What if you could have all the advantages of a real estate agent without paying a commission fee?
Aaron Hendon, who is a 5-Star Realtor with Keller-Williams Greater Seattle, says you can! In our recent conversation, he explained how to find a realtor that can sell your property above asking price in order to cover the agent commission.
Best Ever Advice?
Aaron’s Best Real Estate Investing Advice Ever is “get a good realtor partner.”
“Don’t go cheap when it comes time to find the professional that’s going to sell that home,” he said. “A good realtor, and if you interview a realtor well, he should be able to get you more money at sale than doing it yourself or doing it with a discount broker.”
You may be thinking, well Joe, of course I want to find a great realtor, but I’d still have to pay the 3% commission right? Technically, the answer is yes. However, there is a caveat.
Aaron said, “You can absolutely find realtors whose list-price-to-sell price ratio is high enough to cover their commission.”
What is the List-Price-to-Sale-Price Ratio?
The list-price-to-sale price ratio calculates how much an agent sells a property for compared to the list price. For example, if a realtor’s ratio is 100%, then on average, they sell properties at 100% of the list price. If it’s 95%, they sell properties 5% below list price. And if it’s 105%, then they sell properties 5% over the list price.
Let’s say, for example, you are listing a property for $100,000. If you don’t want to pay the commission (3% of $100,000 is $3,000), then you want to find a realtor with a list-price-to-sale-price ratio that results in a sale high enough to cover the commission. For the $100,000 list price, if you’re agent has a ratio of 104% (and the market average is 100%), then they will likely be able to sell your property for $104,000, take a 3% commission of $3120, and you are left with over $100,000!
How to Find Out an Agent’s List-Price-to-Sale-Price Ratio?
Finding out an agent’s ratio is simple: you just ask. However, Aaron said, “there’ll be people that get insulted, there’ll be people that find you arrogant” for asking the question. Even better! No better way to screen out an agent than for them to get angry at you for asking free real estate agents about their credentials.
“What a great way to vet who you work with, because how dare anyone be insulted?” Aaron said. “They’re about to take 2%, 2% of your commission and they’re going to get insulted.”
Are you worried about an agent lying about their ratio? Instead of asking, what is your list-price-to-sale-price ratio, instead ask them to show you the listings they’ve sold in the last 12 months, which will accomplish the same thing. “It will show the list price, the sale price, and the days on market,” Aaron said. “If should all be right there for you.”
What’s a Good List-Price-to-Sale-Price ratio?
Your goal should be to find an agent who has a ratio that is higher than the market average. The key phrase is market average. research yourself and find out what the market is like.”
For example, Aaron said, “In Seattle, it’s a super hot market. It’s insane. Multiple multiples over asking price. Two days on market, six, seven, eight, ten offers. It’s crazy. [However], it’s not like that everywhere. Our team does 105% of asking price on average, where the local market altogether is 100% of asking price… It’s not like that in Tallahassee, but you should find out what it is like in Tallahassee. Find out what the over market in Tallahassee is like so that when you compare realtors, you’re comparing them against your market average, not some national average, but you, where you’re selling.”
Ask three, four, or five free real estate agents for their 12-month sales history, compare the ratios, and move forward with the top agents. At that point, Aaron said, “after you’ve gotten their actual performance, then you could ask the questions, ‘Okay, do I like hanging out with this person? Does this person fill me with confidence? Do they make sense? Do they have integrity? Is this someone free real estate agents I want to do business with?’”
In other words, use the ratio to screen out underperforming agents, and then ask follow up questions to select the agent that is the best fit.
The list-price-to-sale-price ratio is a calculation of how much more or less an agent sells a property for, on average, compared to the list price. If you don’t want to pay an agent commission, then you must find an agent who has a ratio high enough to cover the commission percentage.
To find out an agent’s ratio, either ask them what’s your list-price-to-sale-price ratio, or if you are worried they will be dishonest, ask them to provide you with their last 12-month sales history.
A good or bad ratio depends on the market average, not the national average.
Ask 3 to 5 agents for their ratio, compare, and move forward in the interview process with the agents with the highest ratios.
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