How Much Should I Pay My Realtor?
What's it Cost to Sell a Home?
According to Homes.com, 6% is the most common listing fee for a licensed realtor to sell your home. In Alabama, for example, most brokerages advertise listing rates between 5% and 8%, with the average commission price being close to 6%. Finding rates below 5% is very uncommon, and rarely do you see as low as 4% advertised. In fact, we can't name another local brokerage besides us who guarantees 4% listings.
Unfortunately, many big-brand name brokerages won't even allow their agents to list for less than 5%, at least not without special permission. This leaves clients giving up huge portions of their home's equity to realtor fees and other costs. According to Rocket Homes, the average seller gives up 10% of their total sale price to various commissions and concessions.
What's the Right Price?
How much you pay can reflect how much you get. That's why when you're asking the question 'how much should I pay my realtor?', there are a few things to consider besides just price.
Do You Get the Same Service at a Lower Cost?
Not every realtor and real estate brokerage offers the same services, and are not necessarily indicative of how much value that agent presents. From how actively they market your property to their level of expertise and involvement in negotiations, the quality and type of services realtors offer can range significantly. It's important to understand what you need and then vet whether the brokerage you're considering can fill those needs.
Discount Brokerages
There is such a thing as a 'discount brokerage'. This term refers to a brokerage that has cheap fees because they have cheap service. Whether they have a low percentage or a low flat-rate amount, a discount brokerage offers their services for less because they are providing less service.
Discount brokerages often won't hold open houses, or they won't do a complete analysis of your home's value; or sometimes they won't even handle negotiations or advise you. A 'cheap' brokerage may sacrifice any number of services to be able to afford charging you less.
New Realtors
Realtor's fees are usually not set by the realtor themselves. The brokerage they work for typically gives them a range of acceptable rates from which they can negotiate from. This means that new realtors with almost no experience are charging the same as the most experienced realtors working at their brokerage. What you're really paying for, then, is the brokerage's name more than the expertise of the individual realtor, yet that's the person who will be advising you and negotiating your contracts.
New realtor's serve as an example of how paying more doesn't always get you more. You're going to pay the same 6% for a new realtor at a brokerage where that is their minimum listing fee as you would if you use their most experienced agent.
The Expensive Big Brands
Back in the day, big brand brokerages mattered much more. The personal network of the brokerage and the agents within could make all the difference in how quickly your home could sell. Sellers needed well-marketed brokerages to help promote their home. Now, it's different.
With the advances in technology, like with platforms such as Zillow, even a small brokerage can match the big brands in their marketing capabilities. In some cases, this leaves sellers paying more for a brand that doesn't necessarily provide the value that used to justify those higher listing fees.
How Do I Find the Best Value at a Great Cost?
Understand your needs, first. Do you need someone to negotiate with potential buyers or are you capable of it? Do you need someone to market your home or is it in such a high-demand and visible area that a simple sign in the yard is sufficient? Taking a moment to consider what you're really looking for from a realtor is a great start. Here are a few things you should consider looking for in a realtor:
- Has proper licensing and insurance
- Lists the property in the MLS
- Lists the property on Zillow, Trulia, Realtor.com, and related sites
- Provides professional comps and a written report on how they value your home
- Handles all contracts and negotiations
- Is available for open houses
- Provides an upfront and clear explanation of their fees
A realtor who meets these criteria can be a great fit. From there, look for one who offers a fair listing percentage. With Southern Bay Realty, we believe 4% is a fair listing fee. At 4%, we provide all of these services as a full-service brokerage.
Is There a Catch With Lower Fees?
With some brokerages, there definitely can be a catch with lower fees. Lower fees often represent fewer services to be provided, but this is not always the case.
Back in the day, real estate was more complicated. Listing a home required a lot more time and effort to upload your listing to each and every website, to prepare paperwork on actual paper, and overall to try and promote it without digital marketing and social media. But it isn't like that anymore. These problems and others have been solved over the years with new technology. Technology has made listing a home much simpler, and digital marketing and platforms like Zillow have made advertising a breeze.
At 6% back in the 90's a realtor was charging a fair fee. It was a reasonable price on how much you should pay your realtor. That realtor had to really work to advertise your home. They needed a personal network, to push fliers and other in-person, real-world advertising. Now it's all digital and streamlined through automation. Listing a home and advertising it to the whole world takes little to no time and only a few clicks.
Yet, as the process has become simpler and the technology more and more affordable, most real estate brokerages have not changed their fees. They're still charging what they used to instead of passing their savings on to their clients.
With Southern Bay, we've recognized that it's just not as expensive and time consuming as it used to be, which is why we've decided to pass that savings on to our clients. At 4%, we still make a fair wage without overcharging our clients. It's important to us that we help you keep more of your home's equity instead of giving it all away in realtor fees.
So, is there a catch with lower fees? Not with us there isn't.
So, How Much Should I Pay My Realtor?
Make sure any realtor you're considering using provides all of the services you require, like MLS listing, contract negotiations, and the input of years of experience. Then, ask for a fair rate. In our opinion, 4% is a fair listing price from an experienced, qualified realtor at a full-service brokerage. Any more than 4% and you're probably just paying for that big brand name representation that you don't even need.
Ready for Great Service at 4%?
If you're ready to list your home, take advantage of our full-service brokerage at the great rate of 4%. Call today to schedule your free consult.
