Home Sellers will Pocket Even More Cash When They Understand That Two Percent will not Deter any Buyer Broker

 

Copyright © 2014- 2019  AUTHOR: Paul R. Marino, REALTOR®, e-Pro®

 

This article is important to you home sellers out there that have wisely chosen to go the Flat Fee MLS listing route, or, in our case, even better, you've gone the FREE, Flat Fee MLS listing route. Even if you've been half asleep looking over some of our articles, you've probably figured out by now you're going to save a serious amount of money by listing with Landfall Properties, LLC. Straight out of the chute you're going to save at least 3% of your sale price. The chances of recouping even more money is now going to be a function of how well you finesse the buyer broker side of your transaction.

 

For the average home seller that only sells a home every ten or fifteen years, it may not be readily apparent what's going on in the world of real estate broker compensation.  It's important that you understand these subtle, behind the scenes nuances of this topic, because it will help you map out an intelligent marketing strategy that will ultimately lead to more money in your pocket on closing day. I would strongly encourage you to read a couple of my related prior posts, namely: "How Much do You Need to Compensate a Buyer Broker to Get Your Home Sold" and, one of my most detailed, tactical articles: "If You Want to Maximize Your Sale Proceeds, You Must Learn How to Handle an Inbound Buyer Lead"

 

Your hope of course, is to sell your home and pay nothing. Zero. But it doesn't always work out that way. I can tell you, having evaluated an abundance of hard, statistical data for all the transactions we've ever been involved with, that 31% of the time (nearly one in three), you will sell your home using our system, and pay absolutely nothing to any broker party. And in the other 69% of cases, it will be a buyer broker that brings in that all important ingredient to any successful sale - that being a fully qualified and vetted buyer. Buyer brokers are your friend. Never forget that, because that 69% figure I just cited looms very large. No worries...it's a heck of a lot better to walk away from the closing table with an additional $10,500 (on a typical $350,000 sale) in your pocket, than to get clobbered with a full fee $21,000 (6% of $350,000). 

 

The figures cited in the prior paragraph (31% have no buyer broker involved, while 69% do utilize a buyer broker), are Landfall Properties, LLC statistics. This is what we have calculated on our company wide transactions. But these numbers are remarkably close to what you see looking at all transactions, across the hundreds of real estate brokerages operating throughout New England. How do we know this? Because the data can be readily analyzed using statistical tools available to all the various state MLS systems (SmartMLS® in Connecticut, MLSPIN® in Massachusetts, NEREN® MLS in New Hampshire and Vermont, and the Maine Listings Flexmls® database in Maine.) It is a statistical fact that in nearly two out of every three sales, it is a broker other than the listing broker that brings in a buyer.

 

When most sellers list their home with a listing broker, few read the fine print. Most only care about one thing: "What kind of sales commission are you going to charge me?" It's entirely negotiable of course, but generally speaking, throughout New England, it generally runs in the 5% to 6% range. A very small percentage fall outside this range. But what many sellers may not be focused on is: "How much of that 5% to 6% commission that you are charging are you offering up to a buyer broker? It varies. There are no "rules" as this is a free and open market, and brokerages are at liberty to set this buyer broker "cut of the action" as high, or as low as they want. 

 

Buyer brokers obviously prefer a higher percentage. No surprise there. Some listing brokerages split the fee 50%/50%, while others keep the lion's share of the total commission. Many do a 60%/40% type split (i.e. 3.5% to the listing broker, and 2.5% to the buyer broker). In three decades of brokering properties, I have never seen a listing broker pay a buyer broker more than they themselves are earning. It's my personal opinion that the heavy lifting in any transaction is being performed by the buyer broker. This is especially true in today's market, which is characterized by a distinct shortage of housing inventory. In many markets throughout New England (not all, but many), properties are going under agreement in very abbreviated fashion, in many cases under 30 days. This is all the more reason why it makes sense to list with Landfall Properties, LLC, because in the end, it matters little who you list with (if you really want to know the gospel truth). The difference is, we do it for free, and others want to take five figures out of your hide.

 

I'm going to throw a critical number out there: 2% buyer broker payout. Having studied thousands of transactions over decades, this percentage is generally a minimum threshold number that will not cause a buyer broker to avoid you. Would the buyer broker prefer to see 2.5% or even 3%? Of course they would. But this isn't Disney World, and sometimes you just have to take what's offered and be happy with it.  I can tell you from personal experience that I have never avoided a property because it was offering a 2% buyer broker payout. At Landfall Properties, LLC, we put people in properties that best fit the needs and requirements of the client, regardless of the buyer broker payout. But guess what? We've never brokered a property at a figure below 2%.

 

One final observation. In the Internet age, buyers find their own properties (80% to 90% of the time). Buyers only bring a buyer broker on board to act as a buffer, and because, in most cases, it costs them nothing. So, because buyers find their own properties, they are generally calling up their buyer broker and just rattling off MLS numbers. From there, the buyer broker sets the appointments, and plans the house tour. Let's pretend for a moment that a buyer calls up their buyer broker and says: "We want to see property A, B, C, D, and E on Saturday."  The broker pulls up the listings, and notices that one of them is paying 3%, two of them are paying 2.5%, one of them is paying 2% and a final one is paying only 1.5%. Well as it turns out, that property paying just 1.5% might be the best match for a particular client. Do you really believe a buyer broker can successfully steer a buyer away from a property with a paltry 1.5% payout, and concoct an excuse that the property "Just isn't right for you." Trust me, buyers today are very savvy and sophisticated. And if a buyer broker were to pull a stunt like this, their cover would be blown very quickly, and the buyer would head for the hills on very short order.

 

SUMMARY DATA: After examining all the Landfall Properties, LLC data from our Flat Fee MLS clients, the following percentages are derived. The range of our seller buyer broker payouts has been 1% to 3.5%. In those instances where a buyer broker is involved, the average payout has been 2.28%.

 

0% buyer broker payout = 31% of the time (no broker party of any kind was involved in the transaction)

1% buyer broker payout = 3% of the time

2% buyer broker payout = 25% of the time

2.5% buyer broker payout = 26% of the time

3.0% buyer broker payout = 12% of the time

3.5% buyer broker payout = 3% of the time