A recent blog post on buzzbuzzhome.com has us look at the transaction of a home purchase from an economic standpoint. How does your home sale/purchase impact our economy?
It would seem that the national average "service and taxes" fee of $22,775 sits well with the traditional high fee real estate agents.
Imagine another reality...the $10.2 Billion spent on these services was reduced to a fraction and the average home owner had more equity, more accessible cash and less debt. What would our economy look like then?
They are not one size fits all, or so my wife tells me!
Garth Turner had a great post on his Greater Fool blog exposing the Buyer Representation Agreement and the dangers of signing one.
There were a lot of really good points brought up in this blog. The one area that he didn't get into is that not all agreements are equal. A BRA is as varied as a seller's agreement and depending on the local real estate board or even individual realtors, they can differ.
For the first time I am going to ask for homework. Think about what you would look for in your BRA. If you could write a BRA that would fit you like a...well bra, what would it look like?
Let's first understand what the traditional "high fee agent" (5%) break down looks like. Typically a 5% commission is split 50/50. Meaning 2.5% goes to the buyer's brokerage and 2.5% goes to the listing brokerage. This means in a $300,000 home there is $15,000 in commissions paid. Man, that's a lot of skin!
In a typical discount brokerage 3% Program the listing brokerage typically discounts their fees down to 0.5% and offer 2.5% to the buyer's brokerage or on occaision they do 1% and offer 2% to the buyer's brokerage. In one way the listing agents are not getting "their share" and may skimp on the service. The other, buyer's agents will prefer to show other listings where they get 2.5%. Same house as above and your still spending $9,000. Still more then a skinned knee!
A typical 1% Program the agent is not offering any commissions to buyer's brokerages and are expecting to work on behalf of both buyers and sellers. The real danger is that for buyer's to get the info they have to call your agent. Your agent now has a buyer looking to buy a home. Your home pays them 1%. Every other home listed with agents (High Fee or Discounts presented above) get your agent more money. Why would they push your home when they can sell the one up the street and make more money! It may only be $3,000 if it sells but unfortunately for you they sold one of the two above and made $7,500 so you sit with their boring old square sign on your lawn selling other peoples' houses!
Ever think someone was telling you one thing and then doing another?
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