Oh no…I’ve Got to Sell my House, Part 2

Ah…the reduced commission. One of my favorite topics. It never fails that when we get called to “interview” with a potential home seller, that within the first few minutes the potential client pulls out the “20 Questions You Must ask a Realtor” that they downloaded off the internet the night before. Question 2 or 3 is almost always, “Will you sell my house for a reduced commission…?” or “What level of service will we receive for a particular commission rate…?”

Don’t get me wrong…you absolutely should interview any potential real estate agent.

More importantly, you should interview your friends and co-workers. Get their recommendations. Interview the different real estate companies in the area. Interview the local real estate association for your city or town–find out who the top sellers were. In fact, we do a lot of that for you…before an agent can be part of our network, they are scrutinized by us. We developed our own checklist and interview that not only tells us the obvious public information, but gives us a pretty good idea as to their honesty, integrity, and motivations–we only want agents willing to put the clients’ interest above all else.

Now…back to the checklists and interviews and reduced commissions.

Here in our local town there are agents (and one in particular who is notorious for doing this) that offer to list homes for reduced commissions to say “Thank You for your Military Service”. Sounds good…doesn’t it? Heck, 5% instead of 6% on a $200K home is a $2,000 savings!

But here’s the problem with those agents and those arrangements (dirty little secret):

When they list your home in the MLS (cooperative listing service for all the agents in the area), it goes in as a 2.5% commission listing–the 5% you are paying is split between the listing agent and the selling agent. Now, when another agent who has a buyer in town is looking to purchase a home, the buyer will ask their agent to print a list of available homes in a certain price range, square footage, etc…

So when that agent compiles a list of possible homes to purchase, he or she may come up with 25 homes. If 22 of those homes offer 3%, and yours and two others offer 2.5%, where on that list of homes do you think your property is going to be listed? Yes…at the bottom.

How hard is that selling agent going to push to sell their client a home that earns them .5% LESS in commission? Not very. All other things being equal, homes listed at a reduced commission take longer to sell. If you have moved because you had orders and your house sits vacant for an extra month…there goes that 1% you were saving in an extra mortgage payment you shouldn’t have had to make.

What irritates the heck out of me is that these agents offer reduced commissions purportedly out of their “kindness” to say “Thank You” when more often than not, all they are trying to do is “collect” as many listings as they can so they can sit back and let other agents sell their properties. Remember that notorious agent in our area? Believe it or not, her moronic husband actually admitted exactly that to my face in some idiotic attempt to prove his business acumen.

Reduced commissions are great as long as you DEMAND that your agent list it at full commission, and that they take the full reduction themselves–that would be an honest “Thank You”.