Sunday, September 2, 2012

How much do you charge?

The most common questions that I receive as a licensed real estate agent are in regards to financials.  I'm not posting this to suggest that the questions are bad questions, in fact, I think it is great that folks are being fiscally responsible by getting that information up front.

How much do you charge? (potential buyer asking the question) 
Buyers do not pay for real estate commissions!  Your representation is free.  The Seller covers the percentage that is negotiated between the brokerages. 

So, the bottom line answer:  I can be your agent on the buying side for FREE!!  How's that for a sales pitch? 

Myth:  I'll save money by finding the house myself
First, is this possible?  Yes, kind of.  

See if this scenario helps explain:  

Johnny Buyer wants to find a house/ Condo.  He thinks he'll save money by not using an agent, so he begins looking online for a condo.  He knows he has to stay below $110000 because he received a pre-approval up to that amount.  He opens the Sunday paper and sees that there is an open house for a condo at $105000.  He goes to the open house, meets the listing agent, loves the condo, and decides he'd like to buy it.  

The listing agent, Bobby Agent, tells Johnny that he'll write up a contract for him on the spot for FREE and he'll have to pay nothing in commission cost.  Johnny is thrilled!  

Bobby Agent writes the contract for $105000.  Johnny signs, the deal goes through and Johnny is the proud owner of a condo... All by himself!!! 

Rewind:  Remember Bobby Agent is working for the seller.  The seller is already going to pay the commissions, so regardless of whether or not Johnny had an agent, Johnny wasn't going to have to pay anything towards commissions.  

This is where it could have benefitted Johnny to have an agent.  Johnny's agent would have drawn up the contract for free as well.  In the contract they would have asked the Seller to pay commissions, and they would have negotiated for the best price.  There is a possibility that they would have still offered the $105000 asking price, however, Johnny's agent would have thoroughly examined the facts to be certain that the price they offered was fair.  There is a high possibility that Johnny's agent would have found that in the past 6 months, there were 3 condo's of similar size and condition that sold for an average of $97,500.  That's $7500 that could have been used to negotiate the price down from $105000, saving Johnny more money than had he even had to pay the commission (but he didn't have to do that either).  

Again, this is just an example, but I've seen a few acquaintances that have found homes and posted their find on Facebook, and then when I look at the facts, I feel like the above scenario may have happened to them (or something similar).  And this is just the negotiation of the purchase price.  Having a buying agent will also ensure that you are properly negotiated for on terms such as time periods of inspections, financing, and closing. (see my post on negotiations)  

Real estate deals are complex.  If saving a bit of money on an agent is worth taking the risk of not being properly represented in all aspects of a deal, it may be time to reconsider whether or not you are ready to take on the financial responsibility of being a homeowner.  

I hope this post answered some questions.  I know it doesn't cover every concern, so if there is still something you'd like answered, email me and I'll get back to you ASAP both in email and here on the blog!

Take care, 
Scott Morrison

Click here to find a house for sale in Gahanna Ohio

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