Selling a house isn’t cheap; even with modern technology reducing commissions, the combined cost of commissions, taxes, and other fees can gobble up about 6% to 8% of your home’s sale price.
The persistence of high commission rates despite the advent of platforms like Zillow and Redfin is frustrating, especially when compared to the wealth management industry, which has significantly reduced its fees over the years.
The National Association of Realtors recently settled a price-fixing lawsuit, which should hopefully reduce commission rates in the future. This makes a strong case for holding onto your property longer to avoid high selling costs. After all, if you don’t sell, you don’t pay any commissions or taxes.
The internet has transformed how we buy properties; I’ve purchased all my properties online since 2003. This has allowed me to negotiate commission rebates with realtors who often just assist with paperwork, a process now streamlined by digital tools like DocuSign.
Saving money doesn’t stop at buying; it also applies to selling. In 2014, I managed to save significantly by listing a property myself, which drastically cut down the associated costs.
However, selling a home effectively still requires expertise in marketing and networking. I’ve seen properties undersold because the listing agent lacked the necessary skills and network.
A competent real estate agent is truly valuable, but with soaring home prices, especially in major coastal cities, paying up to 5% in commissions feels excessive. A flat fee structure would be fairer and more reflective of the actual work involved.
Real estate agents have traditionally split their commission with the buyer’s agents, but even listing agents have to share a significant cut with their firms, which diminishes their take-home pay.
City and county costs also add up, including transfer/excise taxes which are based on the selling price or fair market value. These taxes contribute significantly to municipal revenues, especially when property values are reassessed at higher rates.
Selling a home also involves various other costs like inspections, staging, and compliance checks, which can all add to the financial burden.
The potential tax implications of selling a home are considerable. However, there are exemptions available, such as the ability to exclude a significant amount of capital gains if you’ve used the property as your primary residence for a sufficient period.
Given these high costs, my strategy has been to hold onto properties as long as possible. The idea of paying high commissions is particularly unappealing unless there’s a move towards more reasonable, scaled commission rates.
In the end, the best way to cut costs might be to negotiate aggressively with your real estate agent, list the property yourself, or use a discount brokerage. Holding onto your property, especially in a rising market, often makes more financial sense than selling.
