Why am I seeing more and more PropertyGuys.com signs all through the Kootenays?
Realtor Commissions are High – The value of real estate has increased dramatically over the last 15 years and this has caused a disproportionate increase in the amount a seller pays out in commissions. Because of this, home owners are questioning the traditional agent relationship and whether the costs are justified for the service provided.
Consider the following typical commission amounts. We’ve added HST to the commission calculation since it applies for BC properties (GST only in Alberta). Since most of us will buy a new home after we sell and will have to go into a new mortgage, any amount that we paid out in commission can’t be used as part of our down payment and effectively increases how much we borrow in our new mortage. The right hand column in the table below is the commission amount adjusted to take into consideration the additional interest we’ll be paying on our larger mortage. This is a more comprehensive way to look at the REAL cost of the commission. Even if you are one of the lucky few who won’t be rolling into another mortgage then even focusing on the middle number and considering the savings in after-tax dollars is compelling.
| Selling Price | Typical Commission
(HST Included) |
Real Cost
(Commission + Additional Interest on New Mortgage) |
|
|---|---|---|---|
| $100,000 | $7,280 | $11,490 | |
| $200,000 | $10,920 | $17,232 | |
| $350,000 | $16,380 | $25,849 | |
| $500,000 | $21,840 | $34,465 | |
| $750,000 | $30,940 | $48,825 | |
| $1,000,000 | $40,040 | $63,187 | |
| *Commission calculated at 6.5% on the 1st $100,000, 3.25% on remainder. This is an estimate of average agent commissions across the East Kootenay region with some areas slightly lower and some slightly higher. HST calculated at 12% and mortgage interest at 4% on 25 year amortization. | |||
If the common belief holds true that mortgage interest rates will go up in the next few years above the very modest 4% used in this scenario, the numbers can start to look even more dramatic.
The Web Changes Everything – Buyers shop for real estate using the internet at an ever increasing rate. And private sellers can now list their homes on the most popular sites for buyers. Not only is the PropertyGuys.com site a go to resource with millions of page views per month but since the Fall of 2010 private sellers can have their home posted on REALTOR.ca for a low fixed fee without having to sign on with a full service agent. It could have been argued in the past that private sellers were at a disadvantage from an exposure perspective if they didn’t list with an agent and couldn’t get their home on the Multiple Listing Service (MLS) which REALTOR.ca is the main public portal for. That isn’t the case any more and you get all the benefits of private selling while gaining the exposure from posting your property alongside all other agent listed homes on the most popular real estate website in Canada.*
More Money in your Pocket – Some of our clients price their property similar to others on the market listed by agents. Because our customers choose to sell on their own they will net more money from the sale because they don’t have to pay a commission to a selling agent.
Sell Faster – Because our customers don’t have to deduct a commission from the sale price, they can reduce their asking price significantly to gain a price advantage over other homes for sale in their community. The net result is that pricing their house a bit lower than other comparable homes on the market should allow them to sell faster and net them the same amount of money as a neighbour that is using an agent.
Many sellers use a combination of both approaches to sell faster and make more money.