9% fees for Selling a House? Really?

Question

Hi everyone.  Wanting to not hijack the other thread about RE agents - we are going to be looking at selling 2x houses, one of which is an under-performing $100-150/mo cash flow house that we think we have something like $50-85k equity, the other is a house that we think is worth $165-185k in a regular market that we own outright.

We have been working with an agent for awhile, as investors.  He's been responsive, been transparent for the most part, and some other intangibles.  We'd like to reward the effort of all the low dollar transactions on the buy side --- HOWEVER...  in my first conversation with him he suggested mentally budgeting 9% of the sale price for commissions and other costs from the seller side?  Seems CRAZY!

I like FSBO; it worked well for me. I'm wondering for you agents and folks out there, can you give me some perspective? 9% just sounds like a ton of money right off the top, and I'm struggling to see the value there.

Please give me some perspective here.  Although I'd like to reward this agent, I'm thinking more about the FSBO or flat fee stuff, at this point.  We had talked about my wife getting her license but that timing and goal is now on hold.

Jay Hinrichs · Answer

Jim,  on lower priced properties like your talking about i budget 10%..  6% commission and you will almost certainly be asked to help the buyer with their loan fees and closing costs ( if your selling to a owner occ) at those price points its almost a 100% guarantee that will happen.. then you have your seller paid title insurance and your side of the closing costs. so 4 to 5% will happen if you FSBO it.. In my sales day if we were in a really tough sales environment and it was lower end properties ( late 70s to mid 80s) I charged anywhere from 10 to 25% commissions..  other wise not worth my time.. so on a 50k prop that took a year to sell and advertise etc need to make 5 to 10k.. cant do it for 1500 bucks.. better to flip burgers.. And I was selling land.. not houses.. but same thing on cheap houses I would want at least 10%..  if not more.thats why U see wholesalers dominate that they make 10 to 30% easy when they actually close something just the seller or buyers does not realize many times.

Joseph Cacciapaglia · Answer

8-9% total costs to the seller is relatively normal in many markets. This usually includes 2-3% in closing costs and pro rated expenses, plus your agent's commission. If you are exploring a flat fee method of putting it on the MLS, you should understand that you will still pay your closing costs and most likely be paying a commission to the buyer's agent. There are very few buyers out there that buy directly from FSBOs, and the ones that do are usually shopping for a great deal. So, then you really may just be looking at saving 3% by doing it all yourself. Once you subtract any flat fee that you're paying and any marketing costs, and accounting for your time, it's often not very beneficial to try to do it yourself.

I've been in this industry as an agent and investor for 15+ years. I've often owned investment properties in states where I wasn't licensed, and I always opted to use an agent. The way the market works in most states, you're almost always better off doing so. I'm sure someone on here will tell you about how they sell by owner and get full market price, and maybe that's true. However, the numbers don't support that as a widespread practice.

Theresa Harris · Answer

I don't think $165-185K is a low priced home based on what I've seen posted here.  The 9% as others have said includes closing costs, lawyer's fees and commission.  That is probably about right.

Joe Cassandra · Answer

Likely it's budgeted as:

- 6% realtor commissions

-1-2% CC to buyer

- 1% - other misc + REPAIRS (some of the 1-2% CC could also even these out)

-----

We just sold a flip for $339k...paid 8.2% when all was said and done.

- 4.5% to realtor

- 3.0% in helping buyer's CC

- ~1% in misc repairs

You do the math and that's about $27,000 in selling fees. We needed to dump it fast as the HML interest was very high and on a balloon.

We received a couple offers, but most of the other offers were similar. They'd want $5k+ in CC plus would likely ask for $3-5k in repairs.

It's the unfortunate part of selling a house. We had fixed it up nice too...and they still had crap to complain about :)

Wayne Brooks · Answer

@Jim Goebel That’s your Total costs....5-6% commission, closing costs, transfer taxes, etc, etc.

Jim Goebel · Answer

Gotcha, that's helpful.  I'll explore some of these things.  One is rented currently but her communication has been challenging, so we'll probably just wait til lease is up in June and then list it vacant.  The other higher value house is vacant.

Hopefully our primary agent doesn't take it personally if I'm open I'm exploring other avenues to list, too.

I seem to remember some states brokers and lobbying efforts making FSBO a lot less possible/friendly, and I can't remember how Iowa falls because we haven't listed something here that way before.

Jay Hinrichs · Answer

I don't know your market but up until a month or so ago.. the main thing you need is MLS exposure.. how ever you get it on MLS is key.

In many markets there are brokers that will do limited rep listings  IE just put it on MLS with your phone number as the contact. and charge like 500.00 bucks.. while I think that is risking your license and I would not personally do it.. I know it exists in certain markets.

are the properties vacant  or are there tenants there that have to be notified .. ?? that's a big issue these days.

also on seller prepaids if your selling to an investor you can push back on that one..  I thought these were going to a first time buyer FHA VA type of thing..

good luck with it.. !!!

Jim Goebel · Answer

@Jay Hinrichs

Jay what's your take on the flat fee stuff or FSBO, for someone like me? - ie: investor, we're already used to some of the basics of these transactions, can take good pictures, etc.  We're also not going to get beat up by buyers agents because we're going to be listing the properties as rentals, too as a hedge against not getting the price that we want.

9% fees for Selling a House? Really?

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