Selling Advice: Working with Real Estate Agents
When it’s time to sell your home, it’s natural to consider your bottom line. A home is often one of the largest financial assets people own. Whether you’ve remodeled the kitchen or are planning to use the sale proceeds for retirement, most home sellers want to maximize their profits. To achieve this and reduce selling costs, you may consider engaging low commission real estate agents.
Finding an Agent Worth Their Commission
Low commission real estate agents typically offer to sell your home for a commission lower than the industry average. Traditionally, the average commission rate has been around 5-6% of the home price. However, with evolving commission structures, these percentages can vary.
While low commission agents claim that their reduced fees allow you to make more on the sale, it’s essential to consider if these savings might come at a cost, such as a lower sale price.
In this post, we’ll explore the pros and cons of low commission real estate agents to help you decide if hiring one is suitable for your home sale and financial future.
What’s the Average Real Estate Commission?
For years, the standard commission rate has hovered around 5-6% of a home’s sale price, typically paid by the seller and split between the listing agent and the buyer’s agent. Agents usually adhere to the average rates for their area, as charging more may deter potential clients.
Due to recent changes in commission structures, buyers may now negotiate commissions directly with their agents, potentially lowering seller-paid fees to 2-3% of the sale price. However, the overall average commission rate remains uncertain as these changes are relatively new.
Some real estate agents now choose to charge a lower commission rate, ranging from 1% to 1.5% of the home’s sale price.
What Are Low Commission Real Estate Agents?
As the name suggests, low commission agents charge lower fees than traditional agents. For instance, if the standard commission is 3%, they may charge 2%.
It’s important to note that this reduced commission impacts only the agent’s fee and not other selling costs, as the agent does not control the buyer’s agent commission.
Are Low Commission Real Estate Agents Reputable?
Low commission agents still meet licensure and training requirements, making them just as reputable as their traditional counterparts. If they are members of a professional association, they must adhere to ethical standards. The availability of discount commission agents can vary by market.
Some agents may excel in selling homes faster than the average, particularly in markets with high demand and low supply. However, in a more balanced market, the choice of agent can significantly influence your home sale outcome.
How Much Can I Save with a Low-Cost Real Estate Agent?
If you’re curious about the savings a low-cost agent can provide, consider the following example comparing different commission rates for various home sale prices:
| Home Sale Price | Combined Agent Fees (6%) | Listing Agent Fee Only (3%) | Low Commission Fee (2%) | Savings |
|---|---|---|---|---|
| $150,000 | $9,000 | $4,500 | $3,000 | $6,000 / $1,500 |
| $200,000 | $12,000 | $6,000 | $4,000 | $8,000 / $2,000 |
| $250,000 | $15,000 | $7,500 | $5,000 | $10,000 / $2,500 |
| $300,000 | $18,000 | $9,000 | $6,000 | $12,000 / $3,000 |
| $350,000 | $21,000 | $10,500 | $7,000 | $14,000 / $3,500 |
| $400,000 | $24,000 | $12,000 | $8,000 | $16,000 / $4,000 |
| $450,000 | $27,000 | $13,500 | $9,000 | $18,000 / $4,500 |
| $500,000 | $30,000 | $15,000 | $10,000 | $20,000 / $5,000 |
| $1,000,000 | $60,000 | $30,000 | $20,000 | $40,000 / $10,000 |
| $1,500,000 | $90,000 | $45,000 | $30,000 | $60,000 / $15,000 |
| $2,000,000 | $120,000 | $60,000 | $40,000 | $80,000 / $20,000 |
What Are the Risks of Using a Low Commission Real Estate Agent?
While lower commissions can save you money, there are potential downsides that may impact your selling experience. Here are some considerations:
- Limited Service: Low commission agents often rely on high sales volume to maintain their income. Consequently, they may have less time to dedicate to your sale, which could lead to reduced availability for questions and limited support beyond listing your property.
- Dual Agency Risks: Be cautious of agents who represent both the seller and buyer, known as dual agency. This practice, illegal in some states, can result in conflicts of interest, as the agent may not advocate for both parties effectively.
- Potentially Lower Sale Prices: A discount agent might not achieve the highest sale price for your home. Strategic improvements, effective pricing, and strong negotiation skills can significantly impact the final sale price. Top agents can often secure higher offers due to their experience and networks.
- Reduced Visibility to Buyers: Offering lower commissions may deter buyer’s agents from showing your home. If the commission falls below a certain threshold, it could lead to a noticeable decrease in showings.
- Sale Complications: High-volume agents may be less invested in the details of your transaction. If issues arise post-agreement, their lack of attention could jeopardize the sale.
What Other Home Sale Options Are Available?
- For Sale by Owner (FSBO): If you’re willing to take on the responsibilities of an agent, you can list your home for sale on your own. This includes setting the price, marketing the property, and negotiating directly with buyers.
- Sell to Cash Buyers: Some companies make all-cash offers on homes. While they may provide quick sales, their offers are often below market value, and additional fees might apply.
- iBuyer Platforms: Instant buyers use technology to assess home values and provide quick offers, typically for homes in good condition.
- Traditional Agents: A traditional real estate agent typically charges a standard commission but provides comprehensive services to guide you through the selling process.
When considering selling your home, weigh the pros and cons of low commission agents against your needs and goals to make an informed decision.
