Agents Make Too Much Money
This is a very popular real estate myth among the public. Keep in mind that a real estate agent makes exactly $0 unless they sell a home. They do not receive any type of salary or check every two weeks. While it’s true that real estate agents can earn a good living, it’s not without a lot of hard work. Many people get licensed to sell real estate thinking they can get rich quick, however they soon find out how much overhead there is and how hard the job can be. This is why 87% of real estate agents fail in the first five years.
Agents Keep All The Commission
So, a real estate agent sold your home or helped you purchase a home. Now they get to go cash that big commission check, right? Wrong. Let’s discuss this real estate myth in detail. First, it helps to know that a commission check is paid to the agent’s broker who then pays the agent based on several factors. There is typically a split between the agent and broker. The broker keeps a certain split, often from 30%-50% of the gross commission. This is used by the broker to maintain the offices and keep the lights on. Next, there are sometimes additional expenses taken out of the gross commission such as errors and omissions insurance and administrative costs, not to mention the agent’s vehicle and marketing costs. Finally, the agent will get the remainder of the commission. Oh, and remember, since there are no tax deductions the agent must make sure to set that money aside.
Agents Don’t Pay For Marketing and Expenses
Another real estate myth that a large portion of the public believe is that agents don’t have to pay for their marketing, materials, or expenses. This couldn’t be further from the truth. In fact, individual agents pay for all marketing and expenses. Consider when an agent lists your home, (keep in mind earlier we said that an agent makes no money until they sell a home) they come out to your house and give you a listing presentation. The materials they bring out are paid for by them, as well as the gas and miles on their vehicle. Once they list the home, (if they are a dedicated agent) they will pay a professional photographer to take photos. They also paid for that sign that’s in your yard. Then they will create flyers to promote your home, send out marketing materials, hold an open house with materials they paid for, which may include food and refreshments, the list goes on, but you get the picture. Bottom line is that on top of not getting paid until they sell a home, agents have to spend their own money in advance of a sale in order to get the job done. Worst case scenario and the home doesn’t sell, that agent is out of a lot of money.
Agents Say Anything to Make a Sale
This real estate myth is why agents sometimes get a bad rap from the public, being made out as sleazy salespeople. While, like in any industry, there are agents who aren’t as ethical as others, the majority of agents aren’t there to convince you to buy a certain home, or cover up defects about a home just to get to closing. Realtors abide by the National Association of Realtors (NAR) code of ethics and are held to a high standard. Buying or selling a home is a big decision. An agent cannot force someone to buy or sell a home they don’t want to buy. No matter what they say. For most agents, the goal is client satisfaction. A satisfied client is far more important than the commission check.
Price it High and Come Down Later
A very common real estate myth that we hear from sellers is that “we should list high and come down in price later or negotiate”. Almost any agent can tell you that this is rarely, if ever a good strategy. The goal when listing the home is to create the most exposure possible from the beginning to attract offers. This is how you get the highest price for the home. When you price it high from the beginning, you are essentially giving up your market leverage. Leverage is everything in real estate and so is timing. If you price too high, you can actually lose out to many potential buyers. Also, you may end up sitting on the market because buyers don’t think you are serious about selling. Then when you reduce your price after 30 days, you’ve lost all market leverage. Data shows that the longer you are on the market, the lower price that you command from a buyer. Price it right from day one and save yourself the headache.
Come In Low and Negotiate
Among buyers is a similar real estate myth, which is that it is best to come in low first and then negotiate. This is the wrong way to look at writing an offer. I advise buyers to write the best offer they can the first time. Not only is the seller more likely to take it, but it can often get a deal done before any other parties come in the picture. In a sellers’ market, you cannot hope that the seller will counter your offer or even give you a second chance. When they see multiple offers come in, they may take the best one and reject the others. If you are serious about the home, talk to your agent and they can review comps and come up with a good offer price. Remember, in a sellers’ market the right price may be over the list price.
Selling By Owner Saves Money
This popular real estate myth has many homeowners attracted to the idea that by selling their home by owner they can save money, typically due to not paying a commission. While we all would like to save money, selling by owner may not be the way to do it. Consider first that less than 9% of all homes actually sell by owner. On top of that, the average home that sells by owner sells for 23% less than one sold by a real estate agent. In terms of saving money, most for sale by owners will offer to pay a buyer agent’s portion of the commission, for example 3%. So now we’re only looking at saving the other half, or 3%. When you sell by owner you need to consider, do you have the marketing expertise and budget that an agent has? Are you able to spend hours each day promoting your property? Do you have a database of hundreds of people to market your home to? The answer is likely no. Realtors are also marketers and know how to expose your property to the public to get the highest price. They can do this much faster and more efficiently than the average homeowner.
So, if it takes you 3 months to sell your home by owner, how much did you pay in mortgage payments during that time? Taxes? Home insurance? Homeowners association? You can easily end up spending that 3% you were trying to save. An experienced agent could have sold the home in a month or even a few weeks and taken on all the responsibilities, negotiations, and showings, as well as given you professional representation. Likewise, with professional marketing, an agent will likely fetch you a higher price simply from the exposure they create.
I Don’t Need a Buyer’s Agent
Many homebuyers prefer to start their home search online, checking out listings, going to open houses, and driving by homes. This is fine if you aren’t in a hurry or aren’t very serious about buying a home. However, if you plan on purchasing a home, you really do need a buyer’s agent to represent you. Don’t believe this real estate myth! First, it may help to know that as a buyer, you do not pay the agent’s commission. By hiring a buyer’s agent you are also getting a professional Realtor to represent your best interest throughout the transaction. This agent has a fiduciary responsibility to you that is taken very seriously. Among the things the agent will do for you are: set up showings and provide timely access to homes, research homes in the area to help you write an offer, speak to the listing agent to learn any information about the property that can be used to your advantage, guide you in the offer writing process and the terms of the contract, present the offer and negotiate on your behalf, guide you through he inspection process, work with your lender and title company to monitor your transaction, and ultimately get to closing and hand you the keys. And it doesn’t cost you anything? Sounds like a no brainer!