If you live in the Denver metro, you've probably heard radio ads declaring that it's possible to list your home for a flat fee of $2,500 - but all those ads have a catch: the listing agent is still forcing you to pay a 3% commission to the buyer's agent. There are countless representation options when it comes to selling your home - make sure you're reading the fine print regarding agent commissions when hiring a discount real estate broker.
Many agents are realizing flat-fee real estate makes sense in today's landscape. The arrival of alternate means of real estate representation is a positive sign and proves our industry is ripe for change. Colorado is undoubtedly leading the flat-fee real estate revolution, which is why it is more important than ever to discuss the complexities of commissions and how they affect your equity.
When it comes to commissions, ask yourself the following questions:
Will your flat fee listing agent charge you $2,500 on both sides of the transaction if they bring the buyer?
The majority of flat fee agents charge a "traditional"commission (usually around 3% of your home's contract price) if they bring a buyer to your property. Be clear on how much your listing agent will charge you if they find a buyer for your property.
Why can an agent justify charging $2,500 on one side of the transaction, but not the other?
Flat fee agents feel they can offer their services at a discounted rate on the listing side since they'll make up for "lost" earnings by charging and outdated, full commission to represent the buyer in a transaction. This mindset seems to contradict the consumer savings revolution that so many alternative companies are hoping to lead.
Will your listing agent allow you to pay less than a 2.8% or 3% commission to the buyer's agent?
You should know that choosing the flat-fee route may defy the conventions that are upheld in this antiquated industry. For this reason, other flat fee agents hold their sellers to offering a 3% commission to the buyer's agent. These agents are afraid to diverge from the "going market rate" - an arbitrary number that his been determined by nothing more than realtor tradition - because they do not want to rock the boat.
How can someone promote a new way of selling real estate on one side of the transaction, but hesitate to offer less than a "typical" commission to a cooperating agent? Many sellers are afraid that agents will not show their listing if they offer less than the standard commission.
It's true that some agents put their desires ahead of their clients' needs and steer them away from a property associated with a flat fee commission. There are undoubtedly agents out there who will move for their own benefit ahead of their buyers', but we find that they are the exception to the norm in our industry. Agents have a fiduciary duty to show their clients any home they request to see and there is no legal market rate that an agent must be paid. Professional, experienced agents know that everything on the real estate contract is negotiable - including commissions.
Learn how traditional and flat-fee options compare:
Our infographic below highlights total commissions paid when using TRELORA vs. other flat fee real estate companies and traditional real estate agents:
Unlike competing flat fee real estate companies, TRELORA encourages our clients to offer a fixed amount of $2,500 to the buyer's agent.
TRELORA charges a flat fee of $2,500 to list your property. However, unlike competing flat-fee real estate companies, we encourage our clients to offer a service fee of $2,500 to the buyer's agent. We believe that sellers deserve to be in full control of the commissions paid out in a transaction and do not want to hold them accountable to pay another agent's exorbitant commission.
As demonstrated in the infographic above, total commissions paid on a $300,000 home are only $5,000 with TRELORA. Our closest competitors obligate their sellers to pay the buyer's agent a 3% commission, bringing the total commissions paid on a $300,000 home up to $11,500. It's certainly easy to save money on the listing fee, but why not fight for your equity on both sides of the transaction?
Don't let other agents convince you it's not possible to offer the buyer's agent a flat fee commission.
In 2015, buyer agents in 56% of TRELORA's selling transactions accepted the flat fee offered by the seller. 23% of cooperating agents accepted a commission amount that fell between the TRELORA recommended flat fee and 2.8%. Only 21% of TRELORA transactions closed with the buyer agent receiving a 2.8% commission.
While this trend is internal and not indicative of the entire market, it demonstrates that cooperating agents are willing to negotiate. This data also shows it's has been possible for TRELORA to close over half of our transactions in 2015 with a flat fee paid out to the buyer agent.
It's time you take control of your equity and tell your agent you don't want to spend up to 6% of your home's equity in order to get it sold. Make sure you discuss commission amounts in full detail with your agent before signing a listing agreement. Commissions can be confusing as it is, so it's important to be on the same page as your agent when it comes to commissions on both sides of the transaction.