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Tag: real estate commissions

The day has arrived

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Starting this month, the rules have changed for governing real estate commissions. We’ve been talking about this since the National Association of Realtors (NAR) voted on this change to the commission structure in March, a structure that has been in place for over 30 years.

By now, most real estate professionals have positioned their real estate wheels to work within the new regulations. They have likely also developed a dialogue to have with both buyers and sellers in this market. So, let’s go over some of the significant points.

Typically, sellers paid the agents on both sides of a transaction, selling and buying. This was a percentage stated at the time the property was listed. Sellers will still agree on a listing commission with their agent, however, now have more flexibility to decide whether to offer a commission to a buyer’s agent and what that commission will be. There is no commitment on the seller’s part to automatically offer a commission to the buyer’s agent and the buyer’s agent is free to request a commission fee at the time they present an offer. Like everything in a real estate transaction, it becomes a negotiable point.

The sticking point here is your listing agent may tell you that if you don’t offer a selling commission, selling agents won’t bring buyers to the property. There is of course some truth to that, however, if the buyer’s agent’s commission becomes part of the negotiation, then the agent has no reason not to bring buyers. Also, on popular properties, a buyer may even step up and pay their agent directly if a buyer’s commission cannot be satisfactorily negotiated.

You also need to set guidelines with your listing agent relative to their commission should they find the buyer for your property. Traditionally, when a buyer didn’t have an agent, the seller’s representative often kept the commission offered to the buyer’s agent. Again, this should be agreed upon at the beginning of the listing agreement.

So while you’re thinking about this new round of chaos, let’s go over the July sales for Manatee County published by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 9.9% more properties compared to last July. The median sale price was $499,000, lower by 3.1%, and the average sale price was $661,104, up 3.0%. The median time to contract was 52 days this year compared to 29 last year. There are 10% more listings this July, making the month’s supply of available properties 3.9 months compared to 2.7 last year.

Condos closed 9.6% fewer properties this year. The median sale price was $329,000, down 6% and the average sale price was $354,404 down 8.8%. The median time to contract was 77 days this year compared to 47 last year. New listings were up 0.4% and the month’s supply of available properties was 5.6 months compared to 3.2 months last year.

Per the Realtor Association, both Sarasota and Manatee counties experienced a shift in the market in July. Median prices declined and we are experiencing longer times to sell. Basically, they feel the market is balancing out and buyers have more purchasing power.

The National Association of Realtors says it’s too soon to speculate on how the market will change and I certainly agree. Some of the early feedback around the country where agents have already started with the new regulations is that total commissions appear to have come down. Some of the commissions could be reflective of the value of the property and the level of marketing required.

It’s hard to say at this point, but we do live in a very high real estate price point environment and agent commissions could reflect that.

Castles in the Sand

Commissions not always what they seem

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I had a mother who would negotiate anything from a batch of tomatoes to a living room sofa. It was the culture she grew up in and a little of it frankly rubbed off on me, which on several occasions has been a source of embarrassment to my husband. Now it seems that members of the younger generation are more in alignment with my mother than their mothers. Having access to all kinds of online information, they’re starting to ask for discounts or at least creative ways to get their properties sold.

Most millennials are just as comfortable surfing the net as their parents were with their touch tone phones. With almost everything you need to know about buying and selling real estate accessible from a keyboard, it’s the perfect place to start for novice buyers and sellers, but this generation is taking it a step further. Not only are they doing an extraordinary amount of research, but they’re turning the information into their ability to negotiate commissions.

Some of the more creative commission structures involve half a point higher for the selling agent, something that I did a lot of years ago when I marketed corporate relocation properties. Also, buyer and selling agent bonuses or perks, if the final sale price comes in above listing. Tiered commissions that are geared to shorten the marketing period also are getting the younger generation’s attention. Typically, you would start the process at 5 or 6 percent commission, which decreases on an agreed upon downward scale the longer the property remains unsold.

Negotiating commission becomes even more common in the luxury market. The logic that sellers subscribe to is, “Why does it take twice as much work to market a $2 million property over a $1 million property?”

Getting in the mix of realtor commissions are discount online companies like Redfin and a new one REX Real Estate Exchange, that just started doing business on New York’s Long Island, one of the costliest real estate markets in the country. These companies generally charge between 1.5 and 2 percent and forego using local multiple listing services.

According to Real Trends, a real estate research firm, fees are trending downward from last year’s average rate of 5.12 percent, which is down from 5.26 in 2015. This could also be a result of the overall increase in selling prices around the country.

Despite all the data available, very few sellers negotiate real estate commissions, many of whom aren’t even aware that this is an option, and there is a good reason for that. Real estate professionals are still the best place to go to for on-the-ground advice and strategies. The knowledge they accrue, especially in a specialized area like Anna Maria Island, is invaluable. They have the pulse of an ever-changing market relative to incoming buyers, price points and location.

Millennials may be OK when their computer screen tells them their buyer just walked across the street because their price was too high for the location. However, most of us need a flesh and blood person to take care of what to many people is the largest financial investment we will ever negotiate.

Everyone wants a deal and wants to save money, and that’s a good thing if you don’t sacrifice quality and service. In the words of my mother, “Can’t you do better than that?” Sometimes yes and sometimes no, and sometimes the outcome is the deciding factor.