Do REALTORS Even Matter?
By Seb Frey
In a real estate market as hot as this, where homes appear to “sell themselves,” it’s a fair question: do REALTORS even matter? I’m going to give you an answer that may surprise you…considering that I myself am a REALTOR, and have been for 19 years. In fact, I was even President of the Santa Cruz County Association of REALTORS in 2019 so I consider myself something of an authority on the subject.
I won’t bury the lede here. I’m going to come right out and say it: no, REALTORS do not matter…if you don’t believe they matter. When it comes to answering this question, what you believe matters, because a lot of people believe that when it comes to selling a home, it’s the real estate market that determines how much you’ll be able to sell it for.
This is a very commonly held belief. There’s a real estate market, and so there’s a market price for your home. The market is going to pay what the market is going to pay, in which case, why would a hiring a REALTOR even matter?
Yet something like 91% of homes in California are sold with the assistance of a REALTOR. The other 9%? This is mostly eaten up by new construction sold directly by home builders, and family members selling their property to other family, friends, or neighbors. Locally, very few homes are sold without a REALTOR to a buyer who had no pre-existing connection to a seller.
So why do so may choose to hire a REALTOR? I’m going to posit that the reason for the dominant use of REALTORS is because owners see some value in using one. But given the high dollar cost of the average commission, people have to ask: are REALTORS really worth that much?
Another good question! I’d guess it wouldn’t surprise you to read that some house painters are better than other house painters. Or that some doctors or lawyers are better than others in their respective fields. It’s not too much of a stretch then to suppose that in fact, some REALTORS provide better service, or provide better value, than other REALTORS.
So it’s interesting that most REALTORS charge almost exactly the same fee. And it’s important to note that there is no standard commission, and that commissions are always negotiable. But I’ve researched MLS data, and I’ve verified that there appears to be one particular commission rate that the overwhelming majority of Santa Cruz REALTORS charge.
Now why, if there’s surely a wide difference in REALTORS in their level of skill and service, are the fees so similar? I believe the answer to this is that few people actually try to negotiate the commission. They just accept it as a the “standard” and pay it, because most everyone else pays it too.
So why not talk to a REALTOR about lowering the fee? I’m suggesting here that it’s a good idea you do so. Try to see if your REALTOR will accept a lower fee than whatever you think most REALTORS charge, or what they tell you their fee is. And then, if the REALTOR does in fact accept a lower fee … you probably shouldn’t use that agent.
Say WHAT? That’s right. Here’s the thing: if a REALTOR can’t successfully negotiate their own commission, if they do not believe in the value they bring to the transaction, why would you want that person to represent you in the largest financial transaction of your life? How could you trust that person to negotiate for your money, when they can’t do a good job negotiating their own?
It could be you think that isn’t important, because after all, the market pretty much sets the price. What’s missing here is the understanding is that the market price is really a negotiated market price. And your REALTOR’s ability to negotiate the price (and terms) of the sale of your property to net you the most money possible is one way (of many!) where REALTORS can really prove their worth – or demonstrate their lack thereof.
Even in a super-hot market like this one – where houses “sell themselves” and home owners often receive several offers in a short time, a REALTOR’s ability to negotiate the best price for you can literally mean tens of thousands of dollars – or more! – extra on the sale of your home.
If a REALTOR has a demonstrated inability to be a strong negotiator, as evidenced by their weakness in standing firmly on their commission and exhibiting confidence in the value of the service they provide, it’s a good bet that they will be be unable to extract the very highest price possible from the plethora of buyers you will no doubt find for your home.
Turns out, REALTORS do matter, if you understand how and why.
Seb Frey was the 2019 President of the Santa Cruz County Association of REALTORS. He’s been selling homes locally since 2003 and is the author of Get It Sold! (available at TheSoldBook.com) and stars on his own YouTube channel at YouTube.com/SebFreyTV