Sell-3.5% Commission

The landmark federal legal ruling can help homeowner dramatly reduce their payment for commission fees. 

I support the ruling based on the evidence of the defendants’ collusion in an effort to inflate commissions by forcing sellers to make unilateral and non-negotiable offers of compensation to the buyer’s agent for listings on the Multiple Listing Service (MLS).  I also agree that the current commission ranging from 5-6% is quite high especially in our expensive housing areas.

Homeowners believe that they can benefit from this ruling and cutting dramatically by cutting Buyer’s agent commission.

Wait, isn’t it true that this ruling only tells us the fact that we have known ever since: this is a free market and everything is negotiable? Since I started the business in 2011, I have always told my clients it is negotiable. Every two years in our continuous education, every agent has to go over Ethics and refresh his memory of this rule. 

However, will cutting buyer’s agent commission really benefit home sellers? I think that we take a wrong direction to tackle this issue. Why?

1. First of all, cutting buyer’s agent commission might bring us back to 1980s where only Seller has representation, and “caveat emptor” — “let the buyer beware）。 （Ref. Buyer’s Agent Coming to Be）
2. Who is the weaker side in terms of information in real estate transactions? Buyer, right!? Seller, think twice, would you like a buyer confidently to offer on your house satisfying your expectations? And who gives Buyer this confidence? Would it be the buyer’s agent who tour him around for many months/years and compare many houses or your agent who the buyer just meet at his open house?
3. What is demand after a house is listed on market? Buyers are demand! Who helps a house realize its final value in the market: SOLD? Buyer and his agent!
4. With today’s information technology, what jobs is a Seller’s agent doing? Let me tell you the truth: when selling a house, we are project managers in two fields: marketing and house preparation, and a negotiator. In terms of marketing, almost every agent is on the same footing thanks to today’s technology. In house preparation, we behave like owner’s assistant: schedule meetings, compare quotes, .. . In negotiation, in our fast pace market, within 11 days from a house being listed on MLS to being Sold, how often do you see your agent talk with the other side? Big trick we do and you should do is: ask lower price to lure as many as possible buyers to bid so as to get your top dollars. So even in marketing, no matter how fancy our brochures or website are, they do provide some useful information, they are mainly for you and neighbors/potential sellers to see. Buyers’ eyes are very mostly caught by PRICE. So how much would you like to pay for your Seller’s Agent for being your assistant, being your project manager, publishing your address at your accepted lowest price?
5. Buyer’s agents also need to make money. A buyer’s agent might be able to make one commission after showing his buyers 20 homes, reviewing tons of disclosures, and writing up more than 3 offers. If you only pays this buyer’s agent $5000, he will not show your home. If your neighbor pays him higher commission, he will show your neighbor’s home. Would you like 5 serious buyers to visit your home during your listing agent’s open house? Or you would rather see 1000 agents show your home to their serious buyers. We have over 16,000 agents in our two counties Santa Clara and San Mateo. 
6. Most buyers ask their agents about commission and ask if they can give them discount out of their commission. If you only pays this buyer’s agent $10,000, he cannot give any discount to the buyer. Yes, he can explain this to his buyer. However, 20 sellers offer dramatically different commission to buyer’s agent. Every time he show a home, the first thing he talks to his buyer is about his commission. Do you think the buyer has mood to tour your house, read over 500 pages of disclosures, and make an offer on your home? 

Reference: Homeowner could see dramatic drop in commission fees

If you agree to my ideas above, if you agree that we should pay more instead less to buyer’s agent so that they are motivated to work for you, if you agree “Without a sheep, there can be no wool – the benefit comes, after all, from a price one has paid“; furthermore, if you agree that if pay for buyer’s agent, he does not need to negotiate with his buyer on his service fee. Therefore, he can focus on making deals. Even better, he might be able to offer a discount to his buyer to facilitate the transaction. 

Then please read on my proposals below — help you get your top dollars at lower commission fees.