What Realtors Do NOT Want You to Know

What Land Realtors Do NOT Want You to Know

• The 8-10% (4-5% to listing agent and 4-5% to buyer agent) commission that most land realtors will tell you is "standard:" Back when the housing market crashed and you almost couldn't give land away, it was 8-10% because the price was so low and land was hardly selling at all. That is no longer the case. Do not let anybody tell you anything is standard - that is code for "unexplainable." 
• Land is harder myth: If you know what you're doing, land can be quite easier than residential. There's usually nothing to prepare like there is a house, you don't have occupants and pets to deal with for showings, you're never dealing with unqualified buyers, you're almost always dealing with cash buyers, and people that own land are usually selling to simply cash out - they aren't emotional about their home, they don't need the money to buy another home, and they aren't in a hurry. 
• The difference in how land realtors are perceived vs. residential:
  • Land buyers are never tied to a written agreement with a realtor. No realtor is spending time walking prospective land for land buyers, like residential realtors spend time looking at houses with clients, because the client cannot get in without the realtor. Therefore, it is the buyer who stumbles across the land, often without even seriously looking for land, and they will call the listing realtor directly. This means if the seller signed a listing agreement for 8-10%, there's a pretty good chance your realtor will keep all of that. 10% on a $500,000 piece of property is $50,000. You as the seller can decide if you think that's an appropriate commission, especially given everything outlined above. 
  • Like residential, your land realtor should only be charging a listing fee, not building in pre-set commission for a buyer's agent. As outlined above, a lot of times there isn't a buyer's agent, so you're committing to 8-10% just to your realtor. OR, the opposite issue with pre-set commission being actively advertised, is often a buyer will view that as "money on the table," so after they call the listing agent and realize they want to make an offer, they want their friend or family member to have "dibs" on that pre-set commission. Or they might bring a colleage into the deal because they owe them a favor. None of these reasons actually have to do with doing the job of a buyer's agent. This is why you don't set buyer's agent commission up front. Your realtor may never even tell you about this because you have already mentally written that amount off, and they view it as "a sale is a sale." So unbeknownst to you, you literally just handed the buyer's friend thousands of dollars for absolutely no reason. 
  • Unlike residential, often the buyer is a licensed agent. They might be a homebuilder who also sells their own houses, or in land development. If the seller agreed to a pre-set buyer agent commission, the seller is obligated to pay that buyer commission simply because the buyer happens to hold a real estate license. You decide if this makes sense? 

What Residential Realtors Don't Want You to know:

Why most Realtors insist on charging 6% commission (3% to listing, 3% to buyer's agent):

• Team structures vs. a true independent realtor: Many realtors are part of a team. The reason a realtor would be part of a team is because they do not do enough business to sustain on their own, so they have to join a team, who will offset a lot of their marketing expenses and buy them leads, in exchange for a tremendous amount of the commission earned at each sale. They will often have an entirely additional layer inbetween them and their broker.  This expense is being passed along to the client even though it has nothing to do with selling the client's home. You're literally paying more of your equity because a realtor is not successful enough to operate on their own.
• The "co-agent:" Many realtors will sell you on having two agents. The lead agent is there to secure your business, you'll never see or hear from that person again, except maybe at closing when it's time to pick the check up. The co-agent is who will be doing all of the work on your house, but they're basically in training. The lead agent that got your business will keep most of the commission. So you're basically paying more commission because someone is in training. You as the seller won't ever know that when you sign a listing contract, though.
• The "claim" to all of their "expenses:" The only expenses a realtor has to have is a small (usually ~$50) monthly fee to their broker, and the membership to the lockbox program ($16). If a realtor pays a higher monthly fee or shares more than 10% of their commission with their broker, that's because they opted to share a larger portion becuase their broker offers them more support and training, or they're on a team as oulined above. This expense is being passed along to the client even though it has nothing to do with selling the client's home. You're literally paying more of your equity to have a realtor that needs more training and support, that's the only reason a realtor would agree to higher fees. 
• The "claim" to high marketing expenses: The only marketing expenses a realtor has on each residential listing is professional photography (assuming they hire professional photography), which is $200-$500. At closing, the FMLS charges .0012% of the final sales price out of the realtor's commission. There are no other marketing expenses, please do not let a realtor tell you any different. If a realtor hires out a video production, it's usually just to put on facebook for their own personal branding, it has nothing to do with selling your home. You can't even upload videos to the MLSs that feed any of the real estate websites like Zillow, Redfin, Realtor.com, etc. Sometimes realtors will also tell you they pay for "Zillow Showcase" or memberships such as homes.com. Those tactics are literally in place for realtors to say they do those things to "win the listing." The marketing vehicle is the MLS. What actually sells a residential listing is the style of the home, condition of a home, staging of a home, professional photography, the land the home sits on, and getting the price right with all of those factors considered. 
• Transaction Coordinators: Lots of agents turn over the transaction to a transaction coordinator once under contract, and they will get around $500 of the commission. This is not for you as the client to have more support, it's for the agent to have more support so they can spend their time getting more business once your property is under contract. This is actually quite concerning, because in a lot of ways, the transaction has just begun once under contract. Your agent needs to be highly engaged, not less engaged. There's often a lot of mis communication between agents and their transaction coordinators and details actually get missed or lost in translation. 
• Referrals: Did someone refer you to this agent? They're getting paid for that out of the commission at the end. Did you go through a service like Homelight, Zillow, etc? Those companys are charging 30-50% of the commission. The commission will have to be inflated in these situations to cover for these referral fees. 
• Overhead: Some realtors have an "office" that they have just for perception, they don't actually use it. This isn't 30 years ago - we meet clients at houses, and if we're doing paperwork, all we need is a computer. Everthing is digital. Many realtors pay thousands of dollars every month to buy leads. Some realtors may have a professional company to manage their website. All of these things are passed along to you as the client in these inflated commissions, instead of absorbed by the realtor. None of this is the client's problem. All small businesses have overhead, but lawyers, CPAs, doctors and dentists never seem to feel the need to tell their clients and patients about all of their business expenses. Realtors do it because they're grasping for justifiation on their inflated commission. 
• The 3% to the buyer's agent: Would you ever promise anything to someone before it even happened? If you called a contractor to come out and price building you a new screened in porch, would you tell them up front without even having a conversation "I'll pay you $20,000?" Of course not. So why would you agree to pay a buyer's agent a specific amount before they've even shown it? If the listing agent is pushing commiting to that, it's in their best interest, not yours. It's easiest for them to tell other agents they're protected at 3%. Your agent could also be trying to protect their own reputation in the realtor community. The listing agent works for the seller, not the other agent. Your agreement with your agent should be a listing fee only, and it's your agent's job to get you the highest net price possible, which often includes challenging buyer agent commission requests. Additionally, a realtor may insist on this because if a buyer calls them directly, they will keep the full 6%, which is something the seller usually doesn't think about when signing the contract. That is $30,000 on a $500,000 house - Are you okay with basically buying your realtor a car just because they listed your house, and the buyer didn't need a separate agent? You decide.
• Why a realtor may take a listing they are unqualified to represent, or over promise the seller on a price: There is a lot of competition in real estate, rarely will a realtor risk saying anything that could cause a seller to call a different realtor. Realtors may take listings they shouldn't take because listings establish credibility, and often translate into other business. Your listing might be in a "hot area," where their intent could be to break into that area. This is why many listings are over priced, because if a seller insists on a price that is too high and a realtor doesn't agree to it, that realtor knows the seller will just call the next realtor who will list at the seller's desired price. Then what happens, is the property doesn't sell and the seller blames their agent for leading them to believe it would. They will end up hiring a different agent at price reduction. This is not a win for anybody, except that second agent who now gets the clients who are motivated at a price that the product will transact for because they're so frusterated about their first experience.
• Open Houses: Almost any realtor that conducts an open house is not the actual listing agent. The host of the open house is there to get buyer leads to build relationships with in order to become their designated realtor. The only time an open house is being conducted for the purpose of selling the house, is if the listing agent is running it. I am the only realtor that will be running your open house, I would never allow one of my client's properties to be a prop for another realtor to gain business. When I run open houses, I also do not take people's contact information down on a sign in sheet. I want people to feel comfortable viewing your home without being destracted by badgering sales tactics. Realtors will tell you the sign in sheets are for securty, they're not - they're for the realtor. 

Here's the breakdown of what I will keep out of charging 1.5% commission on a $500,000 home:

• $500,000 X .015 = $7,500.00 
  • 10% of $7,500 goes to Virtual Properties Realty 
  • $30.00 is an "admin fee" to Virtual Properties Realty
  • .0012% ($600) of $500,000 goes to FMLS
  • ~$300 paid upfront for photography
  • Total take home: $6,750

Here's an example of a realtor that works on a team and has a transaction coordinator charging 3% on a $500,000 home:

• $500,000 X .03 = $15,000.00 
  • 65% ($9,750) of the $15,000 could be going to the "team lead" and broker because the team lead buys leads for this agent and pays for all of their supplies since said agent can't take on the expenses of operating on their own
  • .0012% ($600) of $500,000 goes to FMLS
  • ~$300 paid upfront for photography
  • Total take home: $4,950

So before a realtor sells you on all of the extra support because they are on a team, ask for the break down of how all of the 3% is accounted for. If they do not work on a team, they're pocketing close to $13k on the sale of your home, or $25k if there's no buyer's agent. You decide if this is where you want your equity to go. By choosing me, you only work with me from start to finish and there aren't any "hands in my cookie jar." That's why I can operate on a model that nets my clients the most money. 

What your listing agent might be advertising: 

You might be tempated to chose a "big name" in the area. With big names often comes big eagos. Many of these brokers and agents have "rules" that they outright advertise to other agents that they are not available after 5pm or on the weekends for contract negotiations and acceptances. Did they tell their clients they're not available to other agents to accept and negotiate contracts at the times when a lot of real estate happens - when everyone else is off? It is very common for realtors to be working full force on negotiations at 11pm, and certainly throughout the entire weekend. At the same time, not much happens in the real estate world until around 10:00am, when everyone else has already been up and driven into work. So it's not unreasonable to expect your realtor to be available late. You as the client deserve to know if your realtor has a policy to shut down after 5pm or on the weekends, and then you decide if that is the right representation for your property.