Having choices is good. For many, have having a choice represents freedom. For others, choice creates angst out of fear of making the wrong selection.
Dr. Barry Schwartz wrote about this phenomenon in his book “The Paradox of Choice.”
Schwartz describes that having too much choice can create negative well-being. This phenomenon also exists in real estate. Consumers have more choices in selling a home today than ever before. However, choosing the best option for you can be confusing, sometimes resulting in remorse. Do you choose a full-service agent, a limited service broker à la carte broker, private placement broker, or sell by owner?
Recently published research further supports the value of hiring a full-service real estate agent. A study conducted by Rutherford, Rutherford, Springer, and Mohr (limited Service Brokerage: Positive Broker Intermediation?” Journal of Real Estate Research: 2018, Vol. 40, No. 4, pp. 551-595) compared the outcome of using a limited service brokerage to a full service real estate agent. The results indicate that although the limited service brokerage time on market is similar to the full-service agent, your home sale price is likely to be less.
This study is welcome after years of conflicting studies. Some past studies indicated that limited service brokers yielded the same or increased sale price as full-service agents while other studies reached similar conclusions of Rutherford’s study, that using a limited service brokerage is likely to sell for less. The authors concede and discuss other factors that may influence results, such as housing market conditions. Studies that reported positive outcomes of limited service brokerages may have occurred during the go-go market prior to 2007.
How much commission should you pay? Conventional wisdom says that full-service agents are “full-price” (whatever that is) and expensive. However, that’s no longer true. Many full service, high quality agents charge as much (or as little) as discount brokers. A 2015 study by Barwick & Pathak (The costs of free entry: an empirical study of real estate agents in Greater Boston” The RAND Journal of Economics; Vol 46, No. 1, Spring 2015, p.103–145) indicated that increased Realtor competition has forced average commissions to decrease over the last few decades.
Of course, they found that the decreased commission structure of the full-service agent good for consumers and the housing market. They also concluded that decreased commissions would increase quality by decreasing entry into the industry for the wrong reasons.
To make better choices as a home seller, educate yourself. Understand what services are available and what it costs. You should ask yourself if the services can meet your expectations of helping you through the process of selling your home and, how will it impact your sale, time on market and price?
Unfortunately, the National Association of Realtors doesn’t do enough to educate consumers about their choices when buying and selling a home, including negotiating reduced commissions and buyer rebates. And I wouldn’t expect they will any time soon because of their mission (as stated on their website “The core purpose of the National Association of REALTORS® is to help its members become more profitable and successful.”
So how do you choose the best way to sell your home? Be a savvy home seller. Don’t stick to “conventional wisdom.” Explore your needs and expectations. Investigate your choices and ask questions. Don’t fall for sales tactics. And don’t be afraid to negotiate commission.
Dan Krell is a Realtor® with RE/MAX Success in Potomac, MD. You can access more information at DanKrell.com