Your Choice in REALTOR® Commissions

Divorce and Selling a House
September 21, 2020
Parrish “Ham” Womble
November 23, 2020

First, let me introduce myself. My name is Stu Barnes and I have been a licensed Real Estate Agent and REALTOR® for over 15 years in the Raleigh, NC area. I started my career with two larger Firms and after a couple of years I realized the “big corporate” model was not for me. I saw the play books, the role playing in training courses, and ultimately the bottom line. I felt that I could offer “better” services for a lower rate to my clientele.

I have coined the phrase “Real Estate is about Relationships and Representation” and I still use it in my marketing today. Why?….because it’s true. But, that doesn’t mean you have to use a large Firm to get great Representation while creating lasting Relationships. It also doesn’t mean that a larger Firm will not be a fit for you. What is 100% accurate in my opinion is the individual agent you choose is most important regardless of their fee. If you like and trust them….go with your gut. It should not be all about the money; you should feel secure in your decision.

The Real Estate Backstory

Traditional real estate goes back to a time when the seller was the only party represented in a real estate transaction. Way back in time, there would be a Real Estate Agent that would simply have a list of homes for sale….literally a list in a notebook. You would have to contact that agent to see the list of homes and submit an offer through them to present to the seller. Since then, not only was the NAR (National Association of REALTORS®) formed, which incorporated a code of ethics, but MLS’s (Multiple Listing Services) were created and around 1990 Buyer’s Agency was established. This essentially gave both buyers and sellers representation in a real estate transaction. There is something called Dual Agency where an agent can represent both parties with written permission ‘from’ both parties. To go a little deeper there is also something called Designated Dual Agency, which allows a “Firm” to represent both parties, with two separate agents representing each party, but those agents belong to the same Firm, which technically is the same entity.

The reason for this blog post is to explain that buyers and sellers in a real estate transaction are afforded representation whether they want exclusive representation or a dual agency situation. There is much to be discussed about “agency” as it can get very confusing, but nonetheless you should make sure to have that conversation with your chosen agent. To me, again, real estate is about relationships and representation; in today’s changing market I am seeing different business models and it concerns me that some “seem” to be more about the transaction closing rather than what is best for the homeowner or potential homeowner.

Different Business Models

To be clear, REALTORS® cannot give legal advice. An established agency relationship must be put in writing prior to making an offer on a property or listing a property.

The Sherman Anti-Trust Act of 1890 basically says prices cannot be fixed. In a nutshell, it established a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade”. *that is a direct quote from the legalese of the time. So in regard to real estate….fees cannot be fixed, they are totally negotiable. A Firm may have a set fee, but that doesn’t mean a consumer has to hire them.

There are a lot of different business models out there and I don’t think any of them are right or wrong as long as they are legal. It is up to the consumer to choose which model works best for them. With that said, let’s explore the more common models we are seeing today.

Traditional Full Service

The traditional full service model is best described as providing full representation of their client in a transaction. This establishes a fiduciary relationship between the Firm and it’s principal, the buyer or seller. Full service may include measuring the home they are listing, taking pictures or hiring a photographer, coordinating inspections and closing attorneys, but the biggest and most important role of this relationship is negotiating on ‘your’ behalf.

Limited Service

The limited service business model is just as it sounds….the agent may only provide certain services for the consumer. They may take only a certain number of photos, they may charge you for a photographer, possibly limit the amount of marketing or not hold an open house. Services may vary. In turn, they may charge a certain rate or fee that is much lower than a particular traditional full service model. For some sellers, this works…for some, they may want more representation and help with the transaction.

Flat Fee / Entry Only

A flat fee or entry only business model will also work for certain consumers. This is when an agent will enter your property in the MLS and then direct all inquiries on the property to the homeowner. Some agents may offer additional services for a flat fee. Typically, it will be up to the homeowner to negotiate the offer, inspections, etc. This model is good for homeowners that feel very confident about the process and paperwork in selling a home.

iBuyers

I threw this one in as it is very new and trending. This is when a very large organization will offer the homeowner a certain amount for their home without even putting it on the market. I am not familiar with what type of agency relationship is established or if there even is one. With this business model my only advice is to do your research on what your home is worth and your total net amount. Caveat Emptor comes to mind when hearing of this model.

With the models listed above there is something you should keep in mind when selling. In the Raleigh, NC area the typical buyer’s agent fee is 2.4% of the sales price. This is typically paid out of the seller’s proceeds and part of the total commission fee. So when you are researching business models, you should consider the buyer’s agent fee on top of the fee the listing agent charges. So if you see an ad to list your home for “x”%, make sure that is the total commission, not just the commission that goes to the “advertising” Firm.

Barnes McQuade Realty

Barnes McQuade Realty is a Success Based Firm. What this means is we don’t get paid a commission unless the transaction closes. I am able to list homes for 3.9% Total Commission….this includes the buyer’s agent fee of 2.4%. There are no other commission fees associated with the transaction. This is a Full Service business model. Though I see nothing wrong with Limited Service or Entry Only models, I have chosen not to offer these services as my name is on the yard sign. If my name is on the yard sign, I am going to represent you fully.

I am able to list at a lower rate as I do not have the overhead that a larger franchised Firm may have. I simply pass the savings along to my clients. This does not mean you will get less marketing or representation, quite the contrary. I do more to market my listings than I ever did with the larger Firms I was with years ago.

If there is one thing that I would want you to know when buying or selling a house, is that it is your right to choose whichever business model fits your needs, but I strongly believe all consumers need “representation”; make sure you have it. Stu

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