Where does the Commission go? And, why should I need to pay 1,2,6,7% of the sale to people who just do something that is easily done via the internet?
There are a couple of options for selling your home.
You can have a FSBO, or for sale by owner where you do 100% of the work and you represent yourself in every way. Research will show that historically, the seller leaves 35% of the value of the home “on the table”. Going the traditional realtor representation approach will cost 6-7% for residential and more for commercial. The higher percentages that get into 10% or even more is often expected on the more unique the property like commercial properties that are used for sole purposes that are near impossible to market through a simple web site approach.
The higher the commission given the more is expected by the realtor such as marketing materials, signage, physically promoting through various networking, video, on-line specific marketing, and other approaches that are proven time and resource consuming. Most approaches in the average residential transaction will have at least half, but not always, of the agreed upon commission given by the seller to the agent of the buyer. That agent is influential in bringing a buyer to a specified property that they had been searching for on behalf of the buyer.
Of the commission paid, the salesperson you are working with has a broker they represent. All salespeople, who are not the acting broker themselves, must pay a portion of the commission to the Brokerage who provides insurance, and legal oversite to the sales agent so that your transaction does not breach standards or even create a fraudulent activity.
While America is the land of the free and the home of the brave, all these municipalities and states have overall control and authority over how transactions of their property are conducted. Positions of legal descriptions may not change on the daily, but laws governing usage and how transactions in real estate occur do have nuances that GREC and GAR (Georgia Real Estate Commission, and Georgia Association of Realtors) keep updating as needed. Since the municipalities have governing rights over property ownership, they essentially have more rights than the property owner as to how the transaction occurs. A handshake and a napkin cannot constitute legal transaction, only intent. Those napkins and handshakes can be brought into the legal description of the process, but until you have a binding contract that is enforceable, there is no transaction.
A licensed realtor is doing on-going legal and market training to make sure that as technology and shifts in industry occur, they are constantly bringing those improvements and challenges into their approach for their clients.
Is a salesperson who is under contract with a buyer free? No.
While the buyers usually are not asked to directly pay the services of the salesperson, there is a fee associated with the transaction for real estate on most transactions. The rare case is when a seller’s agent has stated that no commission is given to buyer’s agency. In those cases, often the seller’s agent will give the option of acting in a different manner than originally agreed upon that may include the buyer paying a percentage to the agency for the purpose of full and complete negotiation and legal representation, or an a la carte approach for services that are contractually identified.
In the al a carte approach to agency, a transaction fee, a multi listing fee, an advertising fee, and even an hourly consultative fee is commonly established such that fair and justified compensation is established between the parties.
Most industries, where a business transaction falls outside of the daily identity of that business, incorporate agency where a transaction that substantially effects the future operational value of that business, will incorporate a commission structure to the specific transaction. This allows for the experiences of that agency to brought fully to bare for the sole benefit of the transaction itself.
Ibuyer and Iagency are new industry activities.
The internet has created 1% and even less situations where someone has access to agency. Agency is a bit of a stretch of the imagination as if someone doesn’t really know you, they don’t truly represent your real interest. Which is probably the biggest take away from this whole process. Allow your agent to get to know who you really are so they can serve your need so that it is a longer term solution for you establishing community and not just a place to sleep.
The internet is creating the biggest agency in the world. As these tech companies think that algorithms and digital activity define who we are, you are put into a pot of typical buyer and seller and thus the contracting and transactional process become less negotiable and less custom. So allowing 1-2% of the transaction to go to the digital services of an internet based legal team and internet based agency could make sense. If you want that approach to define who you are. Our property becomes a part of how many identify who they are. Not sure that I want to have that boiled down to an algorithm. But, if you want someone who listens. If you want someone who asks questions. Maybe even politely questions your answers sometimes. And, possibly even encourages you to reconsider a decision you seem to be making out of emotion and excitement. Then you need a person as agency. And hopefully, that person is in the form of the McElreath Team.