One of the most common reasons buyers want to deal directly with the seller is because they feel they can save the commission. It’s a valid consideration but interestingly, it’s the same reason the seller isn’t employing an agent; they feel they can save the commission.
Both parties cannot save the commission. The buyer feels they have earned it because they’ve had to find the home, determine its value and negotiate with the seller. They had to arrange their own financing, title and inspections.
The seller equally feels that they have earned the commission because they have incurred all of the marketing expenses and have invested hours upon hours to be available to show the property, hold open houses and answer inquiries. They have had to research value, financing, title work and make decisions.
There is certainly value in all of the things that buyers and sellers are willing to do to save the commission but only one person can save the commission only if the buyer and seller can reach a written agreement.
There is value to having a third party advocate helping each party to the transaction.
The Profile of Home Buyers and Sellers (Exhibit 8-1) reports that 14% of sales were For-Sale-by-Owners in 2004 compared to just 9% in 2013. The trend shows that agent-assisted sales rose to 88% in 2013 from 82% in 2004.
The three most difficult tasks identified by for-sale-by-owners is attracting potential buyers, getting the price right and understanding and performing the paperwork. When surveyed, sellers most value the home selling in an anticipated time frame and for an expected amount.
The reality is that both parties cannot save the commission. It is earned by providing specific services that are essential to the transaction. The capital asset of a home represents the largest investment that most people make. An investment that important certainly deserves the consideration of a professional trained and experienced to handle the complexities involved.
Who saves the commission? Who pays for the market? Have you ever wondered who pays for setting up and maintaining such a refined and orderly market that literally the entire world can dial into and get a fairly accurate value for a product? Imagine flying into Tampa Bay, Florida today and needing to buy a house somewhere in the greater metropolitan area. Where would you begin? Most people would contact a Realtor and find out all they could about the market and after two hours they could have a pretty good idea of what their purchase may look like and the cost. But where did the Realtor get the information? They got it from a vast network the multiple listing services connected in the area and throughout the world. This is a market that does not have a closing bell or an opening bell. It goes twenty four hours a day, 365 days a year and is adjusting every second. Compare that to the stock market which is able to sell a very homogeneous product where each stock is analyzed and valued by people using vey technical analysis and responding to slight whiff of positive or negative news.
ReplyDeleteThe real estate market is fed by Realtors inputting and adjusting information on a constant basis with no closing bell. A fair portion of a commission goes to supporting the real estate market. Agents pay monthly for membership in the local multiple listing services. They pay to obtain and maintain a key to give them access to the property, they pay to belong to the Nation Association of Realtors which monitors the conduct in the market and of course it pays them for the hours they spend analyzing property, preparing for its presentation in the best light and then uploading it to the site so the public can “find it on their own” and compare it to other homes thousands of other Realtors have priced and put on the market.
What percent of a commission should go to that? How much should we pay to have an orderly and well maintained market that will cause us not to overpay for or undersell our properties? The commission also pays ongoing advertising and presentation to the market, responding to offers, negotiating repairs, qualifying buyers and guiding buyers through the financing procedure, negotiating the move out and the move in. People sometime just need to know what they are paying for or imagining a world without what they are paying for and it is then easier to pay for the service.