The following is an interpretation of the comments the author heard on material discussed on the Barry and Larry Radio show on Sept 9, 2018 and commentary from the author.
Host: Commission costs built into a property transaction were established many years ago with a 7% typical rate found in the United States in MSL’s across the county. Later the norm became 6%
Author comment: The 6% built into the listing side of a transaction is typically a split of 3% to the buyer’s agent and 3% to the seller’s agent. It is always negotiable, but 6% is the average commission fee throughout the United States even today.
Host: In the last 10 to 15 years as the internet grew, and as buyers and sellers were able to optimize the efficiency of the internet, real-estate agents appear to not be performing as much work yet they’re being paid exactly as they were before. In the last 3 to 4 years, home prices in the front range have gone up far faster than the rate of inflation, yet agents haven’t cut their commissions. This allows them to make more money on each sale because of the higher prices of homes.
Author comment: Prior to the internet, the agents have had to do all the work manually. But now, buyers often look up to the internet and search for a home on their own to see and evaluate properties. The agent’s work has transformed, but their fees have remained the same. In recent years, some companies have challenged the traditional real estate commissions by offering discounts and new payment structures.
Listen to the whole 8am radio show from September 8, 2018 here:
Host: Though we are aiming for lower commission rates, consumers should be wary of the so-called “discount services”, which offer inexpensive service but some companies offering a lower quality of service.
The workload done by the agent throughout the transaction should determine the fee and commission rate. It should be fair, justified and reasonable.
Ways to effectively market a house
- Developing a marketing plan carefully is vital to advertising the house. When interviewing real estate agents, ask for a marketing plan in writing. Hire an experienced agent who has the best marketing plan, does the research and knows the data and local market well.
- Get the home inspected. – Repair the things needed to be fixed. It’ll attract buyers, and they’ll feel at ease knowing that the house got inspected ahead of time.
How to find the best agent who will be loyal to the client
Host: Work with a true fiduciary only. Find an agent that will protect, negotiate and represent the consumer’s interest with full accountability and confidence.
Kathleen Chiras, a guest on the Barry and Larry Consumers real estate show, spoke to a consumer that had specific desired property details in mind for his purchase. When Kathleen gave details about the property to the broker, he immediately said he had a listing of the house he could offer to the consumer that matched the buyer’s preferences. Kathleen decided not to refer the broker to the consumer as there would be an immediate conflict of interest. Kathleen’s priority is to refer agents that will look after consumer’s interest and not in theirs.
Author comment: The problem here is that the listing agent could make a full commission on both the buyer and seller side of the transaction. Therefore, that particular home may not be objectively shown by the agent compared with properties not listed within his firm.
Host: A full trustee will listen to the buyer’s and seller’s needs and their timeline. He won’t push consumers out of their price point.
Sample questions when interviewing agents suggested by Kathleen
- How do you get paid?
- Do you personally have listings similar to the property I’m interested in?
- Does your company have listings similar to the property I’m interested in?
With these sample questions, it’ll help the consumer sense whose agent will be loyal. When interviewing agent, intuitions should be trusted.