Consumer Poll: Home Sellers Don't Understand Real Estate Commissions

Two perplexed people looking at their phones with the text: Home Sellers don't understand real estate commissions

 


 

BROKERAGE

Many homeowners are misinformed about how much it actually costs to sell a home, according to a new study of prospective home sellers.

Emerging technologies and data-driven startups are empowering consumers and fundamentally changing the way they buy and sell properties. What’s more, discount and nontraditional brokerages are challenging the longstanding reign of the traditional realtor model.

To get a clearer picture of the evolving role of the real estate agent—and the mindset of home sellers in 2019—St. Louis-based Clever Real Estate recently surveyed 1,000 Americans who indicated they were planning to sell their homes within the next year.

What they found was that the average homeowner remains ill-informed about real estate commissions. The survey found that 45 percent of home sellers didn’t know they were expected to pay the buyer’s agent commission.

The findings echo concerns voiced earlier in the year by the Consumer Federation of America, which called for improvement of disclosure laws, and an outright ban of dual agency.

Tom O’Shaughnessy, author of the report from Clever Real Estate, said the poll showed 37 percent of home sellers would consider dual agency, and 46 percent were unsure. These types of arrangements are controversial, as dual agents have no clear fiduciary responsibility to either party involved in the sale.

O’Shaughnessy said that despite wide-spread industry disruption, real estate professionals still have a crucial role to play in the home-selling process—and it’s unlikely that demand for their services is going to go away anytime soon. Most home sellers—even those trying to sell for sale by owner (FSBO)—still need a real estate agent. About 50 percent of respondents said they wouldn’t feel comfortable negotiating with buyers, and about 62 percent wouldn’t feel comfortable finding and completing the necessary paperwork for closing.

Clever’s poll found that many home sellers are on the fence about using a real estate agent, said O’Shaughnessy: 32 percent were unsure if they’d end up using an agent, and 14.5 percent said they were planning to try to sell FSBO.

Here are some other takeaways from the study:

  • Sellers are preparing for a housing market slowdown. Some 65 percent of respondents said they’re willing to wait longer for a better price versus 35 percent of respondents who said their No. 1 goal was to sell as quickly as possible.
  • Consumers are almost ready for AI technology in real estate. Approximately 50 percent of respondents said they would be willing to sell their home using an AI platform that finds potential buyers, and 37 percent believe existing AI tech could outperform a human real estate agent.
  • While many sellers use the internet to find and vet real estate agents, most (50%) said they rely on referrals from friends and family.
  • According to survey respondents, the most challenging part of selling a home is preparing it for sale (27%), followed by attracting buyers (20%), pricing it correctly (18%), finding a good real estate agent (13.5%), negotiating with buyers (10.7%), and handling all of the paperwork (9.7%)

The key takeaway is that many homeowners simply don’t understand all of the costs involved in selling a home. Real estate agents should set realistic expectations at the outset to avoid nasty surprises and difficult conversations further down the line. This is especially true for first time home sellers, who were 53 percent more likely to believe home buyers pay commissions than experienced home sellers.

This article originally appeared in the April 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019.
To read the rest of this issue & more, please visit our Real Trends page online.

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