Real Estate Sales Commission
Should a broker earn money?
A question arose earlier this week from a man who was interested in selling his property. This question, why should I pay a real estate sales commission, is one that has been asked of us several times, though for the most part, people do logically see and accept that some one who sets up a sale for a seller should earn from that work.
So what does a professional do to earn that money?
First off it has to be understood that that only a fraction of properties that are put up for sale actually get sold, and on the other side of the coin, very few of the people that “kick the tires” actually follow through with a purchase. A real estate professional might list several dozen properties and entertain another dozen potential purchasers before there is a match between buyer and seller that actually follows through to a consumated transaction. The problem is that beyond experience and knowledge of the local real estate market which will create better odds, it is difficult to determine ahead of time which properties will sell and which buyers will end up purchasing. In reality this typically means that 90% of the time a real estate pro will be doing work, that though necessary, will not generate any revenue. During that whole time as well as before a professional even opens the doors to their business, there will be costs incurred. Just to start, they have to apply themselves in the proper schooling and learning the intricacies of the industry as well as going through the lengthy and expensive permits and accreditation process to carry on their business. From there, costs mount and become regular expenditures for things like rent, staff , office supplies and of course the big one, marketing. In today’s hi tech internet world that means the necessity of a website and social media sites which achieve search engine rankings. To do that properly and to achieve the desire end result of viable leads, it is a constant time consuming and costly process, which involves daily additions of relevant content migrated to many different platforms and media.
That should do a little to dispel some people’s notion that what you pay in commission to a real estate professional for a successful sale, goes straight into their pockets as net earnings. Just like in any business, there are costs to carry on that business as well as considerable time and energy. At the end of the day, who in their right mind would spend their own money, time , energy and yes, aggravation if they are not going to make some money at it?
The next part of the question to be answered is what should you expect your real estate professional to do to earn their commission? Since the only real end goal is to sell the property their main function of course is to bring a buyer to the table. In simplistic terms, if they bring to you some one who pays you for the purchase of your house, they have earned their commission. In more complex terms, the professional who does more will achieve better success in achieving that desired end result. That “more” includes initial discussion with the seller to do many things such as go over documents and ensure they are in order, familiarize themselves with the property in depth so that they can answer queries in a knowledgeable fashion, and work with you to develop a marketing strategy that will showcase your property in a light that is attractive to the target audience looking for properties like you are selling. The next step would be the implementation of that marketing strategy to ensure a wide net is thrown out in a way that the property is noticed by the type of people who are in the market for it. Once a viable lead is acquired, then it needs to be followed up on and cultivated. By that time a good real estate professional will have determined that the property does match the client and their main function then will be to broker common ground between buyer and seller to reach a tentative agreement. But the job should not be considered complete then. In the majority of cases, a buyer seller or both have limited knowledge of the finalization of a real estate transaction and it is the pros job to be there to guide all parties through in a way that they understand and are comfortable with.
To be clear not all real estate professionals are the same. Some will do more some will do less. The ones who are the most successful will naturally do more rather than less, and the end result is they too will earn more money.
The final question becomes, should you let a professional help you sell your property or should you do it yourself. I guess it depends largely on whether you choose to get a good one or not so good one. If it is a not so good one, then odds are that you will have just as much chance of selling your property yourself and you might as well because it will save you paying a commission. In all likelihood, a not so good broker will only be a “soldier of opportunity”. He might list it on a website somewhere and if he gets lucky, he earns big for very little work. For the most part beyond a simple referral, you will be left to fend for yourself. Now if you decide that it is best for you to try and sell it privately, the plus is that you can either put more money in your own pocket or else lower the price in reflection of saving a commission and possibly make your property more attractive to potential buyers. The negative is quite simply that in comparison to a good real estate professional your market reach will be considerably smaller. Very few people who take that approach as a one shot deal, have the marketing expertise and channels in place to throw out that “wide net”, nor do they have the experience in the ins and outs of settling the final transaction process. Personally I liken it to making the decision to hire some one for any other job. Are you going to try and save a few bucks and fix your own vehicle? Yes you might have some basic mechanical skills and could possible muddle your way through some things, but on the other hand is the time and energy you are going to put into it when you could actually be earning more money doing what you are yourself are actually trained in, really worth it?
Definitely a personal decision that only you the seller can make.