What Percentage Do Real Estate Agents Charge?

I check my stats and other metrics for The Set Fee Blog fairly regularly. It helps me to know what’s drawing visitors and what’s not. It’s also helpful to see what search strings people are using to find me on the web.

Today, I had the following as a search string:

“What Percentage Do Real Estate Agents Charge?”

Ok, so it’s not that unusual. In fact I’ve seen it in the results for this blog before. But today it just jarred me:

What a sad, stupid and unfortunate question!

Seventy plus years of REALTOR double-talk has trained the public to expect to pay a percentage of the sale price of their house to an agent when it sells . . . and that makes no sense whatsoever.

What does a percentage of you home’s value have to do with getting it sold? Nothing!

Think about it:

Here you are in your $350,000 house. Thankfully, you are not upside down. You have roughly $60,000 in equity. So you decide to sell, and list with ABC Realty**, who charges you (and every seller with whom they work) 6%*. When your house sells (for full price), that’s a commission of $21,000!

I’ll give you a moment to catch your breath . . . before I point out that that may be 6% of the sales price, but it’s 35% of your equity!

Meanwhile, your neighbor down the street also wants to sell, but his home is smaller. It’s only worth $250,000. He also lists with ABC and agrees to pay their 6% Commission. When the house sells for full price, the homeowner is going to pay $15,000 — still high, but not nearly as high as your $21,000 commission.

Now, here’s the question of the day: What did YOU get for the extra $6,000 you paid to sell your house through ABC?

More Advertising?

More Open Houses?

A better Sign?

Oh, maybe your agent worked $6,000 harder! Yeah, right.

What you got for the extra $6,000 you paid is this:

Absolutely Nothing

In almost every case it takes no more time, effort, energy, money or marketing to sell a properly priced $350,000 house than it does a properly priced $250,000 house. There are some situations in some areas where a market niche, say, luxury homes, might take a little more time and might require additional or specialized marketing. But these situations are rare . . . and $6,000 extra dollars to sell your $350,000 house? That’s absurd.

It makes no sense today, made no sense yesterday, and will never make any sense at all.

Come on: you don’t pay your dentist a percentage of your net worth when you have a tooth filled, do you? Of course not! There’s no relationship between the two things! Just as there is no relationship between the percentage based commission you are paying your real estate firm and the effort it will take to market your home and process the sale.

Smart Brokers – by the way, ‘Smart’ is a synonym for ‘Help-U-Sell’– Smart Brokers charge a set fee. Everyone pretty much pays the same thing no matter what the sale price is. It’s logical. The Broker works very hard to determine his or her hard costs of carrying a listing, then adds a reasonable profit to it, and . . . that’s it: the Set Fee the office charges everyone.

Here’s a little bit of scripting I actually heard in a REALTOR seminar some years ago. It’s what an agent is supposed to say when a potential seller is shocked by the high percentage based commission.

“I know it seems like a lot, Mr. & Mrs. Seller, but think about it for a moment. We’re getting 6%, yes, that’s true; but YOU’RE getting 94%! I think you’ll agree our commission is actually a bargain!”

I hope next time you need to sell, you’ll do the right thing and call a Help-U-Sell set fee broker. You’ll save a bundle (the set fee is usually thousands of dollars less than whatever percentage based commission you’re being quoted). And you’ll have the satisfaction of knowing that, finally, for the first time in your real estate life, you haven’t been taken to the cleaners!

*Commissions, whether set fee or percentage based, are always negotiable. They are not set by law or REALTOR rule. They are set individually by office Brokers. Price fixing occurs when different Brokers get together and agree to charge the same thing. That’s highly illegal. Different Help-U-Sell offices charge different Set Fees, because the carrying costs of marketing a listing vary from market to market, as do the number of days it takes a properly priced listing to sell.

**The “ÄBC Realty” referred to in this blog is fictitious and is used only for illustrative purposes. Any resemblance between it and any other “ABC Realty”, is purely coincidental.

Things that make you go ‘hmmm . . . ‘

The American Dream – or, rather, the currently popular notion of the American Dream – is under attack.  Congress and the big banks are working hard to dismantle our industry and our way of life.  Credit has become difficult for the average American to get, causing housing demand to shrivel and prices to plummet.  The FDIC has used our tax dollars to buffer the losses of mortgage lenders so that often, it’s in their best interest to foreclose and sell assets for a song rather than work out a new deal with homeowners.  Some speculate that many of the same mega-millionaires  who engineered the fraud that led to the expansion and bursting of the housing bubble are continuing to benefit from the mess they’ve made and are slowly turning us into a nation of tenants.

That’s the dark view of our current situation.  And that’s all it is:  a slanted view through dark glasses.  There is an appealing alternate view as well and truth probably lies somewhere in between the two.

In this climate I think it’s important to remember something that seemed to gel in yesterday’s Broker Roundtable call:

The American Dream is Home Ownership.  It’s not appreciation, mortgage deduction, refi every two years and pay off your credit cards.  It’s Home Ownership.  People buy homes to build families and have comfortable lives, to control their lives and lifestyles.  The financial aspects, while certainly a factor, are just that:  one factor.  Ours is still a nation where the average citizen (with the help of a possibly carnivorous bank) can own and control their own home.  Our job is to help make that dream possible in any way we can.  We seek out those who have a passion for this idea and dig through mounds of possible properties to help them find the ONE that most perfectly matches their dream.  The REALTOR is a hero here.  And make no mistake:  REALTORS are fighting tooth and nail to defend the Dream.  Thank you all for that.  And let’s dig down and send an extra $50 or $100 to our State and National REALTOR Political Action Funds.  It’s the best line of defense we have.

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Congratulate me!  I own the search phrase, ‘Set Fee.’  If you type that into your Google search bar, the Set Fee Blog comes up first and in several other positions on the first page of organic results.  This is what a year and a half of consistent content development on a focused topic will do.  It works with blogging, with your company website (new pages, hyper-local content), with your YouTube channel, and on and on.  Google functions today as a kind of collective consciousness for people everywhere.  It pays attention and notices consistent, value-rich information and if it sees it regularly over a period of time, it reaches a tipping point and suddenly, the creator of the content is deemed to be the best source for the information.

Of course, that’s not at all unlike your Help-U-Sell business (you knew I’d get around to that, didn’t you).  If you go out to a geographically defined population of homeowners with a clear, consistent message that they will recognize as valuable,  eventually you will own that position in your geography’s collective consciousness.  Each homeowner who uses your service and is delighted will sing your praises and your next customer will become that much easier to find.  Eventually a tipping point will be reached and most homeowners in your target market will know your offering; and since the offering is outstanding, most will be disposed to working with you when the need arises.  Twelve to eighteen months of steadfast, unwavering, hard work can have you garnering 10%, 20%, 30% marketshare in your target market and more.

Google has become an electronic version of word-of-mouth advertising.  It listens to what’s being said and if it hears the same thing enough times from sources it decides are credible, it tells the world.  There is no tricking Google – just as there’s not tricking the consumer.  There’s not a way to make this happen other than just do it.

* * * * *

How about a little double-ending action . . . that’s always been a hallmark of Help-U-Sell.  Unlike your ordinary competitors who simply throw a sign in the yard, plop the listing into MLS and then wait for some other broker to wander in with a buyer, Help-U-Sell brokers have always worked to put together transactions without outside help.  That’s why seller participation and consistent target marketing are so important to our program.  Unfortunately, for some of us,  the down market has obscured that focus on getting the job done ourselves.  In an effort to find the few real buyers who are in the market, some have fallen to marketing our inventory to the industry as well as to consumers.  That’s ok.  But here’s a little reminder, courtesy of Kimber Regan of Help-U-Sell Hanford-Lemore in California.

Kimber has taken to ‘creating listings’ for her buyers.  When she finds a real buyer, one who is ready, willing and able to buy now, she sends them off to get pre-qualified and then locates upside down properties fitting their list of wants and needs.  She goes to those homeowners – who are not on the market – and offers to help them with a short sale.    She’s double-ending much of her business these days with this little attitudinal gem, and you can too.

Part of the Help-U-Sell offer to buyers has always been that we will not just rely on the MLS to find their dream home.  We’ll also contact non-listed homeowners who are in neighborhoods and homes that would be right for them, looking for that one or two who may sell if a good buyer showed up on the doorstep.  It’s a very valuable offer today when buyers can find what’s in the MLS on their own via Zillow, Trulia or (if they’re smart and lucky) Listingbook. Thanks, Kimber for reminding us who we are and how we work.

Why Percentage Based Real Estate Commissions Are Nuts

Here’s a rough draft of a video we’re working on for part of the new Help-U-Sell University program.  The goal of the piece is to give new members an understanding of the power of Set Fee pricing.  I think it has broader appeal, though.  What do you think?

Why We Charge A Set Fee

The Low Set Fee is the heart of our identity.  It is the engine that produces the result we are known for:  consumer savings.  There are several reasons why we charge a Set Fee instead of a percentage based commission.

  • It is logical. If you know how your market behaves at any given time, if you know how long it will take to sell a properly priced property, if you know what you’ll be spending each month on marketing — you are able to know what it will cost to sell the typical home.  That, plus a ‘fudge factor,’ is your carrying cost.  Add a reasonable profit for your company and you have a Set Fee that makes sense to you and to the consumer.
  • Percentage Commissions, on the other hand, make no sense at all.  Think about it:  if your company charges, say, 6%, the guy with a $200,000 house is going to pay $12,000.  His friend, two blocks away with a bigger house, worth $300,000, is going to pay $18,000.  What did the friend get for the extra $6,000 he paid?  $6,000 more advertising?  I don’t think so.  Is his agent going to work $6,000 harder?  Doubtful.  Truth is:  they’re paying hugely different prices for the same thing.  It’s nuts and the consumer knows it.
  • It is a differentiator. Differentiation in the real estate business is a good thing.   The California Association of REALTORS has been asking consumers for years if they’d use the same agent again in a real estate transaction.  In 2004, 79% said ‘yes.’  In 2009, only 22% said ‘yes.’  If that’s not a confidence crisis, I don’t know what is!  Seems to me, the smart thing is to look as little like the rest of the pack as you can.  Charging a Set Fee instead of a Commission says you’re different.
  • It drives more business to your door. The Low Set Fee that produces savings over what ordinary brokers charge has great appeal to Sellers, resulting in large numbers of listings which create a strong flow of buyer leads through the office.  More Sellers = More Buyers = More Business.

Maurine Grisso, on the Broker Roundtable Call today, presented the Set Fee as well as I’ve ever heard it presented.  She talks in term of 3 ways your home might sell:  You Sell – We Sell – They Sell.  No matter how it sells, you always pay the Low Set Fee.  If you find your own buyer (You Sell), that’s all you pay.  If our Help-U-Sell office finds the buyer (We Sell), you pay your Set Fee plus our Selling Fee.  If you elect to go into the MLS and another Broker brings the buyer (They Sell), you’ll pay your Set Fee plus whatever % Commission you offer to the selling broker.  In all cases, the Seller saves over what they’d pay a traditional broker.

The Set Fee is who we are.  It’s what sets us apart from the crowd.  It’s what motivates consumers to call us and ask, ‘How’s that work?’  Set it wisely and re-evaluate it regularly, and wear it like a badge of honor.

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