Planning on selling or buying a home anytime soon? Realtor commissions are something you should understand first. The current market rate of a realtor’s service is 6% of your home’s selling price. That means if you sell your house for $200,000 – the realtor commission is $12,000 of your money. This equates to the first 40 months of equity built on a 4.25% interest rate, 30 year mortgage!
If you are a buyer you may be thinking “I don’t pay the realtor commission of 6%.. the seller does.” This is true, but you have committed yourself to paying those realtor commissions by purchasing the house, you have generated an unrealized expense.
That $200,000 house sells 40 months later for $200,000 again, you are walking with nothing from your 40 months of living there (losing any money you put into the home).
What are the alternatives to avoid realtor fee’s if you are selling your home:
Sell your house on your own.
- No 6% Realtor Commissions
- People tend to expect better prices when they are dealing with “For Sale by Owner”
- You probably *should* hire an attorney to handle the closing (which is probably going to run you $500 or more)
- You have to deal with all of the paperwork and negotiations
- Weeding out people who are wasting your time can be tricky (People who don’t qualify for financing for example)
Conclusion: If you think that you will have to offer a discount on your home and pay an attorney to close your home – the commission might be almost reasonable by comparison. Let’s say you have a $150,000 house which would be $9,000 in commission. To break even, you as a for sale by owner must get $141,500 as a sales price. Considering the time and hassle that be involved with “For Sale By Owner” you want to make sure you are not breaking even. Anything above $141,500 in this example is a gain – so it all comes down to how much more do you think your realtor can sell your house.
What are the alternatives if you are buying a home:
Going off above, find a deeply discounted “For Sale by Owner” property. Make it clear to them you understand they are saving 6% and that you want the vast majority of that savings. Maybe the house can sell for $150k through a realtor – but you want it for $143k, if the seller is the person from above – they still will view this as a $1,500 gain over selling with a realtor.
Beware the realtor commissions!