Tale as old as time… you get what you pay for. We realize that there are a lot of questions and concerns about what Real Estate Agents charge to sell your home. There’s also the question of what you should pay for a good Real Estate Agent, as well as what to expect of them. While there is nothing wrong with hiring a cheap Real Estate Agent, your expectations should reflect the price you’re paying. In other words…
What should you expect to pay a Real Estate Agent to sell your home?
The problem is, there’s no right answer. In the Greater Toronto Area, the norm has always been 5% of the sale price, which equals 2.5% to each your listing agent and the buyer’s agent. However, many listing agents are now discounting their commission, and a select few are only charging .05% commission instead of 2.5%. (If you are trying to save money, discount the listing agent’s commission, rather than the buyer’s agents commission.) Just like you could pay vastly different prices for a watch from different stores, so too can you pay vastly different commissions to Real Estate Agents. So lets break it down by what you could pay, and what to expect:
The Dollar Store Real Estate Agent
What would you expect of a Dollar Store watch? It’s something to give a child so that they can learn to tell time. If you hire a cheap Real Estate Agent, they are probably inexperienced, and their price is their competitive edge. I don’t want to assert that a cheap Real Estate Agent might see your most valuable asset as a learning opportunity, but it’s something you should consider when you hear of outlandishly cheap service. Another thing to consider, is that many agents will list homes for very little commission, because they want to use the listing as a tool to pick up buyers.
We strongly believe the education system sets novice Realtors at a serious disadvantage and puts clients at risk during a serious transaction. A much-needed addition to our education system is a mentorship program where novice Realtors learn from veteran agents, rather than the hard way on a client’s home.
Putting your most valuable asset in the hands of a cheap, inexperienced Realtor will lead to a lower net than paying a more experienced Realtor full freight. In previous blog posts, we discussed the importance of staging, photography, videography, timing the market, and negotiations. All these facets of the sale will take a hit if you hire a cheap Real Estate Agent, simply because they cannot afford to pay for good staging, photography, and advertising.
The Walmart agent
There are many large Real Estate companies across North America, which use their size as their main differentiation. These are the companies that advertise on billboards and bus shelters, even though internet marketing has a proven higher return on investment. A Walmart watch looks neater and functions better than the Dollar Store equivalent, but there are no frills attached to it.
You haven’t heard of these Realtors before, but you know the company they work for. At this commission level, I would expect professional photography and videography, brochures and to be found online.
Every agent sets their own commission, but an agent at one of these brokerages probably lists homes for between 1.5-2.5% of the sale price, depending on the services you need.
The Nordstrom Agent
A Nordstrom watch looks good, but might be the equivalent of a Realtor who has more mirrors in their home than books. On the outside, they look very professional and they have years of experience in the industry, but it’s important to figure out if they really are as good as they say they are.
These are the agents you see on large billboards, bus shelters, and newspaper ads. But, some of these agents need that marketing to make a living, because they don’t have any repeat and referral clients. You don’t want to hire an agent that doesn’t get repeat business. They might have a team of agents, or a “buyers agent”, so you need to make sure you know who your point of contact is. Sometimes their business model is set up to bring in many leads, and to pass “small” sales onto less experienced team members.
To hire a Real Estate Agent like this, you should expect to pay close to full commission: 2.5% to each side for a total of 5% of the sale price. But, make sure their local fame is not all smoke and mirrors, some of these agents rely on the fact that they have a billboard and drive a nice car to turn potential sellers into clients. Click here to get the gist of what to ask your Realtor when interviewing them.
The Cartier Agent
The best agent for the job is full-time, knowledgeable, social, and has mastered their profession. They lead by example and they have a strong online presence, a history of success, and a Rolodex of repeat clients.
These agents focus on advertising real estate, rather than advertising their head shot. Their sold portfolio is their marketing plan.
They have worked at 3-4 of the top brokerages in the industry, and have amalgamated what they learned at each brokerage into one stellar sales experience. They don’t rely on extensive marketing budgets, rather they focus on doing a good job for their clients. Repeat clients and referrals are their main source of business.
If they were a watch, they would be a chronograph. A highly calibrated machine that does what they are made to do very well: Sell Real Estate. These agents go above and beyond, and are continually furthering their education, their negotiation skills, and their marketing.
These Real Estate Agents work for full commission (5%), which might seem like a deal once they have presented their listing presentation and told you their history of client success stories. If you ask this agent to drop their commission, they will wittingly respond with a: “If I can’t defend my commission, how can you expect me to defend your sales price?”. But, if you’re one of their loyal clients, they will voluntarily reduce their commission because the client relationship is more valuable to them than the transaction.
the bottom line
The bottom line is… You get what you pay for. Could you find a fantastic Realtor for less than full commission? Absolutely. But, the important thing is hiring the right team that meets your expectations. Remember, every sale is a large transaction, and any Real Estate Agent would be happy to help you buy or sell. If you’re looking for a quote on marketing and commission for your home, please contact us today.
Angus Reed says:
I’m looking to buy my first home, and I need to find an agent to help me. I agree that you should ask questions to find out if they do real estate full time or part time. This is because full-time agents are often more reliable. Thanks a lot for sharing this information.