Let’s start with understanding how your agent gets paid. Your agent (most agents) gets a commission (% of the sale price) that they collect either from the buyer or seller. Usually if two agents are involved they split the commission but check as some agents have different arrangements. For Instance if the house involved sold for $300,000 and there is a 6% commission that would be $18,000 in commission. Now if the buyer and seller agents split the commission 50/50 that would be $9,000 each. Watch this video that explains how an agent’s commission is split up: http://www.youtube.com/watch?v=17jO_w6f8Ck
A lot of people ask me “well if I have an agent when I want to buy a property what incentive do they have to get me the lowest price if their commission is based on the sales price?” My answer is that is a very good questions and that is when you need to get the answers from the agent during the interview process. What we have been told by agents with years of experience is that you want to get your client the best price as they are probably your best marketing tool. They would rather get 10 clients good deals (volume) then get 1 client a bad deal but they make more commission. Agents count on word of mouth.
What would I recommend to my mom (as an appraiser) if she wanted to sell her home? First I would tell her get an appraisal done. The appraiser has no financial interest in your property and will give you an opinion of the value of your home. Would you go talk to the used car dealer about selling your car without checking the prices in the Kelly Blue Book? Another reason for getting an appraisal is you may interview a couple of different agents and some agents may give you a high listing price so they can get the listing but since you can’t sell at that price it sits on the market for months (most people sign exclusive listings). Also you want to know your house will appraise for an amount that potential buyers can get mortgages for. For example everyone agrees to the purchase price of $350,000 but the house appraises at $300,000 and a second appraisal is done and it comes in at $325,000; do you think the bank is going to lend $350,000 on a house that is not valued at that price?; more than likely not. The Buyer may have to come up with an additional $50,000 or walk on the deal. As a buyer you can use an appraisal as a negotiation tool. Sure if you finance you will need an appraisal but what if that appraisal saved you $25,000 to $50,000 in the negotiation, would it be worth it? Remember the price is usually agreed upon before the appraiser for the loan comes to the property.
If you have additional appraisal questions contact the appraisers at http://www.socalappraisalserv.com
Disclaimer: For Information and Entertainment Purposes Only
Green Real Estate Appraiser 