In bringing fresh eyes and ears to the business of buying and selling houses, we often hear from traditional real estate agents about the incredible value they offer customers. At the same time, these agents tell buyers not to worry about the 6% commission they typically charge because the SELLER will pay the cost on their behalf.
It is true that agent fees for both buyers and sellers come out of the seller’s side of the transaction, but it isn’t true the buyer doesn’t get hit. That’s because the fees are typically baked into the sale price of the house and then, when bundled into the loan for house, are hidden in the overall cost of the home.
But, if you think about it differently, that higher sales price ends up being a really big deal over time.
Let’s walk through it.
Let’s say you buy a $500,000 home. If you took away the 3% due to the buyer agent, your new home would have cost $485,000. That $15,000 difference equates to $42 a month over the course of a 30-year mortgage. Tacking on a typical interest rate, that $15,000 turns into $27,000 over the life of the loan. That equals $75 per month with interest included. Ouch.
Still think you aren’t paying for your buyers agent?
Maybe a better question would be: how would you feel if you had to cut a $75 check to your real estate agent every month for the next thirty years? That’s more than double the monthly cost of Netflix or Spotify for the whole family, and those services will probably bring you a lot more enjoyment.
REX gives you cash back when you buy a home. Learn more.
If you were a little unclear about how traditional agent commissions work, you weren’t alone. A recent survey of potential home sellers found that nearly 45% didn’t know that their 6% fee included the buyers agent fee. On top of that, a recent class-action lawsuit filed against, among others, the National Association of Realtors, accuses the organization of “implementing rules that prevent home sellers, home purchasers, and real estate brokers from negotiating over the commissions that home sellers pay. “
This scenario is one of the many reasons we started REX. Now, we can’t completely eliminate the costs associated with buying and selling a home — our agents and marketing team do a lot of legwork to connect a buyer with a home they’ll love. But 6% of the total home cost? C’mon. Those are by far the highest residential real estate commissions in the world. By organizing ourselves differently and using cutting edge technology, REX charges sellers a flat 2% and finds buyers directly. We aim to make money, but the real winners here are the consumers who work with us.