Traditionally, when someone was ready to sell a home, they would partner with a real estate agent for help with the process. That agent would handle the marketing, listing, and negotiation of the home’s sale, then pocket a six percent commission (6%) in return.This has been the model of real estate sales for decades, yet in many other industries, like travel (Airbnb and Expedia), technology is allowing consumers to skip the costs of the middleman in big transactions, creating significant savings.
Real estate is quickly growing into the next frontier as quickly growing companies are showing home buyers and sellers what is really possible, all without the costs of a traditional real estate agent. As a result, a shift is happening in the market. Today, 20% of sellers are opting to skip the agent, using online tools and flat fee companies to sell their homes, direct. Other sellers are using discount brokerages to sell homes for much less commission, often a 1%/$5,000 fee on the selling side.
What Does a Traditional Agent Actually Do For Their 6%?
Before you decide that working with an agent is the right option because that’s how you’ve always done it, consider what an agent’s role actually is. When you sell a home, your agent will:
- Provide market data
- Advertise the property
- Show the home and help negotiate the sale
- Manage the document exchange and keep track of deadlines
Lets look more closely at these tasks:
The Internet makes market data easily accessible. Sites like Zillow, Trulia and Realtor.com all provide this information, as do local property appraiser websites. So the days of brokers being gatekeepers of this information are long gone. Sellers are now able to determine list prices themselves, using comparable data from recently sold homes in their area, to work out the market value of their home.
Most agents use their local MLS system to advertise their clients property for sale (although some agent won’t even do that as it means splitting their seller’s commission with another agent). From Zillow’s free for sale by owner product, to old-school for sale by owner sites like FSBO.com and Fizber, there are numerous ways home sellers can directly market their home online to potential buyers from their own computer or mobile device. And if you want to use the same system that brokers use, which is still where 80% of home are listed, and for FREE, Richr will list your home directly on the MLS fee free.
Home Showings & Negotiations:
While it’s true that tasks like home showings, open houses, and negotiations can be tedious or uncomfortable, you must decide if they are worth the cost of an agent. Picture, for instance, a $1 million house sale. That’s $60,000 in fees, or a good year’s salary in many markets, that you are giving away to a third party for them showing your home (which you will have spent the time tidying up and preparing for viewers) and speaking with potential buyers. Why not treat selling your home like a second job, and keep that money for yourself?
Manage the Paperwork:
Agents spend time keeping track of contracts, disclosures, inspections and deadlines. The documentation is then sent off to a closing agent/closing attorney to review and advise the seller. So long as direct sellers similarly use a closing agent / closing attorney to review and control the deal, there is no reason a seller can’t manage the paperwork themselves.
And remember, by law, agents aren’t allowed to give you legal or financial advice so don’t think they are giving you those services for your 6% fee, as they are not.
Better Options Are Available
Today, more than 20 percent of buyers and sellers are moving away from the 6 percent fee model, opting for discount brokerages, online sales, and modern for-sale-by-owner options. In the modern technological age, it is no longer necessary, or financially prudent, to work solely with an agent who will charge 6 percent. As you weigh your options, consider:
(a) Negotiating with the agent/broker you really want to use – one of the biggest secrets in real estate is that all commissions are negotiable
(b) Choosing a discount brokerage with a good reputation – why pay 6% when you can pay 1% on the selling side
(c) Going the flat-fee route and avoiding paying more just because your home is more expensive – after all, commission structures make it seem that it’s more work to sell a $1,000,000 home than a $500,000 home – but we all know that’s not true.
(d) Using Richr to sell for FREE.