Selling commission question , 1% vs 3%

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Selling commission question , 1% vs 3%

Haris Bajric
Investor · Grand Rapids, MI · Member since 2016 · 11 posts · 13 votes

Hey I am just about to finish my first flip, everything has gone exactly to plan and I should be listing the house next week. The agent that helped me when i purchased the house is asking for 3% selling fee but I found another guy that can do it for 1%. The 2nd agent has said that he will list it on all of the places like MLS, Zillow, Trulia etc etc. He even said that if we list it early next week, he will have an open house right away that weekend. My friend just recently used him and they will close on their first flip this week so it has worked out for him really well. I guess I am a little scared because the 1st agent has more experience and is probably more qualified because he has been doing it longer but I would save 3k if I went with the 1% guy. My brother has used the 3% guy for years and he has had great success with him in his flips that he has sold. Has anyone else encountered this and how did it work out for you?

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Michelle T.
Indianapolis, IN · Member since 2014 · 205 posts · 74 votes
9y

Forgive me while I take my foot out of my mouth.  My mind temporarily flipped from Investor's Agent to residential buyers agent mode.  

I have done many listings at 1.25%, or $1,000 min, and you are right @Michael Hayworth and @Jason Hirko those listings were for an investor that was selling several properties a month, so the bulk made up for the lower %. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    Is it worth it to "save" $3k if that really turns into a $5k or $10k less net to you? 

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  • Michelle T.
    Indianapolis, IN · Member since 2014 · 205 posts · 74 votes
    9y

    I am a true believer in you get what you pay for. How professional can the 1% guy really be? if he is as good as he says he is he'd be charging what he's worth... 3%

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  • Michael Hayworth
    Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
    9y
    Originally posted by @Haris Bajric:

    Hey I am just about to finish my first flip, everything has gone exactly to plan and I should be listing the house next week. The agent that helped me when i purchased the house is asking for 3% selling fee but I found another guy that can do it for 1%. The 2nd agent has said that he will list it on all of the places like MLS, Zillow, Trulia etc etc. He even said that if we list it early next week, he will have an open house right away that weekend. My friend just recently used him and they will close on their first flip this week so it has worked out for him really well. I guess I am a little scared because the 1st agent has more experience and is probably more qualified because he has been doing it longer but I would save 3k if I went with the 1% guy. My brother has used the 3% guy for years and he has had great success with him in his flips that he has sold. Has anyone else encountered this and how did it work out for you?

    There's no way in hell I pay an agent more than 1% to list my properties for me. If you're going to sell any volume of properties at all, 2% makes a huge swing. Most 1% agents specialize in investors and understand our world. Not all 3% agents do. I've used 4 different 1% agents on over 50 properties and had excellent results. Sounds like your friend just had the same experience.

    You'll get many real estate agents on this board telling you that you should pay full price. Realtors obviously have a vested interest in protecting commissions, but they'll eventually be disintermediated just like financial services, insurance, and tons of industries before them. And truth is, there's not a single guarantee that a 3% agent is going to give you good service. There are thousands upon thousands of really mediocre realtors out there - whenever a market is hot, it brings lots of new people into it, and many just aren't very good. (When a crash occurs, good agents will survive it and the mediocre ones won't.)

    There's seriously very little marketing an agent will do for your property. They'll tell you they're doing open houses - those don't sell your house, they get new buyer clients for the agent. Or they'll tell you they're emailing brokers....who get hundreds of those emails and delete them unread. Getting your house in the MLS with an attractive set of photos (learn to take your own...some of the photos full-price agents put in MLS are just downright embarrassing) is the most important thing in getting buyers in.

    Just for getting it in the MLS, of course, you could use a $300 flat-fee broker. The additional value of the selling agent is fielding calls from buyers agents. giving you advice on offers received - usually on competing offers in my market - and negotiating with other agents as needed. These other items make it worth using a 1% agent vs. a flat-fee guy where they just put it in MLS and you have to do all the negotiating yourself, but that's not worth thousands of extra dollars to pay 3% commission.

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  • Jason Hirko
    Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Michael Hayworth Right, right, and right... Not to mention if you have any deal flow at all, an investment-focused Realtor will happily take 1% of your 2-3 deals a month as opposed to the retail Realtor that might work with the same person twice in their life, if they are lucky... 

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  • Haris Bajric
    OP
    Investor · Grand Rapids, MI · Member since 2016 · 11 posts · 13 votes
    9y

    Michael, Well I don't see how it will be an issue because I am still paying the Buyer Realtor 3% so i feel this shouldn't be an issue. And as far as the professional comment above, I don't get why a 1% or 3% means that the guy will be more or less professional. 

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  • Haris Bajric
    OP
    Investor · Grand Rapids, MI · Member since 2016 · 11 posts · 13 votes
    9y

    Well since this is my first one, I want to start doing more and more. I really have learned a lot and I am loving the upside of it. I get the comments of "you get what you pay for" but he just sold my friends almost immediately. I also understand that i am asking Realtors on their opinion but it can work the other way also. 

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  • Jake Thomas
    Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes
    9y

    I will offer to sell vacant well done flips for less than 3% all the time. I am very professional and all my listings are cared for the exact same. I feel well done flipped properties are easy to sell as they are vacant and if priced correctly sell quickly so that means less work for me. Ultimately it's up to you but not every agent is worth 3% either.  

    1Reply
  • Michelle T.
    Indianapolis, IN · Member since 2014 · 205 posts · 74 votes
    9y

    Forgive me while I take my foot out of my mouth.  My mind temporarily flipped from Investor's Agent to residential buyers agent mode.  

    I have done many listings at 1.25%, or $1,000 min, and you are right @Michael Hayworth and @Jason Hirko those listings were for an investor that was selling several properties a month, so the bulk made up for the lower %. 

    4Reply
  • Keith Hancock
    Residential Real Estate Broker · New Port Richey, FL · Member since 2016 · 18 posts · 5 votes
    9y

    What compensation does the agent who brings the buyer get?? 1% total so 1/2% ?? Can't see many agents bothering to bring these types of properties to their buyers. Is the other agent offering 3% total? If so what does he offer the other agents who show?? If he is offering 2% to buyer and 1% to himself, I would say go with him. On the other hand the 1% guy maybe really hungry and be very aggressive in his marketing but the low % to buyers agent still imposes a problem.

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  • Jeff Schneider
    Residential Real Estate Agent · Phoenix, AZ · Member since 2016 · 155 posts · 117 votes
    9y

    I offer full service packages for my investors at reduced commissions but I always recommend they pay the buyers agent 3% or close to it.

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  • Joshua Molnar
    Real Estate Agent / Investor · Miami, FL · Member since 2015 · 14 posts · 7 votes
    9y
    If it's an investor with multiple deals a year I have no problem taking a lower commission. As far as marketing it on Zillow and Trulia etc... don't let them fool you with that, once you upload it to the MLS it's automatically uploaded to those sites. The agent isn't doing anything extra for that. The REAL marketing comes in them running Facebook ads, mail out marketing, neighborhood marketing, email blasts etc... I would ask each agent for his exact step by step marketing strategy written down and what's his 30 day plan for the first 30 days that your home goes on the market which is the most important. This is my issue with 1% agents... they are literally taking food off their families table in a desperate attempt to undercut other agents and take the listings at a discount. So if they can't negotiate their own money that goes in their pockets... how do you think they will negotiate deals on your behalf? And last but not least, make sure you pay the buyers side 3%. Most agents won't waste their time taking clients to homes who's not paying a full commission.
    2Reply
  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    9y

    It's all negotiable.  Building a good relationship with your realtor offers great benefit long term....

    1Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Personally on a first time working with someone I do not cut my commission down. I have no idea what they are going to be like as a client. Are they expecting full color brochures, Do they expect me to do up a full presentation, are they looking for me to give advice on staging and recommend my handyman out for some cheap adjustments? Are they expecting me to be at their place for an Open House a month (will they mind if I pawn it off to a new agent), run ads in 4 different papers? If it is still not sold in a month are they expecting me to get their place on place mats at the local diner and a postcard campaign to the local apartment complexes, hoping that someone who didn't realize they were ready to buy will bite. They could be the total opposite as well and say "Mike just do your thing and let us know if we have to adjust."

    Everything costs money and if it doesn't sell I don't get that money back. Some agents may say they can do that stuff on 1% of a 120K house, but I just can't afford it. Now if we want to do 1% and they cover all expenses (ad spots, mailings etc) then sure. 1% can cover my insurance/MLS access/time. If as a client you are happy being on the back burner and worked on as an "as available", know I will call back within 24 hours, will text some info here and there but am not on a 1 hour recall to have a weekly call where we discuss strategy..... then I can do it. Once we have worked together and get a rhythm going then yeah my numbers adjust quite a bit just not on our first date.

    Good Luck in whatever you decide!

    1Reply
  • Teddy Smith
    Real Estate Broker · Wilmington, NC · Member since 2016 · 236 posts · 126 votes
    9y

    Anybody that's going to charge %1 is going to put a sign in the yard, put it in the MLS, and that's it. Either that or it's someone who hasn't figured out that at %1 you won't make it very long in full-service brokerage....

    1Reply
  • Malgorzata SadowskaPro Member
    Real Estate Agent · Miami, FL · Member since 2017 · 506 posts · 205 votes
    9y
    In addition to lots of great points already made, if it was me, I'd ask both agent(s) to present & COMMIT to (in writing, e.g. additional clause of the listing agreement) their step-by-step marketing. Than, I'd decide, what's better values (& have assurance that the agent will indeed market the property well). Other ideas for marketing I didn't see you mention: Calling agents who are active, e.g. have listed, sold & had buyers in the area. Calling buyers (if they bought without an agent). Talking to neighbors (do their friends want to move to the neighborhood?) Etc. good Luca! PS. I sell 50% of my listings via open houses. So, it depends how an open is prepared for, conducted & followed upon.
    1Reply
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