While we are talking about Real Estate commissions let’s talk about value. Just because you pay a certain price for a property, or just because other properties sold in the area for a certain price, doesn’t translate into a value.
When an appraiser comes out there are things they look at that add, or subtract from the value of Comparable Properties. Comparable Properties is kind of a meaningless term. I use town homes as my best example. Comparable Town Homes can be just as worthless as the one that is being appraised. Adding value for a view doesn’t translate into a property value. The view has a value, but the property is questionable. I’m told I may need to adjust my prejudice against town homes as time goes on.
The same is true in a property with obsolescence. The interior may be gorgeous, but the systems may need updating. One classic example is when the appraiser, or home inspector notes there is low water pressure in a newly remodeled kitchen, or bathroom. It could be caused by a lot of things, but there is a good chance it’s the pipes. So the remodel is actually a liability to getting at those pipes.
A buyer’s agent should know property value. They should know the market place, but they should also know what has value, and what to avoid. You learn that by looking at houses, closing transactions, and getting feed back. It helps to have taken apart a few places.
People in the Real Estate business, lifers, are worth the time to find. All agents charge the same, but a few have value.
Real Estate Commissions
There has been a lot of discussion about how Real Estate agents get paid. The Real Estate commission is traditionally 6% under $700K and 5% over $700K. It used to be 7% when property prices were lower.
Now that property prices are falling again the commission is an even bigger topic of conversation. People are stuck, having less equity in a home makes it harder to sign up for a fee that takes away 6% of the purchase price.
In commercial Real Estate the commissions can be between 5% and 10%. It depends on the price, and difficulty, but all commissions are negotiable.
I used to charge 3% as a Buyer’s Agent, and if you bought through me it was 1% for me to list the property. In order to sell I could charge 1% if you did what I asked. If the property was in good condition, it photographed well, and it was priced well I had no problem listing for 1%.
In my opinion working with a buyer is harder because there are so many variables. The second part about that is that you have to buy well in order to have any value in a property. There have been times when a transaction was so easy that I only charged a fee to get the property closed, and pay my expenses. Some times I would refer the client to an attorney who could handle legal issues, and I was only paid a fee for the referral, usually about $200.
You can get a Real Estate transaction closed through an attorney for as low as about $1200, to $1600 including escrow fees. The agent is paid, we hope, based on the expertise they bring to the transaction.