Real Estate Absurdities
The residential real estate business went through huge changes over the past sixty years. We had the advent of the Multiple Listing Services which enabled all brokers to show and sell other member broker listings - that was big. We also had lockboxes, fax machines (now replaced by electronic document handling and e-signatures), talking signs, and, of course, the INTERNET, the INTERNET, the INTERNET! One thing that has not changed, however, is the way ordinary real estate brokers charge for their services. Even though it is much less expensive to market real estate today than it was even 10 years ago, ordinary real estate broker sales commissions are calculated the same as in 1965: a percentage of the sales price of the property.
And that is absurdity number one: percentage based real estate commissions.
First let's understand that real estate sales commissions of any kind are negotiable. A quick glance through the MLS reveals that most are still charging 6%, some are at 5% and a few are even more, 7%. The percentage amount doesn't really matter, though. If it is a commission based on a percentage of the sales price of the property, it is absurd. Here's why:
Assume you have a big 4 bedroom 3 1/2 Bath two story in Camarillo. You need to sell and you call on Acme Realty (a fictional company I just made up) to list the house. The broker tells you it's worth about $600,000 and that he'll charge 6% to sell it: $36,000. (Go ahead, take a moment to catch your breath!) $36,000 is an alarmingly large amount to pay to sell your house; but it is not one of our absurdities. The absurdity is that your neighbor in a much smaller house, say, 3 bedroom 2 baths, 1600 square feet, is also for sale with Acme, also at 6% - just like you- but because of the smaller size, his price is less: $500,000. When his house sells (and we're assuming full price), he's going to pay $30,000 in commission. Now, WHAT DID YOU GET FOR THE ADDITIONAL $6,000 YOU PAID ACME? Think about it: did the broker advertise more? In more expensive media? Did he work harder? Did he worry more about your house?
Truth is, both houses got identical service. You just paid more because that's the way it's done. There is no logic to it at all; and that's what makes it absurd!
Ordinary real estate sales commissions are high but there is some logic in the high amount. Most real estate sales involve two brokers and two agents: listing broker and agent, selling broker and agent. One broker and agent represent the seller, the others represent the buyer. So your $36,000 commission in the above example was designed to be large enough to compensate both brokers and both agents: four commissions. Here's absurdity number two: What if there is no outside broker or agent in the transaction? What if the listing broker comes in with the buyer him or herself? With no outside broker to pay, you'd think the seller would pay less, right? Not so. In most cases, you pay the same $36,000 in commission no matter how the house sells. It makes no sense, which is why it is an absurdity.
Finally, let's get to absurdity number three. Assume you listed with Acme as outlined above. The next day you go to the office and learn about a new team member transferring in from out of state. When she arrives you tell her about your house and when she seems interested, you invite her over to see it. She get excited, and wants to buy it, so you call Acme to write up the sale and open escrow. No outside broker or agent was involved and, in fact, YOU found the buyer yourself! It does happen! And when it does, do you know what you will likely have to pay Acme? That's right: 6%, $36,000. It's absurd!
I believe, in business, things should make sense. Business should be logical. That's why we are part of Help-U-Sell, the most logical real estate selling system in existence today. We are a progressive full-service real estate agency and do everything ordinary brokers do (and more), without all of the absurdities around how we get paid. When you list with us, you agree to pay us a low set fee at closing that is thousands of dollars less than other brokers charge. If there is no outside broker and agent involved in the sale, you don't pay for one. If you find the buyer yourself, even better! We love saving home sellers money; it's how we build our business.
Help-U-Sell Conejo Valley is a progressive, full service real estate company saving buyers and sellers thousands in Westlake Village, Thousand Oaks, Oak Park, Camarillo, Oxnard, Simi Valley, Los Angeles and all of the Conejo Valley. You may reach us at (805) 379-3300, or by email to [email protected]. Visit our website: www.helpusellcv.com.