Reducing Your Agents Commission and Saving Money Whether you Buy or Sell!

An article posted in the Washington Post today discussed the potential collapse of the real estate market, yet again. It went on to further describe the expired $8,000 rebate program as a mere band aide that has since been ripped off of an unhealed wound.   This is probably the most accurate description yet.  The market is stale and things are turning south quickly.   I don’t mean to paint a dark picture but we need to be realistic.  The government as much as it thinks it helped us, disrupted a cyclical pattern and prolonged the inevitable.   Prices rise and sink and that is the nature of a free market system that is based in supply and demand.  I am not an economist but this is just simple logic.

With all of the above being said I think it’s important that we delve deeper into the problem and look for a long term solution that could really place the real estate market back in full swing.  Most realtors aren’t going to like this suggestion but the truth often hurts.

For too long real estate agents and their brokers have been enjoying ridiculously high commissions.  These commissions range from 5% to 6%, at least in the DC area.   That means every time a seller goes to list their property they are faced with a 6% hit right from the beginning.   Imagine that you go to sell a home in DC where the average home is $500,000.  That means as a seller you are faced with an upfront cost of approximately $30,000 assuming you paid a 6% commission!  That is just ridiculous.   Yes real estate agents work hard but not $30,000 worth…..especially if the home sells in a matter of weeks.

In good markets where homes are selling well above list and sellers are seeing a higher return on investment this 5 or 6 percent payout doesn’t seem bad but what about when markets hit bottom, like they have across this country?  Yes the market in DC is rebounding but people that purchased 5 years ago still are not seeing an adequate return on investment and therefore those homes are not coming on the market.  In this city in particular we had a lot of 1 and 2 bedroom condos swallowed up during the boom but these were never long term homes for most.  Most got in with the notion they would sell in a few years and at the very least break even.  That is not the case.  Instead some owners are being forced to sell at a price much less than what they paid a few years back and when you add an additional 5 or 6 percent deduction on that number, the seller is in pain and is often forced to rent.  This idea of renting versus selling is, in my opinion, what has really destroyed the market and inventory in DC.

So I have gone and given and argument but I have not proposed any sort of solution.  Well buckle-up because here it is.    This is by no means the ultimate fix-all but I think it’s a crucial step in the right direction. Agents need to cut their commissions and offer rebates!  Wow I have probably just turned every agent against me.  How dare I disrupt a business practice that has worked for decades?  Agents, swallow your egos and listen.   If we reduce our commissions and offer rebates this simple step may allow more people to list on the market. At the same time it might allow more buyers to enter was well and not be as pushy with the seller because they are getting a rebate back from their agent.   Phew!

A few companies are offering rebates today and I think they have seen a significant boost in sales because of this.   Unfortunately I have mentioned these companies before because they also have AWESOME websites….drumroll……..Zip Realty and Redfin.  Zip boasts that it offers up to 20% of their commission back and can save sellers as much as 25%.  Redfin has a far superior deal because assuming the company makes their minimum of $5500 buyers can expect a rebate of 50% of the commission.  On the sales side Redfin only charges 1.5% commission and goes the extra mile by hiring a professional photograph for all listings.

If any readers are aware of there agents or brokers that offer rebates please feel free to share in the comments section.

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