Smart home selling includes finding the best service and value but it gets tricky when you’re also trying to find the most affordable route. Some sellers want to avoid paying commission but the alternative options, offering to charge only a “fee,” provide very little value and can end up costing more. Paying a “fee” rather than “commission” sounds smart but it’s misleading. The companies offering an “alternative” to paying commission charge a “fee” and that’s where a closer look is needed.
The main thing to realize is that “fees” are paid upfront and “commission” is only charged when your home sells. Another thing to consider is what you get for your money.
In this article, I’ll point out the important points to understand and most importantly what the “fee” companies are trying to do.
Value – the worth of something in terms of the amount of other things for which it can be exchanged or in terms of some medium of exchange.
Full-price real estate brokerages
Full commission real estate brokerages/Realtors vary but they’re the most expensive route when selling your home. However, and unknown to most consumers, there are some full-service real estate companies and Realtors® offering affordable or low-commission home sales for the same services. There are some low-commission real estate companies that offer great value because they provide full service and you only pay when your home sells.
More affordable commission real estate companies
The majority of homeowners planning to sell their home want the most affordable route. However, some homeowners worry that a lower commission Realtor® will provide less or worse service. Full-price Realtors® tell homeowners, “you’ll get what you pay for when you hire a lower commission Realtor®.” They say this because their higher commission rate is being threatened. What they don’t tell you is, every Realtor® is obligated to provide professional services. Some Realtors® have more experience than others and some provided superior marketing but all Realtors® are held to a high standard. Realtors in Canada are bound by the REALTOR® Code.
Smart home selling includes asking the Realtor® who you’re interviewing to sell your home, how experienced they are, and what they do better. It’s safe to hire a Realtor® offering a lower commission rate. Why wouldn’t you if it’s a better price for the same service and experience?
Why would a Realtor® offer a lower commission rate to homeowners if they don’t have to?
Why do some Realtors® sell homes at a lower commission rate? Because it’s smart business for them. They might earn less commission on each transaction but if they offer a great service at a great rate their business grows. The only consideration to watch for when hiring a lower commission Realtor® is how many listings they have. One person can only do so much and if a listing Realtor® has too many listings, services can be neglected. One service that is most often neglected by a Realtor with too many listings is the marketing of your home. It’s like teaching a classroom with 50 students, full attention and focus are compromised.
The best Realtors®, and what makes them better, whether full price or lower commission, is their marketing. If you can find a Realtor offering a lower commission combined with an exceptional marketing system you’ve found exceptional value.
Do all Realtors® offer exceptional marketing? No, very few offer more than just the MLS listing. The MLS is the most powerful marketing medium to help sell your home but additional marketing is the cherry on top and will help your home sell higher and more quickly.
Misunderstand how the home buying process works is a serious mistake made by many sellers.
Imagine finding a full-service Realtor® with an exceptional marketing program who also offers affordable commission. They’re out there but you need to know what to look for. You also need to understand the difference between “low commission” and paying a “fee” to sell your home.
The difference between “commission” and “fee.”
Don’t get stuck falling for the “fee” approach to selling your home to avoid “commission” until you understand how it all works – what’s included in the “fee” and how the selling process works.
Misunderstanding how the home buying process works is a serious mistake made by sellers. It’s not only what you get for the money you pay but when you pay. And you have to understand fully where home buyers come from and how they search and purchase.
Why pay thousands of dollars upfront to sell your home if there’s no guarantee it will sell?
The most important thing to be aware of comparing the “fee value” to the “commission value” is that the “fee” is paid upfront. Thousands of dollars upfront for a service that might not be successful. Before your home is listed with the fee-type home-selling company you are required to pay the fee. The mistake starts with assuming your home will sell just because you’re paying some company for their service. What if your home doesn’t sell? Is the fee you paid returned? No, you don’t but with a commission-earning Realtor®, you only pay when your home sells. This makes it the safe route to selling your home.
If you don’t do your homework the fee might appear low enough to pay upfront but what if could only pay only when your home sells and only pay the same amount as the “fee,” wouldn’t that be the ideal route? Keep reading, you can!
A closer look at what the “fee” generally provides
What do the “alternative” to commission companies offer for their “fee?” They provide you with a spot on their website and a sign for your yard. The trickier part comes when they charge additional fees (upfront) to post your home to the MLS. This is where the fees become as high as the commission and where the race is lost.
If the real estate “alternative” company is able to post to MLS won’t that now equal the value a Realtor® brings? No, having your home listed on the MLS does increase the chance it will sell but a very important consideration is almost always overlooked at this point. Read the last sentence more than once!
The reason the “alternative” companies’ advertising is misleading is that they avoid the buyer-Realtor® commission conversation. Most sellers don’t understand the interconnectedness of real estate transactions (where do home buyers come from?) below.
A person paying the “alternative” companies listing fee is looking for assistance selling and they’re led to believe the service they are paying for is equivalent to Realtor® service. Unfortunately, it never is. Especially if they’re paying extra for an MLS posting. So, it’s super important to understand how the buyer transaction fits in when selling your home.
Where do home buyers come from?
The majority of home buyers choose the assistance of a Realtor® when making their purchase. When I say majority I’m not suggesting a 60% majority. Over 99% of home buyers are working with a Realtor® to make their purchase secure. Why wouldn’t they, it’s the best way to be sure you’re handling your real estate purchase correctly. Remember, it’s a complicated transaction selling your home and it’s something most people only do rarely. Also, because buyers don’t pay a Realtor® commission directly the service and assistance the Realtor® provides is extremely, extremely attractive.
Who pays the buyer Realtor® for their service and assistance?
A buyer Realtor® earns commission from the homeowner/seller for bringing a buyer to purchase and if a portion of the commission isn’t put forward or available as compensation to the buyer Realtor®, they probably will avoid it. And, if over 99% of home buyers are working with a Realtor®, the choice not to offer compensation to a buyer Realtor will substantially reduce the number of potential buyers. Smart home selling includes understanding how real estate transactions work. If you don’t fully understand how a real estate transaction works you might make mistakes.
This is why homes for sale “by owner” or with a “real estate “fee” company” not offering a commission (or offering a reduced commission to a buyer Realtor®) will be overlooked by practically every buyer.
Studies show a lower selling success rate without a Realtor® and sale prices average 13% lower.
When you call one of the alternative sites for more information they might recommend offering compensation to a buyer Realtor® but their advertising generally leaves that out.
What is the best home selling value?
With only a little research a homeowner will see that “alternative” companies offer very low value. Comparing the companies charging a fee to an affordable commission Realtor® you’ll find the price is similar. The advantages of selling with an affordable Realtor are, you only pay a commission when your home sells and the Realtor® adds security, and experience and takes a lot of stress off your shoulders.