Breaking the Mold
July 24, 2008 by Scott
Let’s face it, real estate is changing. No, I am not referring to the prices of homes and the cycle of markets going hot and cold. I am talking about Realtors and the entire real estate industry. For years, sellers have held on to the idea that the only way to sell a house was to hire a Realtor who would charge a commission for their service. This commission typically ranges from 5-7% of the property’s sales price. Although reluctant, millions of sellers believe this commission fee to be worth the cost for getting their house sold and moving on in life. That’s easy to say when you are profiting $100,000 in equity. But what about the seller who finds himself in a changing market and is simply trying to break even from their mortgage loan? Or how about the seller who could use the 10-20 grand paid in commission fees for pursuing other life goals such as a down payment on their dream home or funding their child’s college expenses. Let’s look at a few scenarios for the U.S. home seller…….
Scenario 1: Bob and Julie
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Bought Home: $400,000
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Sold Home: $650,000
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Realtor Commissions (6%): $39,000
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Profit: $211,000
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Time to Sell: 4 months
Scenario 2: George and Mary
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Bought Home: $200,000
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Sold Home: $210,000
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Realtor Commissions (6%): $12,600
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Profit: $-2,600
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Time to Sell: 7 months
Its easy to see that the Realtor commissions put George and Mary in the hole. What about Bob and Mary? Some may say (in disgust), well look at their profit! They can afford to pay the Realtor commissions! But I think all of us would certainly agree that saving the $39,000 could open up many options for Bob and Mary in pursuing their life goals and decisions.
Sellers are starting to realize that they can sell their property and they don’t have to pay those commissions. Whether its the seller struggling to stay out of the hole or the seller simply wishing to save their hard earned equity, there is a much better way! Hence the birth of flat fee agents. Flat fee agents can provide the same services (if not better) than the traditional Realtor. Paying a flat fee gets you on the MLS, which is the number one tool used for selling property. Your phone number shows on your listing and yard sign to increase your chance of finding a buyer without an agent. Most flat fee agents offer options that give you more service for an increased nominal fee. If you want more website advertising, you pay a little extra. Do you want all your paperwork handled, pay a little extra. Want a virtual tour- no problem. You pay for what you want- what a concept! Why is it that everything else in our world revolves around this model except for real estate? But keep in mind, even the best flat fee packages (such as Norton Team’s Gold Plan that includes the works) is going to save the Seller thousands and thousands of dollars.
Here is another great benefit. Sellers can market their home at a lower and more competitive price when they are not being crunched with the Realtor commissions. This sells homes much faster! Let’s look at George and Mary’s scenario again, this time while using a flat fee agent.
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Bought Home: $200,000
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Sold Home: $202,000
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Flat Fee: $199
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Profit: $1,800
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Time to Sell: 3 months
Now George and Mary avoided losing money and sold their home much faster. Although their home sold for less, they still profit when cutting out the commissions. Do you see the power of the flat fee? With higher end homes, sellers fork over serious cash, sometimes 50K or more! Now they can save all that money for other investments or pursuits and get their homes sold fast and efficient.
You may be asking how in the world flat fee agents can do this? How do they benefit? How do traditional agents view us, and so forth? All these questions will hopefully be addressed through weekly posts and ongoing discussions.
Sellers are beginning to realize that they can save some pretty dollars. More and more agents are giving up on their overpriced sales pitches and converting to flat fee. This is how we feel real estate should be. Maybe the day will come when paying a Realtor commission over 1% will be absolutely absurd. To us, it already is.
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Wow, what a great article! I feel like I know so much more about Flat Fee Listings! You are one smart realtor!