Home jobber Math: 6% Commission Is actually 30%!

Attorney - Home jobber Math: 6% Commission Is actually 30%!

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According to the Kansas City Federal maintain Board the median mortgage balance on all existing residential homes at the end of 2009 was 2,000. Agreeing to the National association of Realtors the median selling price of a home at the end of 2009 was 6,900. The discrepancy determines the median equity (or gross proceeds) taken by a seller at the end of 2009 which was ,900. While the data is dated, it is the most recently ready data found. While more modern data would be preferable, I believe the observations and conclusions would be more or less the same with fresher information.

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If typical seller closing costs other than the cost of the real estate agent commission were about ,900 for attorney fees, replacement taxes, and other miscellaneous fees, the seller would net about ,000 before paying the real estate commission, assuming the seller used an agent or broker to list the home and act as the selling agent. If the broker commission was 6% (which is generally the case for a typical 0,000 home), then the whole paid by the seller would be 6% of the selling price or in this example practically ,000.

So, here's the math that most sellers don't realize. The seller is indubitably paying the agent 30% of the net proceeds received from the transaction. Yikes, that's one-third of the net proceeds! Thus, the seller puts the balance or ,000 in his or her pocket after the closing. And that's assuming the seller had no expenses getting the home prepped for sale. If there were prep expenses that comes out of the proceeds as well.

Those sellers that can put some money in their pocket after the transaction are the lucky ones. Think about all of the sellers that are closer to being underwater with their mortgage. Some reports indicate that as more than 20% of all mortgages are either underwater or close to being underwater. As home prices are lasting to decline, the whole of potential net equity taken out of the home sale is getting smaller and smaller. And guess what, the median commission being charged by agents and brokers has not changed. So do the math! The agent or broker continues to get their commission paid regardless of either or not the home seller net any profit. Home sellers are getting squeezed. The mortgage whole stays the same and the agent commission stays the same. The net consequent is that with falling prices, the home seller is putting less and less in their pocket after the sale...if anything!

It's no wonder that home sellers are seeking alternative ways to sell their home other than using a customary full-service agent or broker. Discount brokers, flat-fee agents and even for-sale-by-owner sales continue to be financially moving to sellers. It is becoming increasingly difficult for brokers and agents to be able to convince home sellers that their 'selling' services are worth the price of admission. At the end of the day, selling a home is indubitably no more complex than connecting buyers with sellers. Once that is done, and a price is agreed to, then either a real estate attorney or a title business will do the rest of the heavy lifting for the home seller! As a representative for the real estate industry, we must all begin to contribute selling solutions that are driven by the financial needs of the home seller first and foremost.

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