If you’re looking to sell your home and researching your options, you may be overwhelmed by the number of agents out there, all with varying business models. And the difference in their fees might be equally puzzling. Why are they so different? The old adage “You get what you pay for” rings true in real estate representation services. Therefore, if you’re paying less for your listing, chances are, you will receive fewer services in exchange for the reduced fee. Here we explain some of the common forms of home listing representation, and what you can expect for the rate you’re paying, and who can benefit most from this type of service.
Flat Fee brokerages charge a fixed rate, rather than a percentage, and often charge this fee up front. Some might offer a “menu” of services with a set fee for each. This minimum service approach can be beneficial for real estate investors and those who work in other areas of the industry that have a solid understanding of the market, contract documents, and sales strategies that want to do a great deal of the work on their own to save money. Much of the marketing tasks, data collection, and photography is left up to the seller, unless an extra is paid for these services. If the fee is paid up front, the broker has no real incentive to sell the property, aside from making you happy.
0% Listing Fee agents and brokers usually advertise “buy with me and we’ll sell your home for free!” This sounds amazing and can be very appealing for sellers that are also planning to buy a home in the local area. So, what’s the catch? High transaction fees are sometimes charged, but not always, and their may be restrictions based on where you’re moving and how much you’re planning to spend. Another big catch is that similar to the fixed-rate brokerages, sellers can expect to sacrifice much of the marketing with a 0% Listing agent. The reason for this is simple- marketing costs money. The agents involved with these deals make their money on the purchase side only, so they must take on a larger number of clients in order to make ends meet. In doing so, the agent won’t be as readily available when a need arises, and might not negotiate as strongly as they would if they were being paid for the sale, too. When you must sell in order to qualify for your purchase, they might recommend a lower list price to get the house sold as fast as possible to get to closing on the buy side.
Independent Listing Agents are real estate agents that do the majority of the work on their own, under the supervision of a broker. (All Texas real estate agents must work under a supervising broker.) The quality of these agents will vary based on the training they’ve received and the amount of personal and business experience they bring to the table. They might have just finished their minimum training to become and agent last month, or they might have 20 years of sales experience. Individual agents set their own fees, within the broker’s policy, so their rates will vary. However, the fees most often range from 4-7% of the price of the property, paid at closing. Since they don’t get paid until the property successfully sells, their motivation to get the job done will be significantly higher than a Flat Fee agent’s. As for marketing expenditures, the numbers will vary dramatically. A new agent or agent that doesn’t sell a great deal of homes might not have a large budget to spend on marketing your property, while a more established agent will. Home sellers and buyers can expect more personalized service and will communicate with their independent agent from start to finish. However, an independent agent that has a lot of business will be handling every aspect of each transaction on their own, so their availability may be reduced, and you may find them booked up when you’re in need. Some handle this better than others, and even further, some hire assistants to help them stay on track. Prospective home sellers and buyers should be sure to check reviews, speak to references, and ask how much time the agent will have for them when considering independent agents.
Full Service Teams set their fees, similar to independent agents and tend to charge between 5-7% of the price of the property, paid at closing. It’s not unusual for a team or independent agent to include a moderate transaction fee to cover staff salaries. Team listing agents are typically experienced agents, with staff to handle data entry, contract paperwork, etc., and buyer’s agents dedicated to home buyers. You’ll work with a few different people between the time the property is listed to the time you sign closing documents. By design, teams will sell more real estate than independent agents, so their experience will be broader, and they’ll have a larger budget for marketing your property. Many established teams spend as much as 30% of their annual income on marketing! They may even have a staff member that does nothing but marketing. Teams have structured processes with experienced professionals to oversee each step, so they usually provide the best service and have the most success selling their listings. Team services are ideal for first time home sellers, sellers that don’t want to be very hands-on, and really anyone that wants top-quality professional results. It’s not unusual for successful teams to generate higher sales prices for their listed homes than their competition, so the cost-benefit are often higher than the profits realized with low-cost services.
When choosing a listing agent, be sure to ask for documentation showing the success of previous listings, read reviews, and get recommendations from others. Know your expected time commitment and involvement and be honest with yourself when it comes to your market knowledge level. Interview 2-3 agents to find the best fit for you.
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