REAL ESTATE COMMISSION BEWARE!

Ok I'm going to make a disclaimer. Usually I write this when I give my opinions and yes they will be biased toward The real estate industry. So yes this will be biased toward my profession and what I do for a living!

When people are anticipating selling or buying a house, there are many factors which people look at. One major factor is how much you can sell your house for, and how much do we have to pay in fees. For all intense purposes I'm going to speak about the selling side of the transaction.

Some people use an agent and some people decide not to. Some people try to do something in the middle, they try to hire a discount brokerage or agent. Some people try to go to a full service real estate agent and try to negotiate the commission. I believe in negotiating everything when it comes to sales, hey all power to negotiating. That is part of my job. At the very least ask. That is my motto. It doesn't hurt.

Usually in Toronto the commission rate is 5%. Some commercial deals are higher depending on the type of deal. I understand that residential commission rate used higher as well. Let's not go there that is in the past, I would like to stay in the present.

Your agent tells you that you must pay 5% of your sale toward real estate fees. 2.5% typically going to both sides. This is where your real estate agent discusses what is involved in that rate or where you freak out and say heck no you won't pay that and storm out the door. So let's say you listen to your real estate agent and he or she tells you where the money goes.

Now not everybody deserves that kind of pay rate. Some people get it and don't deserve it and some people get it and deserve more. Time is money in this world. On the selling side of the transaction a good real estate agent should be advertising your house, doing open houses, advertising on social media, flyering the neighborhood, open houses on the weekend, video tours, advertising on youtube, sending emails to agents and network, they also should make sure that they have over 20 high definition pictures and should be busy with your house. There are other intangibles that agents should be doing that are not mentioned really when you talk to them. These things are being reliable, telling the truth, answering the phone, being presentable, being on time, being available and I can go on. I know to some of you these things are logical and common place. In reality they are not and some of these qualities are worth every penny you pay your real estate agent. They can mean the difference between closing a deal tonight and losing a deal tomorrow.

Some of things mentioned above cost money directly out of the agents pocket. Some of them can mean thousands of dollars. Other costs they don't even see. Costs such as real estate board fees, Orea and Crea fees, Insurance, car, telephone, office, overhead. Yes I know these are costs that go with the trade but I feel that I should mention these costs are paid from the commission Agents receive.

So what do discount brokerages do? Well they usually offer to only post your house on MLS and not do anything else. Some agents do not even take a picture.  Sometimes you can sell your house that way, but not too many agents will look at the house on MLS because they will not get paid in return. Yes the buyer could agree to pay the 2.5% to the buyer agent and that is a possibility but hey let's get real and that is not going to happen. Some agents offer a flat fee and yes they do some work. They might take a picture or two and advertise on their website and MLS. Some will even do an open house or two just to make the customer happy. After the house doesn't sell they are nowhere to be seen. Some agents will offer a discount if they find the buyer for you. That sounds like a great compromise. What if they don't find the buyer? How long will your house be on the market? How many offers are you not seeing because it is an exclusive listing or that the agent is only advertising on their company website? How many offer are not being entertained? It becomes a conflict of interest too. How motivated will you be if you are the agent and you know if you get both sides of the deal you make an extra percent? Yes it is a discount for you, but for the agent it's an extra percent.

Well what am I trying to tell you after giving you a bunch of scenario's. It's not a bad thing to try and negotiate, but you want an agent that will get your house out there, work at getting your house sold, give you great advice andhopefully find you a new one in the process. Another thing you have to understand is time is money. The agent also has to spend time to do all these things in the proper way. How much is your agents time worth? Short cuts and cutting corners is the reason why there are so many real estate law suits in the courts right now. This is another big concern if things in your house are misrepresented. The small claims court maximum just got raised this year to $25000. You want to make sure an agent is asking you the right questions and doing his or her due diligence. I know agents have insurance but if they do not ask you the right questions and you do not disclose certain things then you could be liable and not be covered under the real estate agents insurance. Also the experience of an agent to tell you truth and knowledge of what your price is worth is valuable as well. Over pricing a house can cost thousands in the end if a house sits on the market for too long. An agent who is just taking listings will just agree to list a house to have a listing. It looks better for an agent to have listings even if they are not moving. It makes them look busy, even if they are not moving. Customers may look at the agent and say, "hey they have so many listings lets go with them". Some people choose their agent this way as instead of actually speaking to the agent and asking what they will being doing with their listing. Some people just take it for granted that the agent will be doing open houses, advertising and their due diligence.

There are also a bunch of people who just want to sell the house on their own. They are the people who I call a lawsuit waiting to happen. I'm not saying why I'm call them that but let me just say when you sell your own property you might forget to mention the leak in the roof that you hid to sell your house that the judge will determine that you knew about and the $30,000 you have to pay in damages. OK fine I told you why I call them that. I don't have to like everybody do I. Mechanics don't like people who change their own oil.

Usually there should be a conclusion so here is my crack at it. Do you go to GMC and ask them to give you a deal and when they can't go any lower do you ask them for the parts to the car and make the car yourself?  Usually you get what you pay for in this world. When it comes to real estate agents especially when it comes to discount brokerages you get what you paid for, a discount. Whether that is on the sale of your house or on their commission, the difference has to come from somewhere.

This blog was written by Ernie Arrizza.com

 

Ernie Arrizza

Ernie Arrizza

Sales Representative
CENTURY 21 Kelleher Real Estate Inc., Brokerage*
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