in such a short timeframe.
Consider what you stand to lose
Statistically, property is most likely to fetch its full value within its first three to six months of having been listed. Thereafter, sellers are often forced to drop their price, sometimes by as high as 10% or more, to attract buyers. A real estate professional has a higher chance of securing a sale than an independent seller who does not have the same marketing reach or credibility. Private Property, for example, began as a platform for private sellers, but has since shifted to an industry supported model that displays listings from reputable real estate brands. This is because they understood that, as the consumer market stands currently, homes still sell faster when backed by a reputable brand. So, while a real estate agent might cost you 5% in commission, they could end up saving you as much as 10% (or more) of your asking price.
Paying for the service of a specialised consultant
What would you be willing to pay other specialised consultants such as financial advisors or insurance brokers, that provide access to unique resources and expertise? In conjunction with the overarching brand resources and reputation of an established real estate company, a real estate professional has gone through a two-year qualification process and has taken the time to build his/her own brand, growing their own database of potential clients and developing their own set of unique industry-specific knowledge and skills; negotiating a better price on their seller’s behalf and being able to determine the highest possible achievable listing price being just a few of these skills. Sellers are paying for all these specialised resources and skills when partnering with an estate agent and should therefore consider the commission in the same way they might consider the fee of other specialised fields.
Not convinced? Then find another agent.
Not all real estate agents are created equal. It would be seemingly unreasonable to part with as high as 7% of your sale price on an agent who does nothing apart from upload your property onto a public listing portal that you could have accessed on your own. However, if approached by an agent who can tell you that they are backed by the largest real estate brand in the country, with access to international training and a multitude of instantly customisable print and online marketing materials, would you be more convinced of the value of their services? What happens if that same agent could add reasons why, apart from the brand, he/she brings his/her own additional value to the table – for example, if they have sold 10 homes in the last 6 months, or have the largest market share in the suburb? Quite simply, if your real estate professional is unable to sell you on why they are charging what they are charging, then you should look for another agent who can.