Agent Commissions
One of the criteria sellers use to select a listing agent is price so I thought it might be helpful to put together a document dedicated to the expenses associated with selling a home. While the majority of expenses do not vary from agent to agent, the commission certainly does. Commission is by far the biggest item on the list of selling expenses. Commission to the listing agent generally ranges from 2.5% – 3.0% depending primarily on the price of the home and the company you choose to list your home with.
Menlo Atherton Realty charges only 1.0% (subject to minimums – call for details) to sell your home, which is a savings of 1.0% – 2.0% over other firms. These savings often help bridge the price gap between buyers and sellers. While it is possible to find firms offering even lower commission rates, service level and competence is often much lower as well.
Buyer’s Agent Commission
All commissions are completely negotiable! That said, there are some norms. Here are some guidelines to give you a sense of what to expect.
- Price – by far this is the single biggest factor which determines how much commission sellers offer to a buyer’s agent. Homes priced below $600k will normally offer a 3.0% buyer’s agent commission. Homes priced above $1.0m will normally offer a 2.5% buyer’s agent commission. As you can see, there is a gap between $600k and $1.0m. This is a grey area where you will see some sellers offering 2.5% and some sellers offering 3.0%.
- Location – the better the location the more power a seller has to offer a lower commission rate without impacting. A home in a highly sought after school district is a great example of commission pricing power resting in the hands of sellers.
- Market Strength – when the market is hot sellers have more flexibility to lower the commission rate.
- Statistics – in some areas and markets which rarely see a strong market there is a correlation between buyer’s agent commission and how long it takes to sell a home. I will look for these correlations in recent sales data for your neighborhood and present to you my findings.
Peninsula Home Selling Costs | Preparing Your Home For Sale
Staging
Staging is the art of preparing the interior of a home for sale. Staging can be as simple as rearranging your existing furniture or as involved as removing all of your furniture and replacing it with “staged” furniture and decorations. The cost of staging varies proportionately with the size of the home, the quality of the staging items and how extensively the home is staged.
Another option is to pay for a stager to consult on an hourly basis to guide the seller in making the most of their current furniture and decorations. The option yielding the best sales results is to have the stager partially of fully furnish and decorate your home. The fee for staging an entire home varies greatly depending on the size of the home and the quality of the furnishings as well as the skill of the stager.
A basic consultation can be as low as $250+ and a basic staging package can be as low as $2,000.Staging is generally considered to have a greater than 100% return on investment. Meaning any money you spend on staging should be fully returned to you in the form of a higher sales price. Usually, it’s quite a bit more. My wife owns her own staging and decorating firm called “First Impression Design & Staging.” She provides many of our clients with various levels of staging services. As part of our standard listing services she will come out for a complementary consultation. If you are determined to not use any staging services she will advise you on how to best enhance your home’s appearance.
Inspection Reports
Inspection reports are an essential part of a clean and well-presented listing. When a buyer’s agent sees that inspection reports are missing it raises questions. Those questions often result in lower offers from buyers. Here is a list of the various reports sellers should obtain prior to putting their home on the market:
- Property Inspection – this is the most critical of reports in terms of price & importance and is essential in our quest to present a clean and well-prepared listing to the buying public. The cost of inspection reports can be as low as $350 for a tiny home or townhouse and can be as much as $1,200 for a large home in the 4,000+ square foot range. This type of inspection provides a fairly detailed review of all aspects of the property. Inspectors will even go into the attic and crawl space to complete their inspection. This inspection report will detail any and all observations made by the inspector. For some types of defects (foundation, mold etc) the inspector may call for additional inspections by a licensed professional specializing in that specific type of repair.
- Termite Inspection – Price approximately $250-400 depending on the building type & size. This inspection covers not only termites but all types of wood destroying pests and organisms – most commonly: dry rot, fungus & mold.
- Roof Inspection – Price approximately $150.
- Environmental Hazards Report – Price approximately $125. This covers a wide range of naturally occur-ring environmental hazards as well as an array of other miscellaneous information. Some of the most important topics covered are: proximity to earthquake faults, fire hazards, flood zones, landslide zone proximity, airport proximity, special tax assessment districts and a host of other issues.
- Home Insurance Claims History Report – Price approximately $25. This report lists any homeowner’s insurance claims registered at the address of the home being sold. A number of years back the insurance industry got together and created a claims database, which all companies share.
- Preliminary Title Report – Free. This report covers: lot boundary description, tax assessments, judgments & liens, easements across the property by PG&E, horse trails, walking paths etc. It also contains covenants, conditions and restrictions “CC&Rs” affecting the property.
- HOA Docs (if applicable) – Price approximately $300. Price varies from development to development. If you are selling a home which is part of a homeowner’s association you will need to get a full set of the HOA docs which contain: bylaws, budgets, minutes, meeting notes, articles of incorporation, CC&Rs, financial statements as well as a variety of other documentation. The purchase contract states the seller is responsible for providing a copy of these documents to the buyer. You may as well order them now while time is on your side. Some homeowner’s associations are quite slow in responding to this type of request.
Home Repairs/Improvements
In most cases it makes sense to spend money on repairs in an effort to present buyers with a clean listing free of question marks. Spending money on repairs before you list your home can pay big dividends when a buyer comes to the table. Click here to learn more about making home repairs prior to putting it up for sale.
Marketing
Menlo Atherton Realty will market your home in a variety of ways, most of them online. Click here for more information about our marketing services.
Newspaper Advertising
Print advertising is an open checkbook. You can spend as much or as little as you like and unfortunately there is no correlation between the amount spent and results achieved. This fact doesn’t sit well with most sellers. When a seller doesn’t have to pay for advertising they often want to advertise, advertise and advertise some more. The more the merrier.
However, once sellers realize they pay for their own advertising one way or the other, they begin to carefully scrutinize the whole advertising process and question the cost versus the benefits. Once they do this analysis they quickly realize it makes more sense to look at advertising just like a business; does it make sense? Can I see a return on my investment?
Peninsula Closing Costs
- Settlement/Closing Fee – A fee must be paid to a settlement agent who prepares documents for closing, calculates figures and oversees proper execution of closing documents. This fee is paid by the buyer in San Mateo County and by the seller in Santa Clara County.
- Document Preparation – Some settlement agents charge for the cost of preparing legal papers such as deed of trust, note or deed and/or other loan and title documentation.
- Notary Fee – Because there are legal documents involved, a licensed notary is required to acknowledge the fact that the proper people have signed these official documents in their presence.
- Recording Fees – The recording fee is paid to a government body which enters an official record of the change of ownership.
- Wire transfers
- Recording, Notary, Wiring and Document Preparation Fees – These fees from the title company generally total about $300.
Owner’s Title Insurance
Abstract of Title, Search, Title Examination, Title Insurance Commitment or Binder – In order to ensure there are no pre-existing problems with your property, a title insurance professional must perform a title search and produce some analysis documentation on the home’s title. When a mortgage loan is involved, there may also be added charges for special endorsements that will accompany the lender’s title policy.
City Transfer Taxes
Transfer taxes, which can be a large factor in closing costs and vary depending upon which city the property is located in. Three cities in Santa Clara County have city transfer taxes – Palo Alto, Mountain View and San Jose. This transfer tax is the same for all 3 cities, $3,300 per million is split evenly between buyer and seller. In San Mateo County the only city with a transfer tax is San Mateo. The rate in San Mateo is $5,000 per million and is split evenly between buyer and seller.
County Transfer Taxes
Santa Clara & San Mateo Counties levy a transfer tax of $1,100 per million based on the sales price. This tax is paid entirely by the seller in both counties.
Property Taxes
Property taxes are prorated, in that the seller pays the property tax until COE (close of escrow). The buyer starts paying the property tax once the property is transferred and the escrow closes. Whether property tax shows up on your closing statement as a debit and increases your closing costs or as a credit and reduces your closing costs depends upon what point in the property tax billing cycle your home is sold and whether you have already paid your upcoming property tax bill.
To summarize, total closing costs should be approximately one half of one percent of your sale price, or $5,000 on a million dollar sale. Real estate closing costs often take sellers by surprise because they are uninformed regarding the extent and source of these costs. The more information you have ahead of time the smoother the process will be when it comes time to close escrow. If you have questions about any expenses associated with the home sale process please call me. I’ll be happy to discuss this and any other questions you have in greater detail.
At Menlo Atherton Realty, our discount commission realtors work with home sellers who are serious about selling their home. They recognize and appreciate the merits of our progressive real estate business model. Our home sellers understand that using a Menlo Atherton Realty discount realtor will allow them greater flexibility during buyer negotiations because they are saving money in listing realtor commissions. Are you a potential Menlo Atherton Realty home seller? If so, please call us at 650.630.3313 to set up an appointment for one of our discount real estate brokers to come meet you, tour your home, and discuss our realty sales and marketing strategies with you. We will evaluate your home free of charge or obligation. You can fill out the “What is my home worth” form above. Defend your home’s equity against the armies of the 6% commission realtors! Let a Menlo Atherton Realty discount real estate broker show you how.
