If you have been following along, I believe I described the various components of the listing fee. The MLS advertising fee, the expertise fee, and the marketing fees.
I was using an example of a $600,000 listing even though in my market it is more the exception and not the average price of a home. In visiting other real estate sites I just happen to see that $600K figure in the articles and the comments of various blogs.
If we were to supose that a seller offered a 3% commission to the buyers broker, agreed to compensate me for my expertise fee, and used the marketing package I described in my las post on this suject -- then a 6% listing fee would be the correct amount to agree to for a $330,000 listing.
- $6400 for marketing costs
- $3500 for expertise costs
- $9900 for MLS advertising fee
$19,800 total divided by 6% equals $330,000.
So is 6% a good deal if your property is going to sell for $200,000?? Let's remember that item number 3 above (the MLS advertising fee) is factored on a sliding scale based on percentage. In general terms that percentage rate is 3%.
So 3% of $200k is $6,000. The expertise costs and that particular marketing package is a fixed cost in my examples ($9,900) and yes I would say that if you negotiated for a 6% fee as a seller you would indeed be getting a great value. A 6% listing fee for a $200k sale would equal $12,000 which is less than $15,900 worth of the service package a seller would be getting.
Ahh, but I can hear you now out there saying, "Come on Todd you can do better than that, give me a real deal." Okay, follow along.
The largest expense I have is in marketing. The most expensive cost in marketing is the local advertising in the newspaper. I said in the marketing post that I run a larger ad in the classifieds for the best exposure. I could save on cost by going to a more simple add or even just the really simple and small print in one column like all the unrepresented sellers do. It's one way to beat down the cost. Yet I have no interest in that. In fact I really have no interest in advertising in the daily newspaper any longer. I don't see the same return on the dollar spent as I do in other mediums.
So if you agree with me to not want exposure in the local daily publication we are on the road to making you a deal. But what do you get instead?? How about we start by placing ads on the Internet first. Google Base, Trulia, Craigslist, Propsmart, HotPads, Yahoo... these are all places that many buyers begin their search for new property. As I mentioned before my only cost to properly place listings on these sites is my time, and like I mentioned before my hard cost fee to the client is $200. This is a savings of $4,000 to this point. Pretty good eh??
Now I do recommend the Kingman Golden Valley Real Estate Guide for advertising. Why?? Locals pick them up at many locations in the area and folks passing through town also pick them up. When I take calls about advertising, about 90% are asking me about the ad they see on a particular page (where my listings are found) so I know they are looking at the Real Estate Guide. In my example I was offering a full page, but usually the quarter page works rather well too. Especially for home prices in the lower tier (like a $200K listing). For the 5 months that it would be advertised the cost would be $500.
Now I'm not a big fan of post cards or open houses. Lets agree that we won't use either of those marketing avenue's because you want a better deal. Okay, one open house after the first month. So add $400 to the list. Where are we??
- $200 for Internet exposure
- $500 for advertising in the Kingman Golden Valley Real Estate Guide
- $400 for the open house event.
$12,000 is where we started for a 6% fee on a $200,000 listing. Now we are at $10,600 ($1,100 in advertising fees, $3,500 in expertise fees, and $6,000 in MLS advertising fees), this is now a savings of $1,400. You wanted a deal and now you have one.
But how good of a negotiator are you?? You can still offer less than 3% in the MLS. Offering 2.5% saves you another $1,000. Maybe you could get a good guy discount on my expertise costs?? Know someone who wants to sell their property?? I'll knock my expertise fee down $500 for you and the person you refer me.
The point of this entire conversation was to get you thinking about different means to an end. I don't consider my service to be 'discount' fees. You actually are getting what you PAY for. As I've been saying all along, everything is negotiable... and I mean EVERTHIING!! I also wanted to let you in on what is behind the 6% listing fee. I hope this helps clear the air a bit.
Comments please, lets talk.
The advertising component of the listing fee...
The MLS and the client