Saving Your Pennies?

The struggling real estate market has forced sellers to look for creative solutions to squeeze dollars out of their sale to break even or minimize their loss. More and more frequently, listing agents are asked to ?share the pain? and cut their commission to cushion the blow to sellers caused by lower property values. The dollars saved on the lowered commission may appear to be an easy solution. However, there are significant costs to this approach that sellers may not see immediately.

No Standard Commission Rate in Illinois

While there is no standard commission rate charged in the state of Illinois, 2.5% of the selling price is commonly expected by buyers? agents. When a property is offered at a lower rate driven by a lower total commission paid by the seller, buyers? agents may choose to eliminate the property from their buyers? viewing schedule. This is very easy to do in a high inventory market where there are plenty of properties offering higher commission. Is this ethical? Maybe not, but if the buyer still finds a home they like, some buyers? agents believe this is acceptable. Most good buyers? agents do not look at commission rates, but in this environment when agents may find it challenging to fit all available properties into a viewing schedule, commission can be the determining factor when deciding which properties to eliminate.
Listing agents? costs increase in times of slower sales. It takes more time and exposure to sell a property, more effective and costly marketing, and there are usually more showings required to generate a contract. It also takes a significant amount of effort to hold deals together after initial negotiations due to complex and unpredictable mortgage and closing processes. So, while sellers may ask an agent to ?share the pain,? active listing agents may be forced to take short cuts to make a lower commission listing worthwhile. Additionally, successful and active agents may choose to reject listings whose owners want to cut commission. This leaves the seller with less skilled and experienced agents who need to ?buy? their listings rather than earning the business through superior qualifications. For quality agents, listings are relatively easy to come by in this market ? selling the property and holding deals together has become the difficult part. Sellers need every bit of experience, knowledge, and commitment from their agent to negotiate the best possible price and attractive terms, and to manage a process that culminates in a successful closing.

Sellers Should Demand Exemplary Service

The cliché ?you get what you pay for? can be a tough lesson learned when this important, high-dollar transaction is at stake. Small glitches and oversights can generate costs that far outweigh the potential savings in commission. Sellers should demand exemplary service and expertise from their agents in both the buying and selling process. The best agents will not cut commission, and sellers need top agents to tackle the challenges of today?s market.

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We would like to thank Pfala for kindly sharing today’s photo via the Creative Commons’ License.