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Earning the Commission, Is it Plausible?

Earning the Commission, Is it Plausible?

Five percent of all homebuyers choose not to work with an agent. They conduct their own home search, contact the sellers, negotiate their contract, locate their financing and arranged inspections. All these services are provided by a Realtor®. If you had to think about what motivated them to do all this work, it would have to be the misconception that they were earning a commission by getting a lower purchase price on the home they are wanting to buy.

Eight percent of all home sellers choose not to work with an agent also. They do their own home value research, coordinated all their home marketing, negotiated with the buyer and investigated all the necessary steps to close on the sale of their home. All these services are provided by a Realtor®. They also may have been under the misconception that they could earn that commission by getting more net proceeds from the sale of their home.

Impressions on these two scenarios could go either way. If the home sold for fair market value, you would assume the seller made out on the sale. If the home sold for less than market value, you would assume the buyer made out and got a better deal on the home. Either way, the buyer and the seller are engaging in activities that they are not familiar with and would be less capable than a Realtor®.

The National Association of Realtors® (NAR) Profile of Home Buyers and Sellers reports that 14% of sales we­re For-Sale-by-Owners in 2004 compared to just 8% in 2019.  The trend shows that agent-assisted sales rose to 89% in 2019 from 82% in 2004.

The three most difficult tasks identified by for-sale-by-owners is getting the price right, preparing or fixing up the home for sale, and selling within the length of time planned.

For sale by owner (FSBO) homes did experience less time on the market but often because they were sold to someone that the seller knows. This also could indicate that the seller might have been willing to cut a deal and didn’t get the full sales price potential. The NAR report also states that FSBO homes typically sell for less than agent represented homes.

The reality is that both parties cannot earn the commission.  It is earned by providing specific services that are essential to the transaction.  The capital asset of a home represents the largest investment most people make.  An investment of that importance certainly deserves the consideration of a professional trained and experienced to handle the complexities involved. There is value to having a third-party advocate helping each party to the transaction.

The tasks involved in buying and selling a home exist and must be done.  Especially if the buyer or seller you are working with is already working with a Realtor®. There is paperwork to be filed, entities to be submitted to and background work to be done.

Since nine out of ten transactions involve an agent and therefore, a commission.  It comes down to deciding which is more important: time or money.  If a buyer or seller values their time more than the commission, they’ll usually work with an agent.  If money is more valuable to a buyer or seller, they may try purchasing or selling without an agent.  One thing is for sure: there are two parties to the transaction and only one commission.

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