Why your Realtor doesn’t care about selling your home for the highest price

Real Estate Agent- Selling Your Home for the Highest PriceIf you’ve decided to hire a real estate broker, you’re most likely expecting them to have your best interests in mind, especially when it comes to selling your house for the highest price possible. After all, your real estate agent will make a percentage of your home’s final selling price—so logically, the more your property sells for, the better for everyone. Right?

Unfortunately, this is not always the case. In fact, many real estate agents are more interested in selling your home quickly, rather than waiting for the highest price.

The reasoning behind this is explained thoroughly in the popular book turned documentary, “Freakonomics”, by Steven D. Levitt and Stephen J. Dubner. The following clip offers some insight on the subject:

As Levitt and Dubner explain, that real estate agents will list their own property for approximately 10 days longer than average, and sell it for about 3% more than another home with the same market value.

These statistics suggest that by leaving your home on the market for longer, you’ll increase the likelihood of receiving higher offers, making for a better profit for you, and therefore a higher cut for your real estate agent.

That said, realtors will often try to scare their clients into accepting offers below asking price by using lines like “The market is changing everyday, and there’s a good chance your house will be worth even less by tomorrow.”

Here’s why your interests may not always be aligned:

Real estate agents usually receive a commission fee of about 6%.  Therefore, by selling your house for say $200 000 as opposed to $190 000, you will receive an extra $9400, with $600 going to commission.

While these numbers look advantageous on both sides, the catch is that commission fees are usually divided three ways meaning

  • $150 for your real estate agent
  • $150 for your real estate agent’s firm
  • $300 for the buyer’s agent

The math leads two to options for your agent:

  • Sell your house as soon as possible for $190 000 with a $11 400 commission fee, and reap a personal profit of $2850
  • Put in two more weeks’ worth of hard work to sell your house for $200 000 with a $12 000 commission fee, and a personal profit of $3000.

After considering these numbers, the wait is clearly not worth it from your
real estate agent’s perspective. While you, the homeowner, receive a substantial incentive, your agent receives a bonus of just $150 for wasting two weeks that could be spent working on another large commission. The numbers say it all.

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