Here’s How Much Money You Can Save by Being Your Own Real Estate Agent
A recent legal settlement between the National Association of Realtors (NAR) and a group of homebuyers could fundamentally change the way people buy and sell homes in the United States. The $418 million agreement, which still needs approval from a federal judge, will allow homebuyers to negotiate the commissions they pay to their agents, potentially saving them tens of thousands of dollars in the process.
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Under the current system, home sellers typically pay a commission of around 5-6% of the sale price, which is then split between the buyer’s and seller’s agents. However, the new settlement will remove the requirement for sellers to include and list buyer’s agent commissions in their listings, making it so that buyers are responsible for paying their own agent’s fees.
It’s a potential game changer that could save people who are buying and selling homes. Let’s break it down with some helpful insight from experts.
The Pros of Being Your Own Real Estate Agent
One of the biggest advantages of being your own real estate agent is the potential cost savings. As Seamus Nally, CEO of TurboTenant, explained, “Once this change goes into effect, one of the most notable shifts in the industry will be that sellers won’t be responsible for the buyer’s agent’s commission in a home sale. Typically, a buyer’s agent and a seller’s agent will split the commission of around 5-6% of the sale price, and historically the seller has paid that, but now the buyer will be responsible for the 2-3% split for their agent.”
He continued, “That’s no small amount either — it’s tens of thousands of dollars in most cases. So, by being one’s own agent, that added cost on top of the home purchase can be eliminated altogether.”
For experienced buyers, the new settlement could provide even more financial benefits.
According to Amanda Orson, CEO of Galleon, a tech platform for self-represented buyers and “for sale by owner” sellers, “Experienced buyers will not be forced to use an agent — increasing their financial power in offers if they choose to not use an agent or take on the expense of an agent themselves. In many real estate transactions, the only truly necessary professional fee could be a real estate attorney, with a fee as little as $750.”
This has the potential to save people anywhere from thousands of dollars to millions of dollars, depending on the cost of the house.
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The Cons of Being Your Own Real Estate Agent
While the potential cost savings are significant, there are also some drawbacks to being your own real estate agent, particularly for inexperienced buyers.
As Orson pointed out, “The pros of using an agent in the buying process relate to how experienced of a buyer you are. For many first-time or inexperienced homebuyers, agents provide guidance throughout the transaction, assist buyers in selecting and scheduling the various third-parties involved in the transaction such as inspectors and mortgage professionals, and in general provide a source of comfort for buyers dealing with one of the largest financial transactions in their life.”
Nancy Pav of Century 21 Redwood Realty illustrated this point with a recent example from her own experience: “I was showing houses last week when my clients found a home they loved. It was updated on a nice piece of land. As I did some research I saw that one of the major roads in the area was going to put a bypass through. As I dug further, I saw that the bypass was going to go right through the property! This means that either part of their land will be taken by eminent domain and their peaceful property would become like living by the Daytona Speedway or the entire property would be taken by eminent domain. It’s a lose/lose for whomever buys the property. If a buyer didn’t have representation, would they get this kind of information? Maybe. Would they understand the ramifications of it? Maybe but more than likely no.”
The Future of Real Estate
The NAR settlement will most likely have some big consequences for the entire real estate industry. Orson predicts there will be fewer buyer agents.
“The demand will simply not be there and only the ones offering the highest quality service or niche services will prevail. Second will be a consolidation and exits of brokerages as margins are compressed. And third will be the emergence of new tools and services that assist buyers facilitating transactions outside of the standard buyer-agent NAR model,” she said.
Omer Reiner, a licensed Realtor, entrepreneur and president of FL Cash Home Buyers, LLC, cautioned that while cutting out an agent can save on transaction fees, “what you lose doing this is the knowledge and experience with the market and best marketing practices that real estate agents bring to the table.”
He added that “statistics show that selling a home on your own will bring you a lower sales price. You have to weigh whether taking on the extra tasks that an agent provides and facing a longer time before the home sells is worth what could be a fairly small extra bit of cash.”
Ultimately, the decision to use a real estate agent or go it alone will depend on each buyer’s experience, comfort level and financial situation. Yes, the potential for savings is very enticing, but the expertise of a skilled agent might be worth the extra money — especially if this is your first foray into real estate.
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This article originally appeared on GOBankingRates.com: Here’s How Much Money You Can Save by Being Your Own Real Estate Agent
