The 6% Real Estate Commission Myth: Expensive Homes Do Not Cost More To Sell, So Why Are Agents Earning More To Sell Them?

Have you ever thought about the 6% real estate commission? As in, have you really considered just what it means for a real estate agent to receive 6% of your home’s value for their help selling the home? Even if you have sold a home before, you may not have considered this one tiny fact: Selling a more expensive home rarely takes more time, more knowledge, or more expertise than selling a less expensive home BUT an agent gets paid more to do so. In fact, the whole truth is that the value of your home has absolutely nothing to do with the work that a realtor does.

What An Agent Does For Their Commission

To fully understand this fact, you first need to understand what an agent does to earn the commission in the first place. Let’s look at a few of the main tasks and then evaluate whether these are more complicated, thus requiring more compensation, for a $400,000 home versus a $200,000 home.

Prior To Listing: Before an agent comes to your home for a listing appointment, they will research other homes in your area similar to your own home that have recently sold, known as comparables or comps. The purpose is to help determine the asking price for your home. They will also create a listing presentation that contains all the information they have about your property.

Do agents need to find more comps simply because a house is more expensive? No. Do agents need to provide more documents for a listing presentation because a house is more expensive? No.

At the Listing Appointment: The agent will meet with you to discuss the current market conditions in your area. They will also tell you how they plan to market your home. Finally, they will ask you to sign a contract outlining what they will do and what you will pay for those services if the house sells.

Does a more expensive home automatically need more research to understand the current market conditions? No. Do more expensive homes have considerably different marketing plans than less expensive ones? No. In fact, both homes will be marketed using the MLS, at least the three major online real estate sites (Zillow, Trulia, and RealEstate.com), as well as other marketing methods employed by your agent. Although there may be a few differences, they will be slight, and no differences will be due to the value of the home.

Immediately After the Listing Agreement is Signed: Once you have signed the agreement, the agent will get a lockbox for your house, get the signs needed, and help you determine what can be done to your home to increase the curb appeal. They will also add your home to the MLS database so that other agents and buyers will know your house is for sale.

Do more expensive homes need more than one lock box? No. Does signage increase with the cost of a home? No. Do realtors offer more advice to increase the curb appeal of more expensive homes? No. Do more expensive homes get added to the MLS more than once? No.

Marketing the Home: Every agent has their own marketing plan, but most will create both print and Internet ads, as well as prepare fliers and marketing brochures. They will have professional photos made of the home (often at owner expense). They will list your home on major online sites. Finally, once the home is out there in the public eye, they will coordinate showings with the buyer’s agents.

Do realtors create more print and Internet ads for expensive homes? No. Do expensive homes require more fliers and brochures? No. Do more expensive homes get placed on more Internet sites due to their price tag? No. Will there be more showings for more expensive homes? No, not because they are more expensive.

The Offer and Contract: As offers come in, your agent will review them and help you with negotiations. They will help you determine the best counteroffers so that you get the best deal possible. Once an offer has been accepted, they will provide you with a sound, legal contract. Then, they will help you coordinate times for inspections and negotiate for repairs. They can even help repeal an appraisal that came in too low.

Simply because a home is more expensive, does that mean the realtor will have to help more with negotiations? No. Do more expensive homes automatically require more difficult counteroffers? No. Does a more expensive home require more than one legal contract? No. Are inspections different due to a home’s value? No. Will buyers of more expensive homes expect fewer repairs? No

The Closing: As your home heads to the closing, your agent will help coordinate between the buyer’s lender and broker. They will keep forms updated, solve title problems, be there for the buyer’s final walk through, and make sure all documents are accurate.

Does a more expensive home have a more complex closing due to its selling price? No. Are there more title problems because of the selling price? No. Will the buyer need more than one final walk through because of the selling price? No. Does a higher selling price mean the documents have to be more accurate? No.

Even with all these “no” answers, an agent selling a more expensive home gets paid more. If they sell the $400,000 house, they get $24,000 for their efforts. That’s twice what they earn for selling a $200,000 house without doing anything extra.

What Is the Solution?

When most people realize this “tiny” fact, they feel uncomfortable at best and outraged at worst. Why are realtors getting paid more simply because a house is worth more? More importantly, what can be done about it?

Some have suggested that agents simply be paid less than 6%. In fact, some realtors now advertise that they will sell your home for just 5%. That’s better, right? But wait. If a broker gets 5% of a $400,000 house they will still make twice as much as if they sell a $200,000 house. You see, the basic premise of a percentage commission is flawed!

Many sellers, when they realize the injustice of the 6% commission, or any percentage-based commission model, decide to either sell their home on their own or try using a flat rate discounted broker. The problem with these avenues is that they are left on their own to do what a broker would normally do. Although an agent’s job isn’t dependent on the price of a home, it is still a job that requires expertise. That is why most FSBO homes and those using a discount broker that offers limited services tend to fail. In fact, 88% of those attempting to sell their home in this way do not achieve that goal and ultimately end up with an agent that charges a commission.

But, there is another way. It is the flat fee, full service model proposed by companies such as Recadia Realty. For a flat fee, Recadia will do everything a broker is supposed to do to sell a home. They provide the seller with full services, but for a flat fee that compensates them for the work they do. Whether you have a $200,000, $400,000, or $1.5 million home, the fees remain constant because, at Recadia, they understand that they don’t do more work just because you have a more expensive home.

Recadia’s brokers have the right kind of experience to sell your home and provide you with everything you would expect from a broker…except the ridiculously high fee based solely on the value of your home. Call Recadia today to learn how a full service, flat fee broker can help you save thousands.

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