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The Truth About Real Estate Commissions: Know Before You Sell

The Truth About Real Estate Commissions: Know Before You Sell
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By Thursday, 19 March 2020 03:05 PM Current | Bio | Archive

If you’re looking to sell your home, you’re probably trying to decide whether to use a traditional real estate agent or sell it by yourself (FSBO).

Before you do, you’ll want to determine exactly how much you’ll pay in real estate commissions if you do, what value an agent will provide, and if there are alternate options you may wish to consider based on your own skills.

How Real Estate Agents Get Paid

Real estate agents get paid for their services through commissions. These commissions compensate them for everything they do to help you sell your home, including listing it on a local multiple listing service (MLS), holding open housing, utilizing their own network to reach potential buyers, negotiating offers and repairs, and leading you through the legal paperwork.

Unlike a typical paycheck job, agents only make money when a home sells, regardless of whether they are the listing or the buyer’s agent. The amount they get paid is usually calculated as a percentage of the final sales price, but some agents will charge a flat fee regardless of the home’s value. These commissions vary by state and by specific market and brokerage.

From these commissions, an agent pays any of their own costs associated with their business — usually a fee from their broker or a desk fee. They also have expenses related to marketing and retaining their realtor license.

Commissions Cost The Seller 5% To 6% Of The Home’s Sale Price

The typical commission that a seller pays on the sale of their home is 5% to 6% of the home’s final sticker price. But the listing agent — or the real estate agent who helps you sell your home — typically gets about half that amount.

The other half goes to the buyer’s agent — most buyers hire their own agent to help them find a home and advocate on their behalf. In most markets, the seller essentially pays 3% to their own listing agent and 2% to 3% to foot the bill for the buyer’s agent. The buyer usually doesn’t have to pay any commissions.

You may think you can find a way around this by using the same agent as both the listing agent and the buyer’s agent — sometimes called dual agency — but the agent will still likely expect the full commission since they’re doing work for both sides.

Commissions Are Negotiable

Even if an agent tells you a commission is non-negotiable, trust us, it is. While the broker may not be willing to reduce the amount the agent must pay them after the sale, agents are free to set their own commission rate. This means you may be able to get a better rate by hosting your own open houses or asking for a la carte services.

When there are fewer homes on the market, agents may also be more willing to accept a lower commission because there are fewer opportunities for them to make money. If the market is good for agents, keep in mind that you will need to provide a compelling argument for why an agent should give you a discount below what the market is paying for their services.

There Are Alternate Ways To Sell

In the age of online transactions, there are many alternate ways to sell your home, aside from the traditional real estate agent.

IBuyers are online companies that offer to purchase your home as-is in as little as a week. While you may not make as much, you’ll enjoy a relatively stress-free, quick sale and be able to move on with your life. Plus, you won’t have to worry about negotiations, repairs, or the sale falling through at the last minute.

Discount agents may also offer a la carte services if you’re the DIY type. For example, you may be able to pay an agent simply to list your home on a local MLS and you handle the rest. Licensed agents are the only people who can post to an MLS, but not doing so can really hurt your potential buyer pool.

For-sale-by-owner (FSBO) is also an option to consider. With free online marketing tools like Facebook Marketplace and Zillow, it may be easier than you think to market your home yourself. Keep in mind that you’ll also need to manage everything else on your own too — from staging and repairs, to negotiation and final closing paperwork.

Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.

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If you’re looking to sell your home, you’re probably trying to decide whether to use a traditional real estate agent or sell it by yourself (FSBO).
truth, real, estate, commissions, sell
Thursday, 19 March 2020 03:05 PM
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