Mortgage rates were on a downward trend for 40 years from 1981 to 2021. As a general rule, when rates fall, real estate values rise, as you can now buy more for the same monthly payment. Now, here you are, 30 years in your forever home and considering calling it quits. But that $50,000 commission on your $1 million sale makes you feel sick to your stomach. I get it.
As the quarterback of my clients’ financial lives, I care that they end up with the highest amount possible in their bank account and that they can sleep at night through the process.
Here are six scenarios/situations where I think the agent can justify their cost.
1. You don’t want to move (but need to).
Whether it’s your kids, your knees or both telling you that you need to move, it’s probably not at the top of your wish list. When I started in this profession, a downsize was typically financially driven. Sell the $1 million house, buy the $500,000 condo in cash and pocket some of the money to increase your monthly cash flow.
In the market we’re in now, the new condo now costs the same as the house. The downsize is driven by health and maintenance. And you’re healthy enough, right? Once you engage an agent, it can be tough to get off that treadmill. Their job is to sell your home, and they will be in your ear to get that process started. This sounds negative, but I don’t mean it that way. It’s the same as getting in shape: You may want to hire a trainer to push you a bit.
2. Your home needs some work.
The “some” in that sentence is key. If your home is a wreck, and/or it’s in a very desirable location, that may move you into the category of selling directly to a builder, which is one of the reasons I list in my article Three Reasons Not to Use a Real Estate Agent When You Sell.
I view good agents as master allocators; i.e., they can tell you what to fix and what not to so you can get the biggest bang for your buck when you sell. Often, agents have ways for you to finance these projects as a loan. The loan is then paid back at closing. I would elect this option only if it is 0% interest, or if you don’t have the liquidity to fund the project on your own.
3. It’s a make-or-break financial move.
In metro areas like Washington, D.C., homes are expensive. Therefore, home equity often represents a significant portion of one’s balance sheet. If that’s the case, the outcome of your sale will have a domino effect on the rest of your financial situation. I view the DIY route as too risky in this scenario.
4. It’s a buyer’s market.
In a market where there are more sellers than buyers, it’s better to have more people on your team helping you sell. The agent plays many roles, but the two I view as most important in this scenario are how they market your home and the pool of buyers they bring to the table.
I have sold three homes with three different agents. On the selling side, I have always sought out those folks whose names I see on the most signs in my neighborhood. They have always been very present in the community, and I had little doubt about their ability to market the property.
More important, they have buyers. In their other transactions in the neighborhood, there were other interested parties who did not buy the home. This is a big advantage in an environment where buyers are harder to come by.
5. You’re uncomfortable negotiating.
The 5% commission you are worried about paying can be made up in the negotiation process alone. The best agents are adept in this arena, as they have the most at-bats.
However, negotiation does not come naturally to most people. If you want to sharpen your skills, I’d recommend reading the book Never Split the Difference by Chris Voss.
6. You don’t have a lot of time.
Yes, it may feel like you have more time once you’re retired, but the reality is you have less of it than you did yesterday. Scheduling showings, communicating with buyers’ agents and wiping the crumbs off the counter every time someone who is somewhat interested in your home comes through the door is a nightmare. You may have the space in your calendar to make it happen, but what is your time worth?
Selling your home is a big deal — a very big deal. Just as you wouldn’t get your knee replaced by a family friend doing their first surgery, you shouldn’t sell your home with your friend’s kid who’s banking on you for their first listing.
Your other financial professionals (CPA, attorney, financial planner) should have relationships with reputable professionals who they can coordinate with throughout the process. Happy selling!
