Money for nothing? The downside of commission-based selling.

Written by Stonehouse

Kim Franklin, Principal Agent. Writer of the Blog and guides here at Stonehouse. For more, check out our people or give us a call.

3 February 2020

Many real estate agents don’t see you as a client.

They see you as an easy commission.

They can make a lot of money by doing very little to sell your home.

It’s true. Especially in a buoyant market where well-presented properties sell within days.

How do you feel about that? How do you feel about forking out a hefty commission for little effort? Let’s crunch a few numbers to see how much you’re paying.

For this exercise we’ll follow normal real estate practice, with the following fees based on the first $350,000 at either 2.5% or 3.5%. Anything over and above $350,000 is based on 2%.

350,000 sale price – 2.5% commission = 8,750 & 3.5% commission = 12,250
550,000 sale price – 2.5% commission = 12,750 & 3.5% commission = 16,250
750,000 sale price – 2.5% commission = 16,750 & 3.5% commission = 20,250
950,000 sale price – 2.5% commission = 20,750 & 3.5% commission = 24,250
1.5M sale price – 2.5% commission = 31,750 & 3.5% commission = 35,250

Don’t forget the other expenses you’ll pay, such as marketing and administration costs, plus auction fees. Put them all together, and you’ll see that selling your home in this way isn’t cheap. And, a lot of the time, it isn’t fair.

Just because it has always been done this way in the industry, that doesn’t mean it is right. But many real estate companies will charge the same amount of commission regardless of the calibre of the agent selling the property, or how much effort and time they have to put into it. We don’t like doing business that way. In fact, we refuse to do business that way.

We prefer to act as a real estate consultant that follows professional practice of time & attendance plus disbursements without variation or fee escalation based on the value of the property. If the way we charge sounds familiar then you’d be right. Doctors, consulting engineers and architects all operate under the same principle, so why shouldn’t we?

We have moved away from the ‘no win, no fee’ arena. We ask our clients to pay for what we actually do. It’s fair, and it saves our clients money. Here’s an example:

We recently sold a home for $530,000. It was in market for five days, and we billed for 5.9 hours. We charged $2, 360 plus marketing and GST. Now, if we’d charged 2.5% commission, we would have made around $12,000. If we had charged 3.5% commission, we’d have banked just under $16,000. Compare $2, 360 to $12,000, or $16,000…what would you rather pay?

This example is real, and checkable. It reflects the way we do things, and also the unfairness of the commission-based system. Paying an agent around $16,000, plus other costs, to sell a home that was on the market for a whole five days??? As far as easy commissions go, that one is a doozy!

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