This is a new series I am writing for sellers and buyers. It is designed to help those with questions or issues that come up when listing or purchasing a home.
The subject we are going to delve into today is for sellers. When you sell your home it is always in your best interest to get the most bottom line dollars (for your pocket). What I mean by this is after all commissions and expenses are paid...you should look at what potential plan (or Realtor marketing plan) will fetch you the most money.
The mistake many sellers make is to think it is always best to work hard negotiating the commission rate down so they can pay the lowest amount...therefore making a larger bottom line. In theory it sounds great...but before you go down that road I want to run a couple of issues by you that might make you re-think this strategy.
Issue #1...buyer agents are in the business to make money. If you pay a lower commission to them (ex: you negotiate a 5% commission with your listing agent instead of 6%...so they pay the selling agent 2.5% instead of 3%) it can significantly reduce your showings. Here is why: In many cases agents are limited in the number of homes they can show potential buyers by time (not price). If they can show 10 homes in a day...and have (for example) five opportunities to take their buyers out...they will likely pick the most desirable homes for the buyers as well as themselves. (They may, as an example delete all homes that pay below a certain commission range). This can reduce the number of showings you have and that would likely do two things, give you longer days on the market and reduce the amount you will get for the home (if someone asked you to take a pay-cut at your present job...how would you feel about it?).
Issue #2...sellers...ask yourself this question: If the agent I have chosen to market my home is a best in class agent...why would they take less money then they are worth to sell my home? If you, as a seller who sells a home every few years can out negotiate the listing agent into reducing commission...how will that same agent stack up against a professional negotiator with 30+ years experience in sales like me. You will pay less commission but likely recieve less for the home...after a longer marketing period (longer days on market). If you negotiate a 1% lower commission (on a $300,000 home that is $3000 in savings) but if you stay 60 days longer on the market (how much did you say those two extra mortgage payments would cost you?) and take a lower price for your home because your agent gets out negotiated by a real pro...what did you save?
Issue #3...If your agent makes 1/3 less commission (remember...on a 6% listing each side gets about 1/2 the commission...so your agent would be working for 3%) that agent will likely do 1/3 less marketing of your home (if they make less...they have less to spend). That can also increase marketing time and that can reduce your bottom line (the longer you are on the market the less you will likely get for your home).
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