Lately I have heard about a lot of people asking for 1% commissions. They think the market is "hot" and the listing agent isn't doing any work to move the house.
With all of the new laws since the 2006 bust, agents work harder than ever. What surprises me though is how sellers think the system works.
If you want to get the most for your property, the first thing to do is clean it up and stage it. If I do this as your agent, that costs money. Real money, and I don't get it back unless your house sells.
There are two basic methods for getting the highest price for your property. Right now the method I see is slap a high price on it and hope you find a sucker or the market catches up. When you see a home that has been on the market for 180 days, 360 days or even longer, you know what is going on as a buyer. Buyers agents skip those homes.
The second model is to use the auction format. Price it low or at $0, and then accept bids for a very short period. Many auction houses charge as much as 10% and tack on another 10% buyers fee! That is a 20% commission for an auction. Why are they so expensive? The marketing costs for running a proper auction are astronomical. Hiring bands and catering are not unheard of.
The idea is to build a frenzy among qualified buyers. You did only want offers from qualified buyers didn't you? Another service the agent has to perform.
My approach is simple. If you are willing to sell your house at a low enough price, I'll sell it for a low commission and either buy it myself or quickly find an investor to do it. The below market price means less work for me, quicker sale for you, so I can get buy with a lower commission. If you want at market pricing, and I need to spend money on four color flyers, and direct mail cards, and spend hours on the phone spreading the word about your house, I am going to ask for a market priced commission.
Finally if you are asking an above market price, then my commission will go up accordingly. This is where people get is wrong and end up advertising for their agent.
Real Estate is a simple game of numbers. If your house is priced on market, there will be many qualified buyers, so finding one or two isn't that hard. If you price above market, there may only be a few qualified buyers willing to pay your price in the world. Right now most buyers are still "deal shopping". The economy isn't strong enough for them to just go out and buy at any price.
Finding that magic buyer who has the ability and desire to pay above market pricing takes a lot of work on the agents part. That is why the auction houses charge the fees that they do, and prefer to only feature unique high end properties which are difficult to compare on a market basis. The price is simply opinion and willingness of the buyer.
When you meet with an agent about listing your property for sale, make sure you understand where you home is priced on the market and make sure the agent has the resources and skills to sell your house, not just use your front yard as a billboard.
What you pay for commission is your choice. Choose wisely.
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