Low Commission Fees. Do they really save you money?

Low Commission Fees. Do they really save you money?

Low commission fees such as 1 % or 2 %? You may hear or see these ads or others very similar and it may make you stop and think. Is it worth it? Should I use a discount brokerage with low commission fees? Will it save me thousands of dollars? Let’s take a close look before you decide.

Low Commission Fees not really that low

First, there is a very high likelihood that you will not be paying just the 1% or 2% commission as advertised. In almost every case there will be hidden fees so read the fine print. Some discount brokerages offer low commission fees due to the simplicity of their listing. They may just post your house on MLS and hope a buyer comes along. Real Estate Agents and brokerages charging the average 5% spend much more to get your house noticed and sold. If you want these other “services” expect additional fees. In some cases these fees may bring your total costs to much more than what it would have been with the average commission. Lets discuss these services a little more:

Limited services

As mentioned, there is a lot more to selling your home than simply posting it on MLS and realtor.ca. There are professional pictures, websites, feature sheets, social media, advertising, open houses, and many other things that a real estate agent does to get your house seen. Each cost money but by not doing them, less people are seeing your home. The whole point is to get it noticed by as many people as possible and to sell it as fast as possible. The longer a house sits, the less likely it is to sell without some type of drastic change. By drastic I mean a significant lowering on price or significant maintenance or renovation. Many times these measures (price reduction, reno, etc) cost more than what you thought you were saving by using a discount brokerage.

Cutting corners

There is not a single agent or brokerage that will sell your house out of the goodness of their heart. Each and every one is a business looking to make profit. If they can cut a corner to put more dollars in their pockets, they most likely will. This can include such things as taking only a few pictures of your home possibly with as little as a smart phone.  Photos are very important as the vast majority of home buyers make their initial decision to view a home based solely on the photos. Another way to consider it is by asking yourself if you wanted to impress someone on a first date, would you bring them to the cheapest restaurant that you can find? Most would answer no because they understand that the restaurant is going to be cutting corners somewhere to be offering cheap meals and most likely it will be the quality of food or staff. What would a discount brokerage “cut” to make it more profitable for them?

Negotiation skills – you get what you pay for

The goal with any type of discount model is quantity not quality. Their goal is to get the deal done as inexpensively and quickly as possible, with the least effort as possible, and in many cases that can mean pushing through the first deal that comes along. If they are so willing to give up their money (commission) so easily, how hard do you think they are going to fight for you to keep yours?

Buyers smell a deal!

Sellers using a discount brokerage seem to think that they are entitled to the savings, but unfortunately buyers think they are entitled to those saving as well. If the commission is lower on both sides, than the savings should be shared, right? You can expect the buyer to come in with a lower price because of this. Is the listing agent a great negotiator to overcome this?

Many to choose from…

When a buyer agent is trying to decide on the homes that they are going to show their clients, there may be so many that sometimes it comes down to little things. And for some agents when they are deciding on property A verses property B, which are virtually identical in the eyes of their clients, the property that offers the significantly higher commission will get the suggestion. Let me stress that I personally do not do this. I believe this is not in servicing your client’s best interest, but it does happen. So by offering low commission fees, fewer agents are going to show the home. Sad but true.

So as you can see, there are many considerations to whether or not you want to use a discount brokerage. Not all of them are bad, but you have to read the fine print and make sure you get the services that are going to sell your house. And remember that the buyer is going to want some of your “savings” as well so be prepared to share. After all of that, are low commission fees really saving you that much?

If you have any questions regarding low commission fees, please contact Ryan Ligeza (Click Here)

Watch the short video on this article on YouTube (Click Here)

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