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The Real Estate Secret Nobody Is Telling You!

Often times real estate agents and used car salespeople get lumped into the same bad image. The image of an untrustworthy, disliked person. For a real estate person the most hated aspect is the commission. That fee you pay an agent to sell your house.

I've heard all the arguments as to why the agent shouldn't get so much money to sell a house and I've even used a couple of them myself. But being on this side of the issue has really opened my eyes as to why you NEED an agent to help you buy or sell a house. In this blog I want to address just ONE aspect of the commission. Its POWER to sell your house.

Let me start out with a story to help you understand HOW real estate sales happen.

Two agents were talking one day at an open house. One agent knew a man who was looking for cheap houses in bad shape that he could buy, repair and sale for a profit. The second agent knew a third agent who just got an agreement to list a house that needed a lot of repair and was going to list for a low price. BUT, the house was not on the market yet. So the second agent told the first agent who contacted the third agent and the house sold 2 days later and was NEVER listed on the market.

What does that story mean? It means that real estate is all about matching the right buyer with the right house. But not everyone is looking to buy right now. They are like diamonds buried in the ground. You have to go through a lot of rocks to find that one gem. And that can take some time. You need somebody who "knows a guy."

So you don't want ONE person selling your house. You want a THOUSAND people selling your house. Let's say the average agent knows 200 people. Out of those 200 people maybe 10 are looking for a house right now. Of those 10, one or maybe none, will fit your house. Pretty small chances. But what if you have a THOUSAND agents with 10 ready to buy people each trying to sell your house? That's 10,000 people ready to buy a house right now.

Suddenly, the picture changes! Ten thousand people working with a thousand agents who are looking at your house to see if it fits one of their buyers. The next problem is competition. There may be 2 houses that fit their buyer. Or maybe 5. Or even 10. Then there are the new subdivisions built by corporations that know how to get houses sold. How do you compete?

How do you get those thousand agents to work for you and get your house sold? The POWER of the commission!

Unfortunately, most people think, "how can I get these greedy, good for nothing agents to take less commission?" Instead, you should be thinking "how can I motivate these agents to go out and get me a buyer so I can get my house sold?"

What do you think motivates a real estate agent? MONEY, you bet! So how do you motivate all these agents while saving yourself money? Here's the secret.

PAY A HIGHER COMMISSION!

Okay, I know you knew that was coming. Now let me explain it to you. Let's say you pay a 6% commission. That is usually split between the agent who lists your house and the agent who brings the buyer. So that is 3% each. But agents have to work for a broker (by law) and they have to split the commission with the broker. So that is 1.5% for the agent. 

If you are selling an average house in our area the sale price would be $220,000. That means you would pay $13,200 in commission. The agent who brings you a buyer would get $3,300. But what if you paid a 7% commission?

Then you would pay $15,400 in commission or $2,200 more. The agent bringing you a buyer would get $550 more. So if they had 2 houses that matched their buyer, yours at 7% commission or another one with 6% commission and they knew they would get $550 more for selling your house, which one do you think they would try harder to sell?

Remember, if you are selling your house you are the employer of the agents. If there are two employers and one is paying higher than the other, which employer is going to attract the best employees? Be the employer who pays more and get the BEST agents working for you!

And that's the POWER of the commission. But wait, I told you you could save money doing this. Here's how.

Most houses for sale will do at least 1 price reduction before they sale. Some will do as many as 3 or 4. Usually, the price reduction is around 5%. So with our example of a $220,000 house the first price reduction would be $11,000. 

But what if you had a thousand agents clamoring to show your house because they would personally get rewarded with a bigger paycheck, isn't it logical that your house would sell faster and you could avoid that first price reduction? In other words, you pay $2,200 to avoid losing $11,000. Which sound better to you?

Think that sounds ridiculous? Remember those corporations that are building those nice, new neighborhoods? Sometimes they pay agents 4, 5 or even 6% if they bring them a buyer. Think they know something you don't? Which house are agents going to take their buyers to? Yours, or that new house that is paying the 4%?

Dropping your price is expensive. Paying a little more in commission to get it sold faster is peanuts.

Of course there are many factors that affect how fast a house sells; starting price, location, condition of the house, market conditions, the economy, etc. But the POWER of the commission is ALWAYS at play!

Also, if you list your house with an agent, ask them how they split the commission. Not all agents split the commission evenly. Some try to keep more for themselves. This will actually work against you because if an agent with a buyer sees your house is only paying a 2% commission and the one down the road is paying a 3.5% commission, which one will they try harder to sell? The commission is all part of the strategy of marketing your house. Make sure your listing agent markets your house effectively.

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