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Wednesday, July 31, 2013

There’s So Much More to Buying Or Selling a Home Than Getting Under Contract

[Published Aug. 1, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

We all know by now that it’s easier to sell a home now than it was, say, two years ago, and some sellers think they don’t need to hire a real estate professional to market their home.

What this overlooks, however, is that marketing and getting the home under contract is only the beginning of the work that we do.

In my own practice, I have noticed that our job has gotten much more difficult this year, despite the shorter time it takes to get a home under contract.  Negotiating inspection and appraisal issues and coordinating the purchase of a replacement home so that the seller has a place to move have become more complicated, in part because of the hotter market.

I don’t envy the seller who thinks he can take on the tasks that we agents are used to performing every day. And for what?  Statistics show that nearly all sellers end up offering a “co-op” commission of 2.8% to the buyer’s agent. This buys the seller the unenviable position of being the only party in the transaction without professional representation! 

The seller thinks that he is saving 3.2% by only paying 2.8% to the buyer’s agent, but this assumes a standard listing commission of 6%.  The average listing commission now, according to NAR, is closer to 5%, and it is common for agents (including at my company) to reduce that fee by 1% if they sell the home without having to pay a buyer’s agent and by another 1% if the seller uses them to purchase their replacement home.  

Some agents have even listed homes for “free” (2.8% to pay the buyer’s broker) in return for being able to earn 2.8% on the purchase of a higher-priced replacement home.

If sellers really understood (1) the negotiability of listing commissions and (2) the value of professional representation beyond merely getting under contract, the whole  for-sale-by-owner concept would lose favor completely

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