Buyer Agent Commission and Buyer Agent Fee as a FSBO

Offering a Buyer Agent Commission or Buyer Agent Fee

One of the key decisions you can make in a for sale by owner situation is how to handle paying a buyer agent fee or commission. Most people probably don’t realize that you have a say in how much commission an agent can earn from the sale of your house. When you offer a buyer agent fee or buyer agent commission, you should take many factors into consideration. There is a certain amount of risk you take on by offering below market rate or nothing at all.

By not wanting to work with buyer agents, you can potentially eliminate a large portion of your potential buyers. The longer your home sits, the more likely you will have to price reduce your home. In many cases, by eliminating a buyer agent fee or commission, you can actually net less for your home. BlueMatch has sold hundreds of millions in real estate and never once have we successfully sold a home that offered less than 2% in buyer agent commission.

In this article, we will review a few case studies of sellers that offered well below market rate in buyer agent fees and commissions.

Intro to Real Estate Agent Commissions

There are actually two different real estate agent commissions on each house sale. There is the one for the buyer’s agent and one for the seller’s agent. When you have a for sale by owner (FSBO) situation, the seller’s agent commission isn’t a factor. (This is one of the main areas where BlueMatch saves you money). When you decides to sell with a traditional agent however, you are now responsible for both agent fees and commissions.

Buyer Agent Fee and Commission

This still leaves the question of the buyer agent fee or commission. As we’ll show below, you have a lot of control over this number as well. But having a (low) fixed commission can be a turnoff for a lot of agents. If they know they won’t make much money, they may not want to show your house to their clients. Agents also know that they will typically have to work harder when they work with a FSBO. If you factor in a low agent fee, you can see why agents would ultimately boycott your listing.

Even as a for sale by owner listing, you want to remain competitive when it comes to buyer agent commissions. Real estate works just like any other market. Supply and demand. Check out our vlog on the subject for a deep dive into this topic.

Are You Saving Money by Reducing Real Estate Agent Fees and Commissions?

Saving money by eliminating or reducing real estate agent commission is one way that people get more out of their home sale. But this isn’t a hard and fast rule. There’s a reason over 80% of home sales continue to use a traditional agent model. As a matter of fact, almost 90% of homes closed in the US are closed using a buyer agent in the transaction.

As we mentioned previously, remaining competitive with buyer agents typically benefits your net profit. Here are a few examples that reveal the importance of getting the buyer agent commission right.

Example 1: Stapleton

A quick glance at this MLS listing and it seems like this one flew off the market. Stapleton is a hot area in the Denver area and at the time, the average days on market was less than 9. But that’s not  the case here. As the image here shows, it was listed on November 1st, under contract on November 13th, and sold on December 8th, 2016, for $6,000 less than asking price.

saving money on real estate agents

 

But looking a bit more closely at the listing history tells a different story. This property was originally listed for sale in June 2016. We went and toured the house at that time and comped it at  about $515,000. The original listing was for $499,000, which is pretty close to our comp. In other words, the home was actually priced correctly right out of the chute. If BlueMatch would have listed this home, we would have priced it at $509,000 with a suggested buyer agent fee or commission of 2.8%.

This would translate to roughly $14,252. Sounds pretty steep. But as we come to find out, the 14K would have been a bargain in this particular case.

 

real estate buyer's agent commission

 

You’ll notice on that the buyer agent commission is a fixed $5,000. The listing history suggests that there wasn’t a lot of interest in this home, as there were a number of price drops in July ($485k) and September ($475k).

The sellers let the listing expire and didn’t re-list it until November so the ‘days of market’ counter reset. This time it was listed for $475,000, and ultimately sold for $469,000. Pulling a listing that has become stagnant to reset days on market is a common practice. It is also a practice that you should actively avoid if at all possible.

The final sale price was $30,000 lower than the original asking price. While the sellers saved about $10,000 on buyer agent commission (3% commission on $500,000 is $15,000 and they had a fixed fee of $5,000), they ended up losing way more in total sale price than they saved in a buyer agent fee.

Example 2: Elati

Next, let’s look at this house on Elati Street in Englewood, Colorado. This house was listed at the height of the summer selling season for $334,900. As you can see in the next image, the buyer agent fee is a fixed $2,500. The house went under contract in nine days, but ended up back on the market. The house did go under contract within a reasonable amount of time.

 

for sale by ownerreal estate agent commissions

 

Ultimately, the home sold at the end of June for $340,000. While this was for over asking price, did the sellers get as much out of their house as possible? Let’s consider the next example before answering that question.

Example 3: Elati Redux

This following listing is for house that is almost identical comp wise on the exact same street as our previous example. As far as comparisons go, they don’t get much closer than this.

As you can see from the first image, BlueMatch listed this home for $379,000 on September 1st and it closed on November 1st for $380,000. The home went under contract within days with multiple offers.

saving money on real estate agents

 

Looking at the next image for this home’s listing, you’ll notice that the buyer agent commission was set at 2.7%. This was slightly lower than the average in the area but it was still inline with fair market. This listing got an offer immediately, which was later withdrawn. We put the house back on the market on September 15th and were under contract in six days.

 

real estate agent buyer commission

A 2.7% buyer agent commission on the sale price worked out to about $10,260. And while it may seem like the other Elati seller got a better deal in terms of buyer agent commission, they also sacrificed $40,000 in the sale price. BlueMatch’s sellers netted an additional $30,000 over their neighbors even after paying the buyer agent fee.

Now keep in mind, BlueMatch does not financially benefit or see a dollar of the buyer agent fee. We simply follow the data to help our sellers make the best financial decision when it comes to listing and selling their home.

Competitive Real Estate Agent Buyer Commissions and FSBO

An interesting thing happens when we apply the BlueMatch approach to a for sale by owner home, that includes a more competitive buyer agent commission offering. Remember, when trying to calculate a buyer agent fee or commission, your number one goal should be what you net. Not what you save. If your goal is just to save money, by all means, offer nothing in buyer agent commission and list FSBO. This rarely (if ever) translates to netting more money at the end of your sale.

If your goal is to walk away with more money, you will need to have a strong game plan which should include a fair market buyer agent fee. If you are curious as to what fair market is in your area, you can always reach out to a local agent and ask. They are usually more than happy to help. You also can’t go wrong with the traditional flat 3% buyer agent commission. 3% is generally universal in virtually every market in the US.

Conclusion

Every home sale is different, but best practices still exist that are applicable across the board. Before you decide on an agent, let BlueMatch provide you with a free consultation about your home sale. BlueMatch helps you every step of the way, including figuring out the best buyer agent commission strategy for your situation. Remember, it is never too late to change your buyer agent fee or commission.

If you find that your home is lacking showings or interest, take a look at your buyer agent fee vs others around you. Are you inline with the market? Do you need to make an adjustment? You would be surprised at the turn around in interest once you make buyer agent fee corrections on your listing.

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