You’ve heard the expression: “It’s not what you make. It’s what you keep that matters.” This is especially true in real estate. It’s not just the sales price that a Seller should care about, but also what gets deducted from the sales price. These are known as closing costs, By far, the single biggest deduction is the agent’s commission.
According to the local MLS, 612 homes sold in Berkeley in 2013, and the average commission charged was 5.34% with an average sales price of $841,000. Since the Realty Advocates commission is, at most, 4.5%, that means the average Berkeley Seller that didn’t list with us lost $7,570 off their bottom line.
Since our founding in 1986, Realty Advocates has consistently delivered the very highest sales prices on our listings along with the lowest commissions. Now that is VALUE! Check out our reviews on Yelp.com.
“Homeowners Can Be Fooled”
Says S.F. Chronicle Columnist
Arthur M. Louis, author of the San Francisco Chronicle’s “Moneybag” Q&A in its Business Section, has run some wonderfully provocative commentary lately about real estate commissions. He sure is no fan of the traditional 6% commission!
In columns printed March 3, March 18 and April 1, 2007, one agent writes to complain that Realtors aren’t compensated enough, given that its costs so much to market a house. Another writes that he considers its offensive that Louis “completely underestimates the level of expertise required to be a good Realtor.” And lastly, an unnamed agent claims that his self-interest in earning the highest possible commission would require him to steer clients away from otherwise desirable houses if it offered a lower commission. Louis’s response to this last complainer summarizes them all: “Are you trying to convince me that all those dreadful stereotypes of real estate agents are based on fact?”
As a full service Realtor charging untraditional commissions for over 20 years, I am in full alignment with Louis’s assessments. The problem that Louis points out, and has been documented in several research studies, is that the 6% commission is designed to compensate an agent for the all the time and money spent he/she spends in activities other than the actual job of helping a person buy or sell. Activities like farming, brand advertising, referral fees, and image marketing with fancy offices and luxury cars. Does a nationally airing TV commercial of a generic agent standing in front of a generic house mean that “Joe” seller in Berkeley will get the highest possible price for his house? Why should a seller pay 6% just to support a relo service that requires the buyer’s agent to pay 30% of her commission as a referral fee?
Among agents, it is considered heresy to point out that for the work and expertise we actually utilize to sell a house, or help a buyer purchase one, we are OVERPAID. This dovetails with what Louis says: “many full-commissions real estate agents seem to assume that the world owes them a living.” And clearly, despite many new business models to emerge because of the Internet, “Homeowners can be fooled–witness the fact that many of them still pay 6% commissions.”
Louis offers his own “modest proposal”: “slash the standard commission to 1% and let 5/6 of the agents find other work. The remaining agents will be adequately compensated and home sellers will get a better deal.” No objection here.