Real Estate Fees vs. Commission

The question you need to ask yourself when you are ready to sell your most valuable asset is “What do I want my agent to do for me?”.

There are three ways to sell your home.

The first is to truly do-it-yourself. Buy a couple of signs at Canadian Tire and put an ad up on the local buy and sell group online. No professional help.

The second is a fee based brokerage.

Quite often these are referred to as For Sale By Owner but that’s not entirely accurate. Fee based brokerages are more of a hybrid. A bit of professional assistance and a bit of do-it-yourself. These brokerages tend to charge you based on different levels of assistance. Most start with a base fee which includes signs and your home listed on the MLS. Having a live Realtor help you with comparable home sales to determine your home’s value is an additional fee. Dealing with showing requests is an additional fee. Most things are an additional fee. These brokerages get their money up front in fees and usually advertise that they do not charge commission. This is mostly true because they have already been paid whether you end up selling your home or not.

One of the biggest complaints we have heard from people that have tried the fee based system is that they don’t receive showings, even though they are offering a 2-2.5% commission to a Realtor that sells the home to a client. The cause of this problem in the Oxford County area is simple. Most of the fee based brokerages are only members of the Toronto Real Estate Board or TREB and they do not join any other real estate boards. A large portion of potential buyers are working with a local realtor and have been put on an automated search by their representative. These searches in this Oxford County are fed by The Woodstock/Ingersoll Real Estate Board or WIDREB. Therefore houses that are only listed on TREB do not get added to these funnels and are missed by all of those buyers. They only exist on Realtor.ca and the brokerages website.

Remember, sellers using this system will need to offer a commission to a Realtor bringing a buyer. So this isn’t really as commission free as advertised. And because the listing brokerage does not have access to WIDREB, they can’t really show the seller proper comparable to determine price properly even if paid to. Setting your own price can be very dangerous as prices can increase dramatically in just a few months time. Knowing what your neighbour sold for a year ago is not near enough info. An informed seller needs to know what has recently sold, what is for sale currently as competition and inventory/buyer levels.

Misinformation can potentially cause a seller more than conventional real estate based on these and other factors even though the seller may have felt they won because the “didn’t pay commission”!

This system can work and does have a place in real estate but sellers need to be very careful and very educated if they choose this path

The third way to sell your home is, of course, using a conventional commission based Brokerage and Realtor.

The first thing a seller should do is make sure they are choosing a well connected Realtor who will work for them and earn their commission. And almost all will do a home evaluation for free.

We have a term in the industry for realtors that do little more than hang a sign on the front lawn and that is a “list and walk”. Fortunately this is not most Realtors and a little time on the internet will quickly lead you to the ones that are working hard and spending money to get their clients the most for their homes.

Great Realtors put their money where their mouth is. They invest their money in the listing with no payment up front. They have a vested interest in the end result and doing the best by their client. They have access to all that local information to inform you on why your home is worth what it is worth. Their listings have access to all those buyers that are only looking via a personalized search. And they put in the time and money necessary to properly market your home and get it in front of the largest pool of potential buyers. A good Realtor will make sure that not only those local buyers see your home, but those from London to Toronto as well because Oxford County is in high demand from out-of-town buyers and they are often prepared to pay a premium for the right home!

And the best part (yes, you are reading this correctly) is that Realtors and Brokerages are paid via commission. If the job is well done and a successful sale is achieved then they are paid the agreed upon amount. And if they don’t get the job done, they get what they have earned. If you are unhappy with a Realtors performance, ask for someone else to represent you. You are in the driver’s seat and no one gets paid until you are happy.

As I said before, fee based systems typically offer 2 to 2.5% commission to the Realtor bringing a buyer. The same is true in conventional real estate.

That only leaves the 2 to 2.5% commission most Realtors charge for marketing and selling your home. They are paying for all the marketing costs out of pocket. They are writing all the contracts that you will pay a lawyer to do if selling using a fee based system. They are protecting your interests and making sure your home is properly priced to get you every dollar you deserve. They are there, 24/7.

All three systems can work. You need to decide what is best for you.

If you have any questions about this Blog or any other subject, please reach out to a member of our team and we will be happy to help.