Saturday, April 16, 2005

Did You Know Your Name Is Being Sold?

Here is another pet peeve of mine regarding real estate information online. Use of the internet by potential homebuyers and sellers is up dramatically and there is a boatload of people out there trying to capture your name so they can sell it to a "screened" agent. Do you know what credentials an agent has to have to pass the "screening" test? All they have to do is be willing to pay for your name. They are screened by their willingness to pay someone to give them your name. Wouldn't you rather choose the criteria by which you choose an agent than someone who is just in it for the money? Did you know that when you make an inquiry online and fill out a form for additional information, the agent accepting your name is generally agreeing to pay a 30% referral fee!?! 30%! Iisn't that ridiculous? Let's break down what this really means in dollars (and sense). No, that is not a typo. I want you to make some sense of all this before you spend your precious dollars and cents. See, I do know how to spell.

On a typical $150,000 sale (in my market) the selling agent would earn $3750. This is 1/2 of the full sales commission of $7500. The other half goes to the listing agency. In my market the full sales fee is 6% on the first 100,000 and 3% over 100,000. So half is 3% / 1.5%.

O.K... let's break this down: the $3750 could be divided any number of ways, with part going to the agent's office and part to the agent. Let's say the agent is getting 70% of the proceeds and the office keeps 30% for administrative costs. So, now the agents commission is down to $2625. BUT, the "referring" company gets 30%, so now the agent is down to $1837.50. Let's not forget Uncle Sam who will probably get 20% - 25%... so now the agent actually receives a net fee of around $1470. Ummm... it kind of makes you wonder how hard an agent is really going to want to work for you when the office gets 30%, the referring company gets 30%, then Uncle Sam get 20%. How much is left??? Is that 20%. Did I do the math right? That can't be right, can it? And you think the agents are getting rich? I think not! It's kind of like the rush to California for gold. Who made the money? For the most part, it wasn't the miners. It was the guy selling the shovels and picks! You know who I think sell shovels and picks in the real estate world, right?

My suggestion is to definitely use the internet to get information. There is a lot of great free information to be had. But contact several agents direct and get detailed information, quotes and proposals from them. Do not work through a third party. You will be doing yourself and them a favor, because the agents will make more money (and have more negotiating room with you)... and you'll get better service... in my humble opinion!

I recently sold a $140,000 home to a buyer with whom I had been working with for over a year. Do you think I would have given her the attention I did, if I was going to net 20% of the selling fee. I think not. I could make more money flipping hamburgers at McDonalds.

I love all my clients, and pride myself in developing some great lasting personal relationships with them. For sure, I do love the business... but when it comes to the dollars and cents, it takes some common sense to know where it's wise to spend my time. New, inexperienced, agents may not mind doing this to build their business, but the really good agents probably will be pretty selective.

Just something to think about.

Have a great day!

Realtor, ABR, e-PRO, GRI, REI

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