Wednesday, November 09, 2005
Why you Should Use A Realtor
It's not unfair or unreasonable for consumers to ask
about the fees brokers
charge. Most people only buy or sell homes
infrequently, they are not
familiar with what brokers do or the complexity of
For these reasons, I often find it useful to explain
some of the time
commitments and financial costs that go into
transactions. I explain to
consumers that -- like them -- I need to make
certain assumptions, I based
the figures below on a $75,000 annual income and in
our market I expect
that a typical house will take 16 weeks to sell.
I also need to establish an hourly billing rate to
show the value of my time.
I've picked $40 -- not a lot in many metro centers
and perhaps not reflective
of my training and experience, but a reasonable
figure in the Knoxville area I
So how do the numbers add up? Let's take a look:
1.First Visit. It's important to visit with a
consumer. Figure one hour for
the first visit, $40.
2.Comparative Market Analysis. If I'm representing
a seller, or if I'm
helping a buyer bid on a property, then I need
to do a thorough
market analysis. This typically takes two hours
3.Listing Appointment, Measuring, and
Consultation. When a home is
listed, it's important to make certain that the
listing information is
correct, tour and home with the owner and
suggest "fix up" type
items to make the home more appealing to buyers,
and also to
review the marketing process with the owner.
Three hours, $120.
4.Sign and Lockbox. In some areas of the country
larger firms will have
specialists who install signs and lockboxes. In
our area, that's a job
for most licensees. Thirty minutes, $20.
5.Photography. I want to have a good set of
prospective buyers and also for my records. In
this case, I have costs
for time, film, and development, or if you use a
digital camera there
are still costs for photo paper, discs, etc. $50.
6.Broker Open House. Because I have been active in
my market for
many years I may know of prospective buyers at
the time a property
is listed. However, owners are best served by
having the property
shown to a wide array of possible purchasers and
for this reason I
ask other members of the brokerage community to
view the property
privately. Given four hours of time,
refreshments and promotion my
cost is typically $385.
7.Advertising preparation and placement including
Real estate brokers are really local marketing
experts and part of the
marketing process involves paid advertising. It
takes time to write
strong ads and place them in appropriate media.
I allocate six hours
for this purpose, a total of $240 for my time.
There are various hard costs associated with my
marketing efforts. A
reasonable break-down might include:
*The preparation of 100 brochure box flyers and
their delivery, $39.00
for printing and two hours of time, a total of
*The cost of advertising can vary extensively,
depending on how long
a property is on the market, which advertising
venues are selected,
etc. In my market, figure a minimum of $72.
*Before you can advertise, you need to create
With one hour of my time and the cost of
graphics, the cost is
*Graphics are great, but they need to be
distributed. It takes 30
*I have certain areas where I concentrate my
services, what most
people in real estate call a "farm." I write and
send out "Just Listed"
cards to my farms, an activity which takes three
hours and has some
minor costs, a total of $130.
*A major part of my marketing program involves
by mail to my farms and to prospects who I feel
may be interested in
a listing. My stamp cost is about $42, an
expense that will rise
somewhat with the recent postal increase.
*A large percentage of all transactions involve
buyers brought in by
other brokers and salespeople. I produce special
for other brokers that are active in the area
where my listing are
located. It takes three hours and I have some
hard costs, so the total
*For many listings I find it useful to install a
"Talking House" radio
transmitter. This allows individuals driving by
to obtain basic
information, something many consumers like. It
takes three hours to
write, record, and install a single "Talking
8.Communicating with clients is a top priority.
They want to know
what's happening, and I want them to be aware of
all changes and
contacts that may impact their transaction. Over
the course of a
listing, I estimate that 8 hours are spent
talking about market events,
showings feedback, and other calls with clients,
a total of $320.
9.One of the most time-consuming activities I face
is the matter of
scheduling appointments. It's often difficult to
arrange open houses
for individuals who are busy, or who may be in
town for just a few
days. Over the course of a listing I probably
spend 16 hours arranging
and holding appointments for prospective buyers,
10.It's good news when someone likes a property.
Their first instinct is
to go back and examine the home with care,
encourage. I often spend 8 hours (over the
entire listing period) with
follow-up showings for a single home, $320.
11.Once a buyer elects to make an offer, we then
enter the negotiating
process. Depending on the particular property,
this activity can take
from 6 to 12 hours -- $480 to $960.
12.After a contract has been signed, there is often
a lot of follow-up work
required to assist the parties with the various
details needed to
complete the transaction. This process also can
take from 6 to 12
hours, $480 to $960.
13.In recent years it has become entirely common to
schedule a variety
of inspections and checks as a condition of the
sale. I typically meet
with mechanical inspectors (3 hours), termite
inspectors (1 hour),
and appraisers (1 hour) -- a total of five
hours, or $200.
14.If all goes well, and it usually does, we then
must prepare for closing.
I generally allot 1 hour to review closing
papers as well as 1 hour to
physically attend the closing, $40.
My costs? Between roughly $4,150 and $5,100 for a
home on the market 16
At this point, someone will look at such numbers and
say, "wait a minute.
You sell homes with an average price of almost
$210,000. Commissions are
negotiable, but if you get what HUD allows for the
sale of its properties -- 6
percent -- then your fee is $12,600. Isn't that a
The math here is fine, but the facts are not quite
First, not all homes sell. Even for someone with my
experience, there is risk
every time a home is listed -- there are no "sure
Second, I don't get all the money. If there is
another broker involved who
brings in a purchaser, he or she gets a portion of
Third, even if there is no other broker involved,
the commission is typically
split between a broker and agent. Even in a 100%
like Realty Executives or Re/Max there are still
company fees that must be
paid in exchange for the agent keeping 100% of the
average about $1,000 per month not counting any
other costs such as
advertising, marketing, etc.
These factors, and others, explain why there is a
lot of turn-over in real
estate -- and why individuals like myself work hard
and take risks to earn