Property Guys, ComFree, Naked Realty the list goes on about the many commission cutting companies claiming there is no need for a real estate agent. In this hot real estate market many people have used commission cutting companies but behind the scenes there is a a lot of money at stake when choosing to play real estate agent instead of choosing to pay a real estate agent. Why? I am saving 5% how is using you any better…… well that depends on what you actually sell your house for and the amount of work you have to put in. This past weekend I bought my client a home listed with Property Guys and this story is not particular to just me, but many people who list with commission cutters like Property Guys.
My client fell in love with the home and I couldn’t argue, it was quite nice. I registered an offer with the seller and presented this past Friday night. As most private sellers do, this one was apprehensive to pay a commission to me. What Property Guys doesn’t paste on their website is that when presented with an offer almost anybody will pay the 2.5% buyer commission in order to sell their house, you are bringing the buyer so it’s only fair. Seller still think they are “saving” the other 2.5% commission, but they still have to negotiate at this point:)
This is a huge aspect that people forget, they aren’t good negotiators. I truly relate it to playing a game of cards…… you know when that one buddy always has a good hand, but you also know you can bluff him and win. The other person doesn’t even have a hand when they are selling by themselves, they rarely know what has sold in the area, what the average sales prices in the area and what their home is actually worth. That is what commission cutters don’t do, they do not prepare you for someone who works full time at making a living buying and selling real estate.
After sitting at the sellers table for about an hour we finalized the deal. My client bought the home for 7.5% below the asking price, I got my 2.5% commission AND my SOLD sign goes in the lawn. This seller who thought they were cutting commission and saving money actually ended up losing a lot of money. To be fair let’s assume it was a deal where she listed her home with a realtor and paid the other 2.5% commission, that means she would have sold for 5% below asking price. The average selling price in her district? 98.5%, the assessed value of her home? $20,000 more than we paid for it. This home was actually underpriced to begin with and sold for 3% less than the neighbourhood average. Did she actually cut commission and cut out the realtor? or did she lose money that she will never get back?
I will not sit here and say all commission cutters and for sale by owner deals turn out very bad, but if they were all success stories, there probably would be a lot less realtors right now. My favourite clients actually initially listed their home with Property Guys in 2011 for $330,000, they were always going to buy with me, but wanted to try selling on their own. After 30 days I listed the home for the EXACT same price and in one week we had 9 offers and sold for $35,000 above the asking price…. and they didn’t pay 5% to sell. This is not a story that is particular to just me, but to many other people as well. There is no added value in not paying someone to work and consumers are once again realizing that.
One of the biggest issues of commission cutters and private sales is that you usually have two parties coming to the table with opposite mind sets. The seller who is trying to save 5% and the buyer who thinks that they can save 5% on the purchase price. Right away you have a lot of work to do to try and achieve a meeting of the minds. The value of Realtors has been greatly diminished because of a combination of a run up in home prices and the lack of effort put in to servicing their clients. In the end of the day, this is and always will be an industry where the value of a full service professional is always worth it. I openly discuss the pros and cons of listing your home privately so if you have any questions I would be happy to address them. Have a great week!