Frequently Asked Questions (FAQ)
There are several reasons we can charge you a significantly lower commission, but it’s really just simple math. In a traditional transaction, the seller likely pays a 6% total commission: 3% to the listing agent/broker and 3% to the agent/broker representing the buyer. Since the 3% to the buyer side of the transaction is consistent in both the Home Sense and traditional brokerage models, let’s just look at the other 3% that goes to the listing agent, because this is where the savings occur.
For example, let’s consider a home selling for $200,000. The listing broker commission is 3%, or $6,000. So the seller pays his broker/agent $6,000 to sell the home. But let’s see if the seller actually gets $6,000 worth of services.
Many real estate transactions involve a referral from another agent/broker. In exchange for the referral, the referring party usually receives 25% to 33% of the commission a broker normally receives on either side of the transaction. So, if the starting commission is 3% for the listing broker, when a referral is present, this commission effectively drops to approximately 2.2%.
By law, commissions are not paid directly to the agent working for the seller, but rather to the agent’s Principal Broker. Typically, the principal broker retains 40 to 60% of this commission (average 50%) on every home sold. The remaining 50% is paid to the agent who actually interacts with the seller, enters the listing on the MLS, shows the home, markets the home, handles the offers, etc. Since the seller typically only interacts with the agent and not the Principal Broker, the seller is frequently only getting half his/her money’s worth and paying the Principal Broker for unseen administrative and supervisory duties. So, the seller is effectively only getting 1.5% worth of services, not the full 3% worth. Now, what if a referral is present? That 1.5% drops to 1.1% and the seller is effectively getting $2,200 in service ($200,000 X 1.1%) from the agent.
What if the Principal Broker happens to be the same person as the agent? This is where Home Sense comes in. Home Sense is both agent and broker, so we do not charge twice for half the work. Now, we’re getting closer to the 1% Home Sense charges for seller representation, but let’s look at a few more factors.
Most real estate firms have large offices, often times to house most, if not all, of their agents. Typically, the only way a real estate firm makes money is from real estate transaction commissions (the traditional 3%). So, paying for that office space comes from the commissions. And what about non-commission office staff, regional marketing expenses, franchise fees, gourmet coffee for clients, etc.? Again, these expenses are paid from real estate sale commissions. When you don't have these expenses, you don't need the typical 3% commission model to be profitable.
Tradition and geography play an important role in average commission rates. In Canada, the average total commission per residential transaction is 3%. For the United Kingdom, this rate is 1.5%. But in the USA, rates hold fairly steady at 5.5 to 6%, but may range from 4% to 7%. It’s difficult to trace the origin of the 6% USA commission model, but it's been around for decades.
A typical real estate agent represents some buyers, and some sellers. To acquire either type of client, an agent normally conducts marketing efforts, which take time, cost money, and do not yield guaranteed results. And if an agent represents a buyer, much of their time consists of showing homes that the buyer does not buy. And what if the buyer or seller back out of an agency agreement after extensive involvement by the agent? This “lost time” is compensated for by charging a 3% commission model for those transactions that do result in commission payment. Most business models use this approach and understand that not all leads will result in a sale and commission.
As you may hear, “Time is money.” So when a listing agent conducts several Open Houses for a given home, that effort and time are built into the commission as well. Most research indicates that Open Houses do not result in a quicker sale or higher sale price. Rather, Open Houses more often benefit the listing agent by attracting unrepresented buyers with whom the agent can court and offer a 3% commission service to in a separate transaction. If a house is priced right, it will sell within days because most agents who represent buyers are notified immediately when a new listing appears on the MLS, especially when it’s a home that fits certain buyer requirements. Motivated buyers will normally not wait for an Open House but rather visit the home as quickly as possible and when casually-interested parties are not present.
Finally, Home Sense also understands that, in most cases, a home sells itself. Buyers are savvy these days and will typically not buy a home because an agent has pressured them or exaggerated certain features. Buyers take their time, know what appeals to them, envision their furnishings being present in the home, and research nearby shopping, schools, and amenities before they submit an offer. If a seller’s home is staged correctly (Home Sense offers a $150 refund on professional home staging services) and priced correctly (Home Sense provides each seller with a market analysis and recommended asking price range), a home will sell itself. And when a home showing does occur, the owner typically is not present. So, we let the owner coordinate with the buyer agent when “conducting” home showings.
Home Sense is the broker and agent, does not require big offices or conduct Open Houses and home showings, is very innovative, lets the internet do the marketing, and only focuses on seller representation. We therefore trust our 1% commission is viewed as a fair, honest deal compared to the traditional 3% rate.
According to the National Association of REALTORS (NAR), approximately 90% of all homes sell with a real estate professional (an agent). The remaining roughly 10% sell by the For Sale by Owner (FSBO) approach. Home Sense is a hybrid of FSBO and agent approaches, for a substantially lower fee than standard listing agents.
Home Sense Duties:
We provide the following services when you hire Home Sense:
- List your home on the local MLS, viewable by all real estate agents, and other major real estate websites.
- Conduct a Comparable Market Analysis (CMA) and offer a range of asking prices.
- Review and suggest recommendations and guidance on all offers.
- Provide you with tips for negotiating offers and contracts, completing disclosures, taking wonderful pictures, and setting the asking price.
- Syndicate your home listing on websites such as Zillow.com, Realtor.com, Homes.com, Trulia.com, and craigslist.com, when instructed by you.
- List your home with a 3% buyer-broker commission, assuring any buyer agent will get paid an acceptable commission and therefore show your home to their potential buyers.
- Provide you
- A real yard sign, with a real metal frame, two Open House pointers, and a lock box.
- All Tennessee Association of REALTORS (TAR) forms that REALTORS use.
- 20 full-color professional flyers.
- PDF files of all forms, flyers, tips, etc.
- A notebook to organize all paperwork.
For these services, Home Sense charges you 1% of the sale price, due at closing (no up-front or cancellation fees, risk-free).
Home Seller Duties:
Our business model is for individuals who wish to take advantage of the significant savings by performing some of the duties normally reserved for a listing broker/agent. We ask the seller to perform the following duties:
- Provide Home Sense with photos of and information about your home so we can list it on the MLS.
- Conduct home showings and any Open Houses.
A seller may ask, “Wait, how much time will I spend showing the home to potential buyers?” We say, “Probably not much longer than if you use a traditional listing agent.” This is where a lock box comes in handy. When a buyer comes to visit your home, he/she will normally be accompanied by their agent. The buyer will likely prefer the seller be absent to view your home in a relaxed condition. If you have a lock box the agent/buyer can visit when you’re not at home. This is a good time to run errands for an hour. But a traditional listing agent will likely recommend you excuse yourself during showings anyway. So, it seems this “effort” may not really be an effort after all – Please note, Home Sense recommends taking extra security measures when unrepresented buyers or buyers without their agent visit your home while you are not there.
What about Open Houses? Are they really worth it? When an agent hosts an Open House, he/she has the benefit of exposure to potential buyers for possible future representation. So, by removing that dynamic from the Open House question, the answer changes. Sure, offers are made at Open Houses, but it’s not common at all. And if a buyer is really interested in your home, he/she will likely make arrangements for a standard individual showing as soon as the listing is public. Open Houses also tend to attract curious parties who may or may not be serious about a home purchase at the moment. Even so, if you think two hours on a Sunday may be worth it, certainly host an Open House! And if it goes well, host another one in a couple of weeks. Open Houses are typically held on Sundays from about 2 PM to 4 PM.
That leaves the negotiation process. Home Sense will review all offers you receive, negotiate on your behalf, and provide you with suggestions and tips necessary to maximize your position, including:
- Important things to look for in an offer
- How to
- Assess contingencies
- Respond to an offer (accept, reject or counter the offer)
- Assess the math
- Handle multiple offers
- Handle few or no offers
Your home will typically sell faster when you partner with a real estate agent instead of going it alone. Here are some statistics from The National Association of REALTORS.
- Only 9% of homes sales consist of For Sale by Owner (FSBO) transactions.
- 70% of FSBOs state they have difficulty selling their home.
Honestly, it is very possible that your home could sell for just as much using the FSBO approach compared to marketing your home on the MLS. And you could therefore pocket more money by not paying the typical 6% commission. However, the problem is the FSBO approach typically works well only in certain conditions, such as very small markets that do not attract out-of-town buyers, homes with very high traffic counts, or manufactured home parks. But your home will likely remain on the market longer because you are not exposing it to the network of REALTORS. Normally, an agent will not show an FSBO home to a prospective buyer because there is no commission structure present. This requires the agent to negotiate one with that specific seller, which takes time (time is money), and may not even be possible.
Yes. Home Sense will be your seller (listing) agent, and our commission is 1% of the sale price. But the buyer agent (the agent representing the prospective buyer) will require compensation as well. This is typically 3% of the sale price. Advertising this commonly-acceptable rate preserves the incentive for buyer agents to want to show your home to prospective buyers, so your property gathers interest from as many prospects as possible.
Certainly, any commission rate beyond the typical 3% would expect to attract more attention from buyer agents, and potentially result in more home showings. But that may not necessarily result in a quicker sale, as there are only a limited number of buyers looking for a home at any given time. Plus, an unreasonably high commission for the buyer's agent/broker may indicate something suspicious about your property. So, we require advertising a buyer agent commission of an industry standard 3%.
Like any other listing that uses a full-service commission structure. The MLS does not advertise the listing broker commission (1% for you). No one knows you’re not paying the typical 6% for your listing. It will attract the same type of buyer agent as any other listing because it will state a 3% commission for that buyer's agent.
Currently, we serve at least the following counties of Tennessee. Other areas are available, so please contact us if your county is not shown.
Our business model works for individuals who wish to take advantage of the significant commission savings by performing some of the duties that traditional agents provide at a premium rate. Therefore, we ask the seller to perform the following duties:
- Provide Home Sense with pictures of and information about you home so we can list it on the MLS.
- Conduct all home showings, including any Open Houses
Sellers coordinate and conduct their own home showings. You can request the buyer's agent contact you directly and/or use the lock box we provide. Since listing agents recommend the seller not be present during home showings, if you can field some phone calls and schedule a few showings, Home Sense does the rest, including passing the savings on to you.
No need to return them. You can keep them handy for the next time you use Home Sense.
Although not required, most offers will include earnest money. We suggest handling earnest money in one of the following ways:
• Request that the offering party submit the earnest money to that party’s agent and request either a copy of the check or proof of deposit into a trust account (this is standard practice for agents).
• Request the offering party deliver the earnest money to the title company listed on the purchase offer agreement, again, requesting a copy of the check.
• If the offering party hands you an earnest money check, either deliver or mail it to the title company listed on the purchase offer agreement and inform the offering party you have done so.
We strongly discourage the seller from retaining the earnest money. Home Sense typically does not retain earnest money.
Home Sense will first provide you a Comparable Market Analysis for your property, which is the most widely-used method of determining an asking price. From those results, Home Sense presents you an estimated range of asking prices. We then provide you with an overview of how home pricing works, what factors influence price, and how to fine tune your asking price.
If you want to adjust your asking price during the listing period, just let us know and we will change the price on the MLS (and the flyer, if requested) as soon as possible. No extra fees.
Home Sense does. We request all offers first come to us. We then review each offer and recommend how to proceed. After all, we're acting on your behalf.
Home Sense provides all forms necessary for completing a transaction. These TAR (Tennessee Association of REALTORS) forms are most commonly used in residential real estate transactions and are time-tested to provide the smoothest contract executions.
Please contact us here for any other questions you may have.