If you want to avoid these fees when trying to sell your home fast then read to the end to find a better way.
Before diving into the relatively complex world of estate agent fees, let’s deal with the easy one first.
Brace yourself for a shock: most investors seldom charge a fee because they oftentimes manage all the fees related to selling. Moreover, because they’re not estate agents there is no commission to pay, they’re not the people listing your house. Some investors want you to pay closing costs so ask them upfront.
How do real estate commissions function?
Two agents are involved in the average sale:
- A seller’s agent (AKA listing agent) who represents the home seller
- A buyer’s agent representing the person buying the home
Both are licensed real estate professionals aiming to help their clients through the buying or selling process.
The seller’s and buyer’s agent are paid a percentage of the property’s final price when it is sold. The payment is called real estate agent commission, which is included in the sale price of a house.
Real estate commission costs for both the buyer’s and seller’s agent are usually referred to as a single percentage, roughly 5-6%. Occasionally, however, commission costs are separated for each agent.
Who pays for real estate commissions?
Home sellers pay the real estate commission of:
- the agent representing them
- the agent representing the buyer of their home.
These commission costs are paid out of the money made from the home sale.
Why does the seller have to pay for the buyer’s agent?
Because it’s a marketing cost, you offer a commission to motivate the buyer’s agents to show your house to their clients.
Commission rates aren’t fixed, the home seller can negotiate lower rates.
How do real estate agents get paid?
When you sell your house, the percentage of the sale price that is set aside for the realtor commission is shared between the buyer’s agent and the seller’s agent. The specific terms of how commissions are paid are stated in the listing agreement, a document that home sellers must sign when hiring their agent.
Often agents don’t keep all of their commission when a house sale closes because they have to split the commission with their principal broker (a real estate professional with a broker’s license, qualified to supervise real estate transactions).
All real estate agents without a broker’s license (68% according to the National Association of REALTORS®) must work under a principal broker.
The amount for the broker is 25% – 50%, depending on the agent’s experience: more experienced = bigger share.
What are the factors that determine agents’ fees and how to negotiate a lower rate?
Real estate commissions are not fixed and many factors push rates up or down depending on your area and your specific circumstances.
Being aware of the factors that affect commission rates can:
- let you know if the agent is offering you a decent deal
- help you negotiate lower rates.
Why do agents lower rates for repeat clients?
You scratch my back and I’ll scratch yours
Agents occasionally offer lower rates in exchange for repeat business because the long-term value of clients that return for numerous transactions outweighs the losses incurred by lowering their rate for a one-off transaction.
If you are selling a home and plan to purchase in the same locale, then take advantage of this. Ask your listing agent to represent you whenever you buy a home in exchange for lower commission rates. This way, you save on commission while your listing agent earns a commission on two real estate transactions, not one.
How do local real estate market conditions impact commission rates?
Real estate commission rates change over time depending on whether there’s a buyer’s or seller’s market.
A seller’s market means that more interested buyers are out there than homes for sale, consequently, houses sell quicker and at the listing price or above.
A listing agent’s job is simpler in a seller’s market so they are more likely to lower commission rates, but the opposite is the case in a buyer’s market.
A buyer’s market entails fewer buyers than homes for sale, therefore houses stay on the market for long periods of time and sellers usually lower their listing prices.
3 factors that can help you determine if the real estate market is better for home buyers or home sellers at the moment:
1 – Months of inventory
The months of inventory is the main indicator of how much supply and demand there is for houses on a market.
How is it measured?
Number of houses listed for sale in the most recent month
The number of homes actually sold that month.
When months of inventory exceed 6 months = a buyer’s market.
When less than 5 months = a seller’s market.
Anything between these values = a neutral or balanced market.
2 – Sale-to-list ratio
On the whole, if houses in your locale are selling for a higher price than listed then you know you’re in a seller’s market. This is measured by the sale-to-list ratio:
The final sale price
The listing price.
3 – Median listing price
Increased listing prices suggest that the demand for houses in your area is on the up.
If it’s going down, however, then homes in your neck of the woods losing their allure.
When the demand for houses goes up in your vicinity then local real estate agents are more likely to lower commission rates.
Why do agents offer reduced commission rates for high-value homes?
If your house is valued highly (when compared to others in your neighborhood) it’s easier to negotiate lower commission rates (and vice versa) because they make more money for every transaction on these listings. That is, the lower commission rate is offset by the greater earnings on these house sales because of the superior sale price.
Agents that have a reputation for selling homes that are highly-priced, moreover, will probably attract comparable listings going forward. Therefore, reducing commission rates (in the short term) so as to gain experience selling houses of high-value can lead to similarly valued deals in the future.
To fee or not to fee?
So who should you go with?
Agents who want 6% or investors who claim to waive fees but end up lining their pockets anyhow.
The third way
There is an alternative.
So if that’s what you’re looking for and want to sell your home fast then reach out to SellforcashAZ.