Real Estate Fees Explained

2024 witnessed the single greatest change the national real estate industry has undergone in the last 100 years.

Commonly referred to in the press as the Sitzer-Burnett anti-trust lawsuit filed against the National Association of Realtors and others, the lawsuit alleged, and the jury agreed, that NAR, along with major national brokerages such as Keller Williams and other large real estate companies, conspired to set real estate commissions at 6% and awarded a $1.78bln judgement against the parties named in the lawsuit.

I will not go into a long-winded discussion about the validity of the lawsuit, but as a small independent broker, who is not associated with any of the large corporate owned national real estate franchises, here are the facts, the real estate fees I charge have always been negotiable and have never been set at 6%.

I charge 6% for listings valued under $1M, to be spilt 50/50 between the listing and selling broker, 5% for listings valued between $1M to $2M, split 50/50, and 4% for listings valued above $2M, split 50/50.

I do this for 2 primary reasons: 1) to affect the sale of my client’s property at the highest market determined price possible, in the shortest amount of time possible, and 2) to earn a reasonable profit for my company, and to be fairly compensated for the professional services I provide.

This landmark ruling has caused a whole new set of industry rules to come into effect, the most important being that Buyers must now pay their agents fee, versus the past industry standard, where the Sellers paid the real estate fee, that was typically split 50/50 between the agents.

I would suggest from years of professional experience, it is absolutely in every Sellers enlightened self-interest to offer compensation to the Buyer’s agent, to achieve the highest market driven selling price.

But here is the GOOD NEWS, there is a simple work around.

Mr. and Mrs. Seller list their $1.5M home for sale and agree to pay the listing broker a 2.5% commission. They also instruct the listing agent to make it known that they will offer a 2.5% closing credit to the Buyer, to be used to pay his agent. Perfectly legal and most importantly, completely voluntary, and at the Seller’s sole discretion.

At this point, it simply becomes an accounting exercise.

Old method: 5% debited on Seller’s closing statement for Realtor commissions, (closing agent disburses 2.5% to both Listing and Selling Brokers).

New method: 2.5% debited on Seller’s closing statement for Listing Broker fee, 2.5% debited on Seller’s closing statement as a Buyer credit, which is now transferred to Buyer’s closing statement, and Buyer then pays the 2.5% commission to his Broker.

The net effect is you are adding a step into the accounting process, but the bottom line is the same, in this case the Sellers paid 5% to sell their home.

I tell clients, you are paying a “success fee”. You are only paying a real estate fee for the sale of your home at a price that was acceptable to you, that fully factored in the real estate commissions and subsequent net sale proceeds you received.

America’s economic system has always been the envy of the world, and our MLS system is the best home selling system on the planet. With the push of a button, millions of potential home buyers are notified that your home is for sale.

Ask yourself a simple question, do you think an antique car auction with 10 people in attendance vs 10,000 people in attendance will achieve a higher or lower selling price for your classic car? The answer is obvious, and it should also be just as obvious that setting up a competitive bidding process, with millions of potential participants, costs millions to maintain, and ultimately benefits all home sellers by achieving the highest possible market determined selling price.

It is the oldest adage in business, you get exactly what you pay for. America’s world class MLS system, that is based on incentivizing thousands of agents to sell your home, at the highest possible price, is definitely worth paying for.

Please feel free to reach out anytime with your questions.

Brent Leathwood, MBA
Licensed Real Estate Broker
941-882-2995
Brent@BrentLeathwood.com
www.SRQLifestyleHomes.com

BRENT LEATHWOOD, MBA

LICENSED REAL ESTATE BROKER | BK 3300751

CROSS BORDER REALTY LLC | CQ1046895
2100 CONSTITUTION BLVD. #207
SARASOTA, FL, 34231
(941) 882-2995
Contact
3 Big Mistakes Buyers make:

  1. 1. NOT KNOWING THE NEIGHBORHOOD...ContinuedReal estate always has been and always will be a local business. Know your neighborhood is a cardinal rule in this business. A real estate professional knows what is going on in their local market area. Hire a knowledge, local professional. When we see folks wandering around with a notebook and a list of questions, we know they are the most likely to make a costly mistake. A PROFESSIONAL Realtor, (please note the word professional), can spend 15 minutes listening to your needs and wants, and probably rule out 90% of the local market options, and focus your attention, on the 3 or 4 or 5 communities that will meet your needs, and make sense from both a financial and lifestyle point of view. I am amazed at how many people from out of State, go it alone, end up buying in the wrong community, and come to regret it. I meet people like this everyday, and everyone single one of them will say to me: “I wish we had met you first.”
  2. 2. GETTING STUCK IN AN HOA NIGHTMARE...ContinuedHome owners association nightmares are the stuff of legend in our State. Do not buy the wrong property in the wrong community. A knowledgeable real estate professional can explain to you upfront, the ins and outs of the HOA regulations of the community you are considering, and help you avoid 99% of these potential pitfalls. This is another very costly mistake.
  3. 3. THINKING YOU DO NOT NEED A REALTOR WHEN BUYING A NEW HOME...ContinuedEverybody knows you need a Realtor to represent you, when buying a resale home. Many do not know, you also need a Realtor to represent you, when buying a new home. The new home sales person in the model home works for the Builder, not the Buyer. They are paid to look out for their employer’s interests, not yours. You will not save $1 by going it alone. You will lose money. A lot of money. One of our largest local builders reported 872 annual sales, of which, 762 were handled by Realtors representing the Buyer. That is 87% of the total. The Builder has already factored paying a finder’s fee into the price. The Builder will not rebate $1 of this money back to you. Builders laugh under their breath, when Buyers try this negotiating tactic, even though they will politely agree with you. Professional representation costs you $0, why would you fend for yourself, in a market you know almost nothing about? Buyers know less than 20% of what they actually need to know, to get a great deal. Having gone through the new home buying process hundreds of times with clients, we know all the pitfalls to avoid, and how to make the process go smoothly. Do not go it alone, get professional representation, it costs you $0. Not doing this is the most costly of the 3 mistakes. But everyone has heard the old saying, you can lead a horse to water. We are in the business of helping our customers solve a problem. Our ability to do that, is the sole reason we have a thriving business. We are here to help you through the entire process, and get a great deal.

4 Big Mistakes Investors make:
  1. INCOME... ContinuedThe rental income does not justify the $/sq. ft. purchase price.
  2. EXPENSES... Continued The monthly expenses are too high, relative to the property type and rental income produced.
  3. CAP RATE... Continued The capitalization rate is too low to justify the investment.
  4. HOA REGS... Continued The home owners association regulations are too restrictive, or do not permit the intended use. Frequently overlooked or glossed over by some sales people, the long run financial consequences are catastrophic if a mismatch occurs.
Avoid Costly $$$ Mistakes: Hire Brent. Costs you $0.