Some of the benefits of selling your property to a real estate agent are that they can tell you how much your property is worth (retail value) and sell it close to that price. Unfortunately for most sellers, their houses are typically worth a lot less today than they would like. Neither an investor nor a real estate agent will be able to be help much with this aspect of home selling because a seller’s house is worth what the market is willing to pay. To find out what the market is willing to pay for your house a real estate agent uses comparable sales. “Comparable sales” is a real estate term for nearby, similar houses that have sold recently. Anyone can now check the value of their house based on comparable sales with websites such as CyberHomes.com and Eppraisal.com. You can find the value of your property through an agent but now through the internet, you can also figure out the value yourself.
Can a real estate agent sell your house close to your house’s actual value or greater? In my local area most houses are selling for about 90% of their value. Subtract the 6% real estate fee and most home sellers are getting 84% of the value for their house. On RealEstate.AOL.com you can check the average house value and average house sale prices for your local market – right now you will find a discrepancy with the sale price being a lot lower than the value.
However, the higher the price your house sells for, the more money your agent will make, so therefore an agent has more motivation to sell your house quickly, right? Consider this, the average home sale price (in my local market) is about $180,000. Your agent will make 6% of the sell price or $10,800. This commission is shared between the listing agent and the selling agent. So now, your agent will get $5,400 for your house. However, the real estate agent needs an agency since it is illegal for a real estate agent to represent buyers or sellers in a real estate transaction without first signing with a broker’s agency. Each agency requires different commission splits from a 50/50 split with a novice agent to an 80/20 split with an experienced agent. So now the agent has $2,700. The agent is taxed on their income rate plus 15.3% in “self-employment income.” That may be 30% + 15.3% taxes on the $2,700. $2,700 – 45.3% is about $1,500 leftover. So for your $180,000 house a real estate agent will make probably a little more than $1,500. Let’s say that he or she works very hard to market your property and gets you an extra $5,000. The agent will only earn $41 ($5,000 x.06 – 50% (list agent and buyers agent) – 50%+ (agency) – 45.3% (taxes)). How likely is it than an agent will do the work required to bring you $5,000 and then get paid $41 for their efforts? The chance of this happening is nil.
However, if a real estate agent lists your house lower, it will sell quicker. If your house sells quicker the agent can sell more properties and earn money faster then they can by negotiating a high sale price on fewer properties.