Of course you want to make as much money as possible when selling your house. After all, it’s your biggest investment. And why not try to get the most amount of net proceeds possible?
This is the very reason why some homeowners opt for real estate agents who charge less commission. Or perhaps try to sell their property on their own through FSBO (for sale by owner) services.
Ultimately, it’s a counterintuitive approach. Here’s why.
What do you need in order to get the greatest amount of money possible when you sell your property?
The answer is exposure.
You need to reach as many buyers as possible. Through as many different marketing channels as you can. So you can stimulate the demand for your property.
This means either you or your real estate agent needs to do a good job marketing your property so that many potential buyers see it, hopefully encouraging them to make an offer, and even perhaps trying to outbid each other on it.
In late 2016 to early 2017, the sheer shortage of houses available for sale affected the supply side of the real estate market, while the demand grew exponentially. It became fairly easy for a seller’s real estate agent to ‘market’ a house.
They listed the property for sale on the MLS. They underpriced the listing to stimulate a bidding war. They ‘held back offers’ to give as much exposure to as many potential buyers as possible. Then, on offer night, they had lineups of hungry buyers, all vying for the coveted property. One buyer got it. Dozens of buyers didn’t.
In today’s market, if you’re a buyer, there are a lot more options. Unless you’re looking for a home in a very hot pocket in Toronto, chances are you’re not running into multiple offer situations. Even if you are, there may not be as many buyers competing as there were just a few years ago.
If you’re a seller in today’s market, and you’re in…. say…. York region, there is such intense competition amongst sellers due to the sheer number of houses listed on the market.
How do you compete? How do you get buyers to choose your home instead of someone else’s?
The answer boils down to how well your property is marketed. And commission is one of those factors.
Sellers counterintuitively think that saving money on commission is going to do them a favour. Less experienced agents use this as their ‘competitive advantage’ — it’s not.
Think about it, Mr. & Ms. Seller.
How can an agent, who cuts their commission, possibly give you the most effective marketing for your property? How could they possibly reach the most number of buyers possible? How could they stimulate demand so that your house becomes desirable?
They can’t. Not with a reduced commission.
An experienced agent knows how much money they need to properly market your home. They spend money on marketing materials, print brochures, virtual tours, staging services, social media ads, print ads, newspapers, postcards, websites, video commercials, digital marketing… they spend money to get your property out there.
An agent who cuts commission can’t afford to market your property. How could they afford to when they’re charging less commission?
Knowing that cutting commission can’t possibly do you a favour when selling your house, what should you look for when your real estate agent proposes the commission they’re charging?
The answer is simple: ask them what they intend to do to market your property.
It’s one thing for your agent to charge you 5% even perhaps 6% commission — and not do anything extraordinary to market your property aside from ‘putting the listing on the MLS.’ Remember, every agent can put your listing on their board’s MLS. That’s the easy part.
What is your agent doing differently to market your property to reach more buyers so you can find the one who will see the value in your house and pay a price you’re happy with?
This is where you have to do a bit of research. Every real estate agent has a different marketing plan. Their approach to selling your house varies based on their experience, niche practice and target market.
When you interview a real estate agent, ask them what their marketing plan is. Ask them for examples of marketing materials they’ve produced in the past. Most importantly, ask them for the results they’ve achieved for their clients. Ask for client references, not just testimonials.
Don’t just have an agent charge you an arbitrary commission percentage without explaining the value you should derive from it. Make your real estate agent accountable to the commission you’re paying. After all, 5% of the equity you’ve earned through owning your property will be rewarded to the agent(s) who will be selling it.
Make sure they earn it.