What is it? How much should it be? Why pay it?
Let me get this right….I’m going to sell my home and give a real estate agent how much?!? That is a common reaction when someone engages a real estate associate to help with buying or selling a home. Here we will help you understand why that 5 or 6% commission will be the best money you ever spent. In fact, if you choose a qualified and reputable agent, you should make more money (even with the subtracted commission) than you would have doing it by yourself.
First of all; what is a commission exactly? The real estate commission is a fee the associate will charge for helping you sell or purchase a home. This is typically established as a percent of the price paid for the home. (In Florida it is often 6% split so that the buyer’s agent and the seller’s agent each get 3%)
What does that fee cover? Real estate agents seldom receive a salary. That means that everything they do to sell your home has to come out of their pocket, in advance, with no guarantee that money will actually be made. For instance, if you sell a $200,000 home and your agent earns the 3% commission of $6000, that sounds like a hefty chunk of change right? But let’s break this down. They are responsible for:
- Photographing the property (if hiring a profession you’re looking at anywhere from $150-$1,000 depending on size, type of equipment etc)
- PRO dues (Which enable realtor to BE a realtor and post in MLS) These fees are averaging about $1,000 per year in FL.
- Marketing your home. Marketing is EXPENSIVE! For example, if they want to send out postcards and limit it to one small neighborhood, your agent is likely already spending over $200. A newspaper ad or magazine ad can run hundreds to thousands. Don’t forget all of the internet ads that the realtor must pay monthly dues to in order to utilize. Those add up very quickly.
- Expenses such as gas and tolls.
- Association fees for Chamber of Commerce, local designation etc.
- Desk space at their broker’s office or rent at their own.
Those are just the very obvious ones, and after all of that is said and done, the agent must then split their commission with their broker. This split varies from agency to agency and is often dependent on the amount of business the agent does. The broker split can be anywhere from 10-50%! That $6,000 is starting to look like a bargain right?!
Perhaps you now believe that realtors aren’t over paid, but you might still be wondering, why hire one in the first place? With the internet, I could just do it myself. That is true, of course, but statistically, using the skill and experience of a real estate agent, will net you significantly more money with a lot less stress. According to the Realtor 2017 statistics: The typical FSBO (For Sale By Owner) home sold for $190,000 compared to $249,000 for agent-assisted home sales. Not only can an agent help you get more money, but they can intercept a lot of headache and paper work on your behalf. This article has a great list of things an agent can help with.
Ultimately it’s your decision; to hire or not to hire. Whatever you decide make sure you go in armed with knowledge. If you are hiring an agent, research their past transactions and history and remember, you can interview more than one! If you still want to fly solo, we get it. Just be careful and take your time to understand anything you sign thoroughly. If you find yourself in need of advice, you can always reach out to our team at Florida Homes By Susan and we would be happy to help in any way we can!