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Deciphering real estate commissions

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Dear Phyllis,

We are going to sell our home in the fall. While this may not be ideal timing, this is what works best for us. We have talked with several agents and their commission varies from 4 ½ to 6%. Our La Crescenta home is 1400 square feet and will sell for around $900,000. Perhaps you can weigh in on these different options:

4 ½% – because they have so many buyers this agent says they don’t need to list our home in the multiple listing service. They will represent both buyer and seller for the 4 ½.

5% – they will list in the MLS and the commission will be divided equally between our agent and the buyer’s. There will be a lockbox for showings or my home can be shown by an appointment with me to let the different agents in and then I can take a walk around the block.

6% – they will list in the MLS and pay for home staging. Our agent receives 3.5 and the other agent 2.5. They won’t use a lockbox and this Realtor will be there for all showings. In addition they will pay for some type of interactive floor-plan. Thanks for your guidance Phyllis. GK

Dear GK,

As a real estate professional in the industry for over 20 years, I know that the Realtor® you choose can significantly impact the selling price of your home. Real estate commissions and the service provided can greatly vary. Deciphering real estate commissions isn’t quite as simple as one might think. Commissions are divided between the listing and selling brokerages and the buyer’s and seller’s agents. Let’s put this in perspective:

Agent 1: 4.5% or $40,500:
The Multiple Listing Service (MLS) is a powerful selling tool. Unless you have a reason for anonymity or convenience, there is seldom a valid reason for you to avoid the power of the MLS (multiple listing service). There are more than 1200 licensed real estate agents in Glendale, over 400 in La Canada, and more than 200 in La Crescenta. Let’s assume each one is working with just one buyer… that’s a lot of exposure to miss.

Agent 2: 5% or $45,000:
How do you feel about meeting Realtors® with their buyers? Are you comfortable with a lockbox and a variety of Realtors® bringing their clients to your home when you or your agent aren’t there? Having your Realtor® present for all showings offers a variety of benefits, such as additional security and the ability to screen potential buyers.

The difference between Option A & Option B is $4,500. Likely your home will sell for at least $4,500 more if the home is exposed in the MLS and the thousands of online sites to which it downloads.

Agent 3: 6% or $54,000:
If your floor-plan is confusing or your furniture outdated, staging is often worth the investment. This agent’s commission is an additional $9,000 more than in Option B. Just partial staging of your home will likely be a minimum of $5,000. Again, having your agent present for showings is beneficial.

You address commissions, but other than staging and an interactive floor plan, you don’t mention a marketing plan. Each Realtor® should have a marketing budget and a specific and unique plan to sell your home. This should include professional and (perhaps) drone photography, brochures, print advertising, etc. You should carefully compare each of the marketing plans. Which will sell your home for the highest price?

When deciphering real estate commissions keep in mind not all agents are created equal. Once you and a buyer agree on the selling price you will open escrow. Then the buyer will hire an inspector at which time the buyer may ask for a price reduction or a credit. Which of these agents will be the strongest negotiator?

Who has the most experience? The real question is which of these Realtors® will net you the most money upon close of escrow?

Feel free to contact me with any additional real estate questions, as I would be happy to help you, GK.

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