When choosing an agent to sell your home don’t make the mistake of only looking at the commission rate each agent charges. If you base your decision on commission alone you will be in for an unpleasant surprise.
So, how much does it really cost to sell your home?
There are three costs to consider when choosing an agent.
1. The agent’s commission rate.
2. The amount of advertising and marketing they are asking you to commit to.
3. Finally, the cost of underselling. This is the biggest cost and it’s a “hidden” cost. More on this and how you can avoid it later.
Typical agent fees average between 2% to 4%. Some agents will offer a lower commission but charge higher marketing fees and upfront advertising costs. Many property owners are talked into committing to unnecessary and expensive advertising campaigns. These can typically range from $1,000 to $5,000, and are payable regardless of whether you sell or not.
To cut costs some sellers hire a discount agent. What these sellers don’t realise is, in order to survive, the discount agent is more concerned with getting the property sold regardless of the price. This often leads to selling your home at a lower price. What if the buyer was prepared to pay, say $30,000 more, but your agent couldn’t get it from them because of their poor negotiation skill or because of their choice of selling method. The amount you lose could be as much as 10% or more of your selling price.
In their quest to find the best agent some sellers get derailed and start looking for the best deal. These are two different things. It’s critical that you evaluate agents on their marketing and more importantly their negotiation skills. Their negotiation skill will determine whether they are skillful enough to get the buyer’s highest price for your home or not. If they are not skilled they will undersell your home and you stand to lose tens of thousands of dollars, and guess what, you won’t even know it.
Another area to be careful of is the method of sale you are encouraged to use. If your agent’s preferred selling method focuses on your lowest price, or your reserve, and not on the buyer’s highest price, you are again at risk of underselling your home.
The method of sale and your agent’s negotiation skill level will have the biggest bearing on how much more you end up with in your pocket, than any concession you may get in their commission rate.