This is Part 2 of the blog I wrote yesterday - "Whaaat? Sellers pay for the marketing expenses?"
The seller may ask: "Why should I pay for the marketing expenses? My agent has to take care of that. Afterall, that's why I'm paying the big commission." Very good question that allows an interesting discussion.
First, the real estate profession is service oriented. Conventionally, agents are paid a percentage of the sales price for their services. The marketing costs are absorbed by the agent and their broker. My point made in yesterday's blog is that many sellers do not fully participate in understanding what expenses are being incurred by an agent/broker to market their property. For motivated sellers in a buyers' market - this means that you as a seller have an opportunity to take more control in the process - thru contributing to the marketing costs. This also means that agents will need to better articulate their value added service (this in part has lead to the discount and a la carte brokerage services - because agents cannot always convince sellers why the standard commission rate should apply - agents can't sell the value add). A la carte brokerage services to me just mean that the costs are broken out instead of all being tucked into one commission rate. Why wouldn't a saavy seller want to have more insight into the process, effort and direct expenses towards his property.
Second, as a service oriented business - the commission represents a value for the agents time, knowledge expertise and skill set in the business. It is possible to separate out three components to a commission: out of pocket expenses attributed to the listed property; a value for the agent's service; and lastly, risk management. The expenses is objective. Sellers and their agents can devise a good/better/best marketing budget and plan, then decide which to implement and the associated costs. Value of the agent's services is discussed above. The third component is managing the risk. For the seller this means the risk of whether he will get the price he wants and how long it will take to sell - all critical pieces to conventional success. For the agent, it means the risk of not getting paid and not getting marketing expenses recovered. An honest and open discussion between the seller and agent will help to bring awareness to these underlying issues in the relationship, and ultimate goal of selling the property within a timeline and price point that meets the seller's objectives.
Look for Part 3 - aka List High? Sellers fooling themselves? Agents with a self-serving business model?
Linda Mardi, President
Licensed Real Estate Auctioneer
Our speciality - simplifying the way America buys and sells properties