Real Estate Fees: What You Should Think About Before You Decide Who to Hire and What to Pay

I have this discussion constantly with sellers and it’s a hard one for them to understand initially. Real estate fees are part of the expense of selling your home. Trying to undercut or save by not offering at least 3% to the buyer’s agent only hurts you as a seller. Many buyers are unwilling or unable to pay out of pocket for the difference between the cooperation fee you pay as a seller and the fee the buyer’s agent receives from the buyer — typically at least 3%. Also, when selling your property, it is most important to give the property the maximum exposure possible (assuming it’s priced correctly, which is first in importance). Paying your listing agent at least 3% allows them to properly market your property so that buyers in the marketplace will look at it, and offering at least 3% on the buyer’s side makes buyers’ agents able to show the property without having to go to the buyer to ask for the difference.

Marketing properties properly is the hands down largest expense to an agent or real estate brokerage. Most agents these days shoulder the majority of the costs. Typically, only very successful agents who bring in large revenues can afford to provide their clients the best marketing and tools available. For instance, my personal preference for giving sellers’ properties exposure is the Internet. I have spent thousands of hours of my own personal time writing for my website (www.SellingTucsonRealEstate.com). I have spent countless hours deciding on layouts and working on it to make it the best in the business. I have spent in excess of $40,000 on professional web designers, content, and a professional website company to monitor and keep my website moving up the rankings for Google, Yahoo, MSN, and the other large search engines, so that my site is found well ahead of the other real estate sites in Tucson. My sellers profit from this tremendously. I feel that my clients get maximum exposure when they hire me, and that they cannot get this package anywhere else. To duplicate this type of exposure offline, I (and other top agents) would have to invest and keep investing in marketing materials and advertising so that my listings would not only sell faster but for more money then they otherwise would. I guess what I’m trying to get at is that by hiring me, a client picks up thousands of dollars in exposure and tools that will, in my opinion, place them way ahead of the competition, which is fierce in today’s strong buyer’s market. (There are many other great agents out there, but since I do not pretend to know every agent in the marketplace and what they do and don’t do and what they provide for their clients, I can only speak for my own services I provide to clients.)

There are many sellers out there who will never believe that a 6% or 7% commission to the right agent and company is worth paying to get their home sold. They believe that the MLS is the answer to all their questions and having a price that is close to the others in the neighborhood will be sufficient. They then hire an agent (or try themselves) who may not be very successful in obtaining buyers for the property or getting the word out about the listing, or who have poor negotiating skills. The property then sits for a long while and in the meantime (at least currently in Tucson), they watch the real estate market decline 5% or so. How much better it would have been to have hired the correct agent and paid the more traditional full service commission! Again, I will say a successful agent has to charge this fee most of the time to be able to actually make a profit on the sale after paying for marketing, advertising and the other tools a pro uses in the sales process. The seller who does that and listens to the agent about pricing strategies, staging, and market conditions knows what to expect, and many times will sell their property faster and for more money than another agent could get because a “Pro” real estate agent should also be a master negotiator and will get a buyer to pay top dollar. This gets the property sold and the seller more money. In current market conditions, this actually makes the seller a lot more money because the market is declining every day while the property is for sale. For all these “extras,” a top real estate agent typically charges only 6%-7% (3%-4% for their services and 3% to the buyers representative), whereas a discount brokerage charges 4%-5%.

This entry was posted on Saturday, November 24th, 2007 at 12:10 pm and is filed under Buying. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.