Let’s talk about real estate commissions and what Bramptonians should be aware of. In case you haven’t noticed, Brampton has a large population of realtors competing against each other for your business, and one of their most effect strategies for them to gain your business seems to be commission cutting. In theory, this isn’t a bad idea; undercut your competitors so the chances of the customer choosing you are much higher. Walmart has been doing it for years, but the most expensive product at Walmart is probably a patio set priced a little over $1,000 and if you can get it for $800, you consider it a good deal. Price cuts for products can be and usually are good deals; price cuts for services can be costly mistakes. What you’re selling is a house, your home, you’re biggest investment, the biggest sale of your life. The person in charge of this transaction for you should be a true professional with the best value proposition.
A listing agents mission is to get the clients home sold, usually for the most amount of money, that’s usually top priority but goals differ from client to client. The common misconception around the city is that all realtors are the same and all realtors offer the same value, regardless the amount of commission paid. So an agent charging, let’s say, a thousand bucks to list your home, will do and provide the same services as a full service agent.
Discount Agents VS Full-Service Agents
Is a discount agent better than a full service agent? Well it depends, full service in Brampton seems to range from 1.0-2.0% for the seller, and the standard 2.5% still stands for buyer’s agents. We’ve seen listings that have offered buyers agents less commission and they usually take a lot longer to sell (but that’s a story for another day).
A model that’s become popular with discount brokerages running in today’s market is to take a standard upfront fee for listing the house. This fee is paid upon signing the listing and is paid regardless if the home sells or not. Could people say, “well doesn’t that remove the agents incentive to sell the house, if he’s already been paid”, possibly, but if the agent just wanted to get the cheque and then not care if the client gets their property sold, well then that is by all means a terrible agent. How do these discount models survive with such low rates when realtors have such high expenses? Many ways, first they probably have another job and this is just quick side money or your house is not being marketed to its full potential because of the lack of funding available from the agent to spend. If you’ve paid an agent $1000 to sell your house, then you’d assume he’s probably going to spend less than a $1000 to market it. Nobody wants to run a business in negatives. To provide a solution that helps agents and the brokerage make money, there’s usually a clause in the agreement, that states that when you, the seller, decide to buy a house, it has to be through the brokerage that sold your house. So if you didn’t have a pleasant experience from the agent when he sold your house, well then buckle up, because now you HAVE to buy a house from him as well.
The full service agent model offers clients a wider range of services available, so that the most amount of people possible can be targeted, and in return, get the seller the best possible offer. In this model, the agents are paid after the home has sold. So if you’ve picked a good agent, he/she is going to go in overdrive to get you the most amount of money and until that happens, you don’t pay them anything. The agreements are more flexible than discount brokerages; you’re not obligated to purchase your next home with this agent. Although, always read contracts very carefully, every agent runs their business differently. Full service brokerages typically spend anywhere from $1,000-$3,000 marketing your home, obviously the latter being for homes that require a lot more “make up”. Those costs are found in the cleaning, advertising, professional photography (If an agent pulls out his iPhone and starts taking pictures right after signing the listing, you’ve got trouble), Home inspections, etc. Good full service agents in the end risk a lot. A lot of time and a lot of money is invested into a property with the hopes that you get an offer good enough that you’re seller will accept. There’s more than a enough stories of agents investing a lot of money into a home and getting offers, just to have the sellers say, it’s not the offer they’re looking for and pull the home off the market. All the money spent on the home, gone, from the agent’s pocket, with no return on the investment.
In the end, it’s the seller’s decision, it’s their property and they have to make the decision that benefits their family the most. When choosing an agent to represent you in the sale of your home, knowledge is key. Pick an agent that knows the neighborhood and somebody that will protect your best interest. Selling your house doesn’t have to be as stressful as it’s made out to be. Simplify the process; contact the MyBramptonLife team for more information.