When selling a home, it’s important to know the different ways that you can save money on your commission. For example, some agents charge flat fees, while others require sellers to pay them a percentage commissions based off of how much they sell their property for. So which is the better option for you?
What does a seller’s agent do to earn their commission?
There are many reasons why working with an agent might be a better option than trying to handle the sale of your home yourself. Agents have access and insight into what it takes to effectively market a home. When it comes to setting the sales price of your home it’s important to price it correctly if you want to reduce the number of days that it remains unsold. Agents use what is known as a comparative market analysis (CMA) uses different types of local data to figure out different prices that your home might sell for, depending on whether you are looking for a quick sale, or are prepared to wait it out in order get top dollar. In addition, when setting prices by themselves, homeowners tend to use emotional information which really has no bearing on what a home purchaser is willing to pay, or what a mortgage institution is willing to lend on such a home. Real estate agents know this and price the homes accordingly.
The second reason why you should consider working with a real estate agent is because they will negotiate the sale on your behalf. Negotiation can be complicated, and it’s important that you have someone who has experience in these types of negotiations on your side. It’s highly likely that most buyers will be working with an experience agent (since there is no cost for them to have this benefit), and a good agent is going to exploit every weakness that you might have when it comes to negotiating in order to get a better deal for their client.
Third, agents carry Errors & Omissions (E&O) insurance. The complexities of a real estate transaction and the exacting details can be a breeding ground for mistakes. These are often minor or inadvertent but still liable to cause legal proceedings if the buyer is not satisfied with any problem discovered after the sale of the home has been completed. E&O Insurance protects against any potential liability from errors committed on your behalf during the sales process and if they happen to be major then E&O Insurance will cover the legal costs.
What is an agents cost when it comes to selling a home?
Good agents know how to effectively market a home in all kinds of market conditions. The reality is technology is making the online home selling process much easier and far more efficient. Technology allows agents to list a house in less time, with less manual work required on their part. For most agents this has been not reflected in the amount that they charge their sellers for listing their homes. However, flat-fee brokers do acknowledge this by charging a lower amount than would be paid when compared to be charged 2-3% of a home’s sales price as commission.
Regardless of whether a commission is being charged as a percentage or a flat-fee, the same amount of effort should be made to market a home so that it sells quickly and at the best price possible. In an ideal world this would be a reality, but unfortunately it doesn’t seem to be the case. If you interview 5 different agents regarding the sales of your home, you will probably get 5 different explanations on exactly what they will do to help you get your home sold. Some agents do as little as taking the photographs of the home, along with the details of the home, and put them onto the Multiple Listing Service (MLS) database, and simply wait for buying agents to bring potential buyers to view the home. It gets worse when some agents choose to forego the costs of professional photography to ensure the home is presented as well as possible online, and will take photographs with their cellphones and use those. So their costs would be minimal.
Then you have the more professional agents who will invest their own money (or their brokers’ money) to not only have professional photographs, but also video, 3D virtual tours, along with newspaper and online advertising (i.e. they are actually making an effort to try and find a buyer as well as selling a home). With these agents the costs for marketing a home will be hundreds, and depending on the location, maybe even thousands of dollars. So the decision on exactly how much an agent is willing to spend on marketing dollars really will depend on the potential return on their investment when the house eventually sells. Therefore, an agent who is going to earn 3% commission, is probably more likely to spend more money than an agent who is only going to earn 2%.
So with this being said, you might ask with that logic, won’t a percentage based agent spend more money on marketing than a flat-fee commissioned agent? A lot of time that is likely to be the case, and you will find flat-fee brokers out there who will openly advertise that they do nothing more than add your property details and photographs that you have to provide into the MLS. Then you have full-service flat-fee brokers like LISTED Realty in Fort Myers who offer the exact same services that you would expect from a percentage based broker. As an agent with LISTED Realty, I provide professional photography, professional videography, a 3D virtual tour and online marketing for all of my listings regardless of how much the house is going to be sold for, because I believe it’s my duty to do everything in my power to help get a home sold quickly and efficiently. How much commission I earn would not be a driving factor for my marketing efforts.
So, which is the best option – a percentage based broker or a flat-fee broker?
Clearly any home seller, when they choose an agent to help them sell their homes is efficiency and value. There is no point in cutting the amount that you will pay in commission if you choose an agent who can’t sell your home and it sits on the markets for months and months, and you find yourself continuing to pay a mortgages, insurances, taxes, etc., which work out to be more than the additional commission you would have paid to a far more efficient agent who could sell your house quicker. Ideally, you would have the best of both worlds, where you can have the complete suite of sales, marketing and support services of your agent and their broker, but paying as little in agents’ commission as you can.
When you speak to potential agents that you might want to work with, don’t only ask them for specifics on how they’re going to market the home for you, and what additional administrative support is being offered, also ask them for something called a Seller’s Net Sheet, which gives a complete breakdown of all the costs associated with selling a particular home to calculate how much the seller can expect to bank once their home has been sold. A Seller’s Net Sheet will include all of the agents’ commissions among the other costs.
Once you have all of the information above, then you should be able to make an informed decision on which option is best for you.
If you are thinking of selling your home in Lee or Collier County, and would like to know more about the flat-fee, full broker service from LISTED Realty please call me at (239) 223-8224 and let’s schedule an appointment to talk.
Callum is a young and energetic licensed Realtor® who is based in Fort Myers, Florida. Callum is quickly making a name for himself as a driven agent who uses the most up-to-date real estate technology to sell homes in the way they should be in the 21st Century. Callum joined LISTED Realty in 2020, and works in partnership with his dad, who is also a licensed professional, to get the job done quickly and efficiently.
Callum is still single, and when he's not working you're likely to find him working out at the gym or playing soccer with his local team.