THE ONLY GAME IN TOWN

The place to advertise a property for sale and to look for a property to purchase, by a wide margin, is the local Multiple Listing Service (MLS) or any source which consolidates and presents MLS data (e.g., Zillow.com or Realtor.com).  Consequently, it is advantageous, bordering on necessary, for sellers to advertise their houses for sale on a local MLS and buyers to  search MLS-listed houses for sale.

This piece is not intended to be an indictment or endorsement of this situation.  Rather, it is a brief description of the current options being offered by real estate firms engaged in representing sellers in search of finding a competitive advantage under this framework.

Note – Each state sets it’s own rules governing the real estate business.  Also, individual listing associations (MLS’s) set their own operating rules.  So rather than start every sentence with “Generally,” please know that individual state and local rules may not allow or may preclude the need for what is discussed here.  Generally speaking.

IMPLICATIONS FOR HOUSE SELLERS

Multiple Listing Services are cooperative associations of licensed real estate professionals, based upon voluntary membership.  A person can hold a state-issued real estate license and not be a member of an MLS.  Fundamental to the MLS is the open sharing of information and agreement of all members to participate in an equitable arrangement of commission sharing or splitting.

The agent commission commitment is made in the listing agreement.  The listing agreement is a standard “fill-in-the-blanks” form provided by the local MLS association which provides information describing the subject property, along with some administrative details, e.g., commission split.

By agreeing to pay the buyer agent commission, the seller is assured of not alienating any potential buyers and thus reducing the likelihood of a sale.

The point of explaining this is to show why the commission reduction schemes employed by listing agents are effectively all geared only toward reducing the seller agent-side commission.  To reduce the buyer agent commission in the listing contract could place the seller at a disadvantage in the market place, which could be argued to be contrary to the seller agent’s fiduciary responsibility to his/her client.

 

MLS LLISTING OPTIONS

Within that framework, real estate professionals have devised several operating paradigms to compete for seller representation, while achieving profit goals.  Below is a comparison of a representative group of such options.  Three measures of impact will be grossly addressed; Services, Cost Savings and Impact on Sale.

The following is used for comparison.

  • $300,000 sale price
  • 3% “standard” seller agent commission
  • Flat Fee for Listing-Only Service $500

Traditional Even Split

This is currently the most common approach.  It is easiest for the seller’s agent to simply apply an even (or nearly even) split at the current market rate.  Generally, seller’s have heard these numbers in their conversations with friends and neighbors.

In this example, the seller agent commission would be $9000.

Services – Full agency representation.

Cost Savings – None.

Impact on Salability – None.

 

Reduced Commission – Full Representation

A simple adjustment to the even split is to reduce the seller agent commission rate for full representation as a means of being competitive.

For example, a seller agent commission of 1.5%, which is half of the more standard 3%

Services – Full agency representation.

Cost Savings – $4,500

Impact on Salability – None.

 

Reduced Commission Contingent Upon Future Business

A spin on the reduced seller commission reduction is to offer the reduced commission rate on the contingency that the seller uses the firm, or one of it’s affiliates, in the purchase of their next house.  Once again, the seller gets full representation.

An example is for the listing firm to offer a 1.5 % commission.

Services – Full agency representation.

Cost Savings – $4,500

As the reduced commission offer is contingent upon using a company affiliate on the purchase of the next house, the seller should consider whether their plans comply with the listing contract reduced fee contingency.

Impact on Sale – None.

 

Low Flat Fee – Reduced Representation

In most markets, it is possible to find a real estate firm which will list a property on the local MLS, but provide no representation, for flat fee.  In addition to listing on the MLS, this option may include providing a yard sign and the state-required seller forms (e.g., disclosures).  Sellers can option for additional services and representation on an ala carte basis.

This approach places more responsibility on the buyer agent to “take up the slack,” due to lack of a seller’s agent.

Sellers are encouraged to become familiar with all the requirements placed upon them to navigate a successful transaction before committing to this option.

Also note that the local MLS may not allow this type of listing-only service.

Services – Although the maximum cost savings is substantial, it comes with very limited service, e.g., list on MLS and provide yard sign.

Other services are available, generally on an ala carte basis, for additional charges.

Cost Savings – $8,500 – Assuming no additional fees for ala carte services (e.g., offer review and consultation).

Impact on Sale – Minimal.

 

Hybrid – Flat Fee with Reduced Commission

There is a hybrid fee model which combines a commission rate and a flat fee.   Under this method, a flat fee is charged up to a specified sale value, switching to a commission rate applied to the amount from that switch-point up to the sale price.

For example

The real estate firm charges a base $5,000 for sales up to $250,000.  For the amount that the sale exceeds $250,000, there is an additional 1.5% charge.

Under these conditions, sellers of houses priced below about $165,000 will pay more commission, compared with the standard 3% value.

Sellers of houses between $165,000 and $250,000 will realize a reduction in commission fee, improving as the sale price increases.

Sellers of higher priced houses may realize a significant commission fee reduction, depending upon the sale price of the house.

Services – Full agency representation.

Cost Savings:

For a $300,000 sale this generates a seller agent commission of $5750, which is a savings of $3,250 relative to the “standard” 3% seller agent commission charge of $9,000.

For a $400,000 sale this generates a seller agent commission of $7250, which is a savings of $5,750 relative to the “standard” 3% seller agent commission charge of $12,000.

Impact on Sale – None.

 

NON-MLS SELLER OPTIONS

There are options available to homes sellers which do not involve contracting with a real estate agent for listing on the local MLS.  These non-MLS options are discussed at:

  • The Quick Cash Sale
  • For Sale By Owner

 

DETERMINE YOUR BEST OPTION   

In making any significant decision, the place to begin is by conducting a comprehensive analysis of your situation and desired outcomes.

HOUSE SALE OPTIONS MODEL

The Park REI House Sale Options Model integrates qualitative and quantitative information which define an owner’s situation, through an analysis of both the economic consequences and other implications of several house sale options.  Model results provide a comparison of the economic consequences in the context of other nonquantifiable factors providing a perspective on each option.

If you are trying to figure out what is the best way to sell your house, the place to start is with the House Sale Options Model.

The Model results are only a portion of what we provide.  With the Model, Park REI provides access to experienced staff with whom you can discuss results.

Run the House Sale Options Model today and get on your right track for selling your house.

Take Action Today

Use the Home Sale Options Analysis to develop your best plan for selling your home. Engage the professional support necessary to efficiently complete the sale.

Example Home Sale Options Report:

Get your FREE Home Sale Options Analysis Report

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  • House Information

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Get your FREE Home Sale Options Analysis Report

  • Contact info
  • House Information

Or Call 800-749-8229
for more info