Helping Families Home


Beaverton Oregon Real Estate: Don’t believe everything you read on commission

I recently went on a listing appointment and I have to admit that I was thrown a one, two punch about my commission because they had flyers and post cards all saying that we can sell your house for 3% and 2.5% and for even $1.

I then helped these clients realize that these were all gimmicks and I as a real estate professional will not send out, what I consider, false advertising. What these flyers and post cards are designed to do is get their foot in your door, and they do. They are eye catching.

But, if it sounds too good to be true… (What did your mom tell you?)

Let’s break down the math of one of these “3% to sell” or “2.5% to sell” listing presentations that this owner had in their home. I found the small print and they quickly realized that it was too good to be true.

3% to sell, yep that is what it said, but what it didn’t say is you also had to pay 2.5% – 3% to the buyer’s agent. So 3% quickly became 5.5% or 6%. Weird, didn’t say that on the post card or flyer did it?

One of the flyers had a pretty little “*” on it after the 1.5% to sell, and that little “*” at the bottom said 1.5% plus buyer’s agents fee and advertising costs. “Advertising costs”? I could make up any number I wanted and it could end up being 15% to sell your home real quick!

One agent they talked to on the phone said that they could do it with the buyer’s agent fee for as little as 3.5%. (2.5% to the buyer’s agent and 1% to them) My clients said, “This person said there were no catches with that 1%. That is all they charge! So why can’t you do it for 1%?”

I asked them why they called me? They said, “Because we see a lot of advertising from you. You have sold a couple of our friends’ houses and they were very happy with you and were happy how quick you sold their homes.” I said, “That is wonderful, so can I do some math for you then?” They said, “Sure”

1% of $300,000 = $3,000

This number so far is pretty easy, but now let’s breaks it down a little. The average agent does 4 transactions a year. But, we will give this agent a great year and give him 3 transactions a month!

So, how he is making $9,000 a month from commissions, so far so good!

But, now he needs to pay his car payment and house payment. We are going to be conservative at $2000 a month.

$7,000 left (Still going strong!)

Now, lets look at insurance: house, auto and E/O insurance for real estate. Now, we have to pay more in auto insurance because we carry clients in our car. So, let’s go with $500 a month.

$6,500 (Still looks good doesn’t it?)

Ok, benefit of doubt here and we are going to go with this agent as a single male, and only has to feed himself every month. So $150 in food each month, does that work?

$6,000 left

Oh, but what about water, electric and gas? I’m going to put my expenses every month here. $300 per month in water, electric and gas, you can put your amount here if you want.

$5,700 left

Next as an agent, I need to pay for my MLS access and this is approximately $45 a month, plus my national Realtor dues are about $45 a month so there is another $90.

$5,610

Oh, wait, I have to drive clients to and from your house, so I have a gas bill of $600 a month.

$5010 (This is getting smaller quickly.)

Then they have their cell phone bill, and if they are like me they should be spending about $200 a month.

$4,810

Internet access is at least $40 a month, unless they have dial up, but I wouldn’t advise that.

$4,770

Now, they need to put a sign in your hard and that is $29 per listing and this guy has 3, so there is another $90.00

$4,680

Ok, this person also has a website and e-mail, I’ll give it to him that he is using a free e-mail system, but his website is costing around $50 a month.

$4,630 left

Oh, wait…You need flyers for your house to go with that sign they put out. Color flyers, double sided are $100 for 100. Oh yeah, he has 3 listings, so there is $300.

$4,360

Did, I forget that those post cards and flyers you received aren’t free either? Let us say they sent 100 flyers and post cards to your neighborhood, plus 100 to another neighborhood. 100 colored flyers is another $100 and the post cards are another $60. Oh and postage for 200 mailings is $86, for a total of $240.00

$4,120

Did I mention that we get a 1099 for our taxes and have to pay every three months? Last year, I paid $9,000 in taxes, if this other agent has 3 listings a month, I’m going to have to say he is about the same. That equals $750 per month in tax payments.

$3,370 (Left… ack!)

Oh, I almost for got the biggest piece of this… He still hasn’t paid his desk fee yet, so he is probably on a 70/30 split with his broker. So that $9,000 he gets per month is actually only $6,300…So we should have started the math there instead of at $9,000.

So, $3,370 minus $2,700 in desk fees equals $670 left in this agents pocket to spend on advertising your listing. Oh, wait, that’s right, he has 3 listings, so we need to divide that by 3.

He has $223.00 to spend on advertising your listing. Do you think that any agent would spend their last $223 advertising your listing or keep the money to do the little extras in life, like go out to eat or to the movies?

Wait…Wait…Wait, I forgot…What if they don’t sell one of those listings? That means they have $3,000 less to spend and they have ZERO to spend on advertising your home. You get a sign and an MLS number and I have to admit that does sound nice, but I don’t call it marketing.

I would like to point out one last thing… If I market your home and get it sold in 30 days, versus the average of 90-120 in the Beaverton area right now, you have just spent an extra 3 months in mortgage payments that equals more than that 2% you saved using that other agent who promised you to only do it for 1%.

Todd Clark – broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739
Todd@IFoundYourNewHome.com
www.IFoundYourNewHome.com

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2 Comments so far
Leave a comment

Just think – you were conservative with those numbers too. Well put. I will be linking back to this excellent conversation!

Comment by Linsey Planeta

Well stated and rationally explained.

Comment by Christine Donovan - Costa Mesa Real Estate




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