It’s All About The Net!

mphillips Flat Fee , Flat Fee Commission , Real Estate Leave a Comment

If you are selling your home or thinking about selling your home, I have a question for you: What’s more important to you, the total sales price you agree to with a buyer or the total net proceeds you see on your closing statement?  Although the total sales price does have an effect on the net you will experience at closing, there are other factors that can effect your overall net proceeds even more than sales price.

I think it is fair to assume that every home seller would like to maximize the total net proceeds we see on our closing statement.  Who wouldn’t want this?  Ok, so let’s talk about the difference between between final sales price and final net proceeds.  Let’s look at how a lower sales price with a flat fee real estate brokerage model can actually net more money back into your pocket compared to a slightly higher sales price with a “traditional, 6 % real estate brokerage.

Here at Hill Country Flat Fee Realty in Texas, we charge a flat fee of $3,995 for our full service listing.  So let’s take a home that is listed for $599,000 and compare the net proceeds the sellers would experience with a traditional 6% listing and our full service, flat fee listing of $3.995.  After a few weeks on the market and much back and forth with the buyers, the seller receives an offer and settles at $585,000.  With a traditional 6% commission (commissions are negotiable and are not set in stone, but 6% has been the norm for many years), the sellers would be paying $35,100 in real estate commissions for a net sales price (before other closing costs, fees, prorations, etc.) of $549,900.

Let’s take that same listing of $599,000 and now compare that to our fat fee model.  This time let’s assume the buyer didn’t want to pay $585,000 and the best offer the seller could get was $575,000 or ten thousand dollars less than the other offer at $585,000.  Let’s assume the buyer had a buyer’s agent and the seller had to pay her the typical 3%.  The same seller in this scenario would have a net sales price of $553,755 (3% commission would be $17,250 and our fee would be $3,995), netting the seller $3,885 more money than the $585,000 sales price with a 6% commission.

Take a step further and in our model, had Hill Country Flat Fee Realty procured the buyer, we reduce the buyer’s side commission from 3% to 1.5%.  In this case, the net sales price to the seller would be $562,380, a difference of $12,480 (in the spirt of transparency, Hill Country Flat Fee Realty procures the buyer for our listings about 18-20% of the time, so this example is less common, but certainly can happen).

Here is the point: when a seller is locked into paying a high commission rate such as 6% to sell their home, often times they do not have much wiggle room in negotiations due to the high amount of commissions they have to pay.  With a low flat fee model, as you can see, a seller can usually take a lower offer and often times net more money in the end due to the low flat fee rate they would be paying.

There is a misconception in the real estate industry that flat fee or discount real estate companies don’t provide full service or full representation.  Although Hill Country Flat Fee Realty does offer an option that is less than full service (for a one time, upfront fee, generally for very experienced home owners who feel they have the time and desire to go it on their own), the vast majority of our sellers (95%) opt for our full service model.

With our full service model, our sellers get pretty much everything a seller needs/wants just like what a traditional broker would offer to include high resolution photos, virtual tour, sign, lockbox, disclosures, social media marketing, showings, negotiations, title and escrow, etc.  The only thing we do not for our listings is host open houses.  In our opinion, open houses are no longer very successful in selling homes.  Serious buyers will find the home online and will schedule a showing through their agent or call the listing agent for more info.

Bottom line as a seller: before signing a listing agreement that obligates you to a high commission (5-7%), think of how much money you can save by considering going with a flat fee broker instead.  After all, why give your hard earned equity away?

Hill Country Flat Fee Realty serves the Boerne, Fair Oaks Ranch, New Braunfels, Kerrville, Comfort, Bandera, San Antonio and Fredericksburg markets.  We offer our sellers 4 options to chose from, all of which include local MLS and national exposure, which is what really matters.  For more information about our 4 options, please visit: https://hillcountryflatfeerealty.com/choose-an-option-2/.

 

 

 

 

About the Author

mphillips