How to find the right real estate agent to sell your house Continued ... 3. Myth: You get what you pay for Most people think commission rates are high but accept them anyway. There are full-service discount realtors who charge less and offer the same service. Why hasn’t this caught on faster? Some homeowners are convinced by the industry that “you get what you pay for.” That’s what traditional agents always say. But it’s clearly not true. Are agents working twice as hard today as they were 10 or 15 years ago? Obviously not, yet commissions have doubled in that time along with home prices. Rates very by province but assuming a 5-per-cent commission, the cost of selling an average-priced house in Toronto is $25,000 today compared, with half that a decade or so ago. If you got what you paid for, they’d be working two times harder right? In fact, technology – Internet, smartphones, iPads – has made their jobs a lot easier. Commissions are too high in many cases. But what’s the right number? Is it 1 per cent? Or 3 per cent? Takeaway tip: You should always negotiate the commission. Before you even let an agent in your door, ask them what they charge. You can also structure the commission as an incentive. For example: 2 per cent of they sell your house for the asking price, double or even triple it if they exceed asking price by 10 per cent. 4. How the realty industry operates Before answering the 1 per cent or 3 per cent question above, you have to understand how the industry works. Agents who work for big-name firms have to charge a lot because they’re charged big fees, as much as $2,000 a month. It’s not that agents are greedy; it’s that big firms are charging them through the nose. Takeaway tip: Avoid agents with big overheads; they’re more likely to be desperate to generate a quick commission to pay their bills, even if it’s at your expense. You also don’t want your agent making too little. If he charges too little and needs 20 listings at a time to make a decent living, you won’t get good service. Most people are good enough at math to understand that an agent charging 1 per cent will save you money compared with an agent charging twice as much, assuming they both sell your house for the same amount. But will the cheaper agent return every call? Will he see to every showing? Probably not. He or she is more likely to miss that prospective buyer who loves your home and wants it badly. An agent charging 2 per cent who works only a little harder can get you a lot more money. If he sells your $500,000 home for only 5 per cent more, he’ll put an extra $19,500 in your pocket after commission. (Interestingly, there’s a realty company in British Columbia that charges homeowners a 1-per-cent commission but the minimum dollar amount is $6,900, so clearly 1 per cent isn’t enough.) In other words, the cheapest agent is not necessarily the best, neither is the most expensive one. When you get quotes for a kitchen renovation, you usually don’t choose the highest, or the lowest. Picking an agent is no different. Price is important, but there are other factors involved. Final takeaway tip: Do your homework and shop around. It may be old-school advice, but it’s so worth it.
Posted on: Wed, 04 Dec 2013 09:30:03 +0000
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