Many people think that the Internet has made it so much easier to sell a house, but they need help understanding why they should still hire a real estate agent and pay them commissions. It’s understandable when you only consider the aspects of selling a house that boil down to buyers and sellers finding each other. The Internet has certainly made that part simpler.
There are plenty of ways for sellers to use the Internet to advertise their house for sale to potential buyers without having to rely on real estate agents and their access to multiple listing services.
In fact, there are even buyers who use the Internet to advertise that they’re in the market to purchase houses and offer to buy from sellers directly to make the process quick, easy, and less costly by eliminating the need for agents. So, with the Internet creating such an efficient marketplace, why should a seller bother hiring an agent?
It could cost you more than you think you’ll be saving.
55,000 Examples of Sellers Who Lost Money
The Federal Trade Commission (FTC) recently came to the rescue of 55,000 home sellers who were misled by an online home-buying company. The company promised sellers that their cutting-edge technology would save them money by offering to directly pay them “market value” for their home and cutting out the costs (such as commissions) involved with the traditional home sales process involving agents.
“Rescue” might be a strong word, though. According to this MSN article, the FTC will only refund about $1,000 to sellers eligible to receive a portion of the 62 million dollars the company was fined. That’s likely a drop in the bucket compared to how much most sellers cost themselves by selling to this company. The FTC said, “In reality, most people who sold to them made thousands of dollars less than they would have by selling their homes using the traditional process.”
According to the FTC findings, here are two ways selling to this company either costs or loses sellers money:
Sellers were misled about the actual market value of their homes and convinced to sell for less than they could have sold their house for on the open market.
Sellers ended up paying more in costs to this company than sellers typically pay to work with real estate agents.
For companies like this one to make money, they have to offer below-market value for a home. According to Tomasz Piskorski, a professor at Columbia Business School who has researched this type of business model, on average, they buy houses at a 3.6% discount compared to what sellers would get by selling their homes through the traditional process.
It’s difficult to say how much each seller paid in fees in the past, but this company is still in business, and here are some of the costs and expenses they publish online.
A “service fee” of 5% on every home they buy, which they literally say is “similar to how commission works for real estate agents.” This is interesting, considering they positioned themselves to avoid the cost of a real estate agent.
They also may deduct “repair costs” for anticipated repairs, so sellers don’t have to pay cash upfront to sell their home. This is a slippery slope because they are “anticipating” what could be wrong with the house, not necessarily basing it upon an in-person inspection by a licensed inspector.
Considering how much homes are typically worth, $1,000 probably doesn’t help most of those sellers recoup anywhere near the amount of money they lost. It doesn’t even come close to making up for the loss of wealth those sellers should have after selling an asset that often accounts for much of a person’s net worth. Sadly, in most cases, the decision was likely made in hopes of walking away with more net worth by eliminating the cost of real estate agent commissions.
No matter how easy it may seem to sell and buy houses due to technological advances, there’s much more to getting the best results possible. So, if you question whether hiring a real estate agent and paying a commission makes sense, think about the 55,000 home sellers affected by this one company. While they probably all felt like they would come out ahead by avoiding agents, they’d probably all gladly turn back time, hire an agent, and willingly pay a commission.
The Takeaway
It may seem appealing to avoid paying real estate commissions, especially since technology has seemingly made selling your home directly to a buyer easier. However, without the help of an agent who knows the LOCAL market values and has the skills to get you the most for your house, it’s easy to lose more money than their representation would’ve cost you.
At Set Your Rate Real Estate, we offer a new way to sell your home. Your Rate. Your Choice. Your Perfect Sale. Call us today at 301-733-3267 to get started.
תגובות