Real Estate the Ramsey Way - How Can I Avoid High Realtor Commissions?

Episode Date: November 11, 2024

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Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate home ownership with confidence. Dave is in Charlotte. What's happening, Dave? Hi, guys. I'll try to make this short and sweet. I have a $1.5 million house that's in an area where the houses sell normally less than seven days at or above asking price.

and you guys have made me very cost conscious. So it's hard for me to justify to pay a 6% commission or $70,000 for a house that's going to sell in less than seven days, basically just to get it listed on the MLF. So what are my options? I know a real estate attorney said he would charge me $6,000 to do the actual close. But in terms of working with agents, can you shed any light on how I can minimize the commission? Well, they've changed the structure recently.

And it's kind of becoming, you know, a big bubbled effect within the real estate world. But I think a lot of agents are still kind of abiding by that 6%, the 3%, 3% split. So, I mean, if you're using someone for their services, I mean, I guess it's now, it can be dependent on the agent now to a degree because of what they're choosing to do on the commission side because it has changed in recent months. But overall, I mean, you're using their services. so you will be, yeah, paying some level of a commission, I'm sure. If you want to do sell by owner, you know, you could do that, where it's just you doing it,

then you wouldn't have an agent involved. But usually we find, statistically speaking, you'll make less as a private seller versus if you actually use an agent. But so I would use an agent and I understand the frustration around it and some agents are changing their commission structure because of everything that's happened in recent months. So you could talk to them and see what. they would say and what they were, what, you know, what they're requiring for their services. So it may depend agent by agent. Yeah, because I recognize there's some value to an agent handling some things, but I recently had an inspection done.

So, you know, I think it would be a relatively very clean sale in a very short period of time. And, you know, first, you need to pay somebody $70,000 for a week's work. What did you buy the house for? It was excessive. $5.50. So you're making a million dollars off of this. Right. That's pretty wild.

So letting go of... I've had it. 25 years. Yeah, you've hung on to it, and that's appreciated. Why are you guys selling? We're just downsizing and retired and moving to another house. Okay, that's great. Here's what I'll say about the agent.

I think if you're just looking to get it on the MLS and that's all the agent's good for, then you need to find a better agent. A good agent's going to make up for what they cost you. And that might be, you know, if you went for sale by owner, you might get 1.4.3. We don't know. And if you work with a great agent, Maybe they get you, you know, you start an abiding war and you got 1.57, right? Right.

So that's part of it. I just went through a tax deal with this city. So I've done a pretty extensive study of comps, you know, in the neighborhood and in the zip code. So, you know, the data is pretty readily available in terms of how long it will sell and what, you know, how close to asking price. So that's usually the value that an agent brings. But in this case, I'll just have to look at other options. I feel like you should go into real estate, Dave. You've done all the work, man.

Yeah, I know it hurts, and I'm like, I'm the same way because I'm super frugal, but the one thing I'm willing to spend money on is a good agent for the largest transaction of my life, which I assume this is for you. And I understand that, but like I say, knowing the area is still well and, you know, knowing that what they're selling at. Yeah. I mean, there's ways you can negotiate. You know, let's say your agent who's going to sell, well, that becomes your buying agent

and they end up taking one and a half percent off. Yeah, yeah. And so that stuff happens all the time. So I would get in touch. And if you want to kind of vet some, we've got Ramsey trusted real estate agents. Go to Ramsey Solutions.com slash agent and see who's out there. Interview them. See what they're willing to do and see what they're willing to offer.

I'll reach out for a couple of them. Thanks for your time. Absolutely. It's a great question. I love that you're thinking this way. And it's what's helped Dave built this level of wealth. Well, and to have a mediator between you and the buyer and all of that, right? I mean, like, it's just they take a lot of the grunt work out for you.

Yeah, they really do help. Absolutely. Thanks for the question. Tony is on the line in Washington, D.C. Tony, how can we help today? Hi. So my question is I finally decided to follow the baby steps the right way and decided to sell my rental property.

So I put it on the market and I got no offers except an investor, like a really low offer, and then no one even viewed the home. So my question is, do I take – it's not really a lot. because I owe $91,000 on the home, and it's worth like $314 now. So how much do I lower the price? I lowered it $15,000 and still no hits. And the offer that I got that was from an investor, it was like $100,000 below. When you say you lowered it, are you working with a pro real estate agent on this?

Yes. Okay. And what is their take on why this hasn't sold and the street? strategy around lowering the price? So she said that because of the market, the interest rates, he said that right when I listed it, the Federal Reserve or something went up again on the rate. So buyers are nervous. And then my home is not rural, but it's growing.

So it's a demand area off and on. Okay, but what about the pricing? Did she think your pricing was correct? Yes, she said it was correct, and it was comfortable. And how long has it been on the market? About 30 days. Oh, for heaven's sakes. You've got to be patient.

Yeah, we're seeing things that, depending on your area, it could be 60 to 90 days. Yeah. Sit tight. Sit tight. I don't know that I fully trust this real estate agent. If I'm in your shoes, I'm going to connect with a Ramsey trusted real estate agent. You can do that at Ramsey Solutions.com slash agent. And I would get a second opinion and see what they think about all.

this and go, hey, here's how we staged it, here's how we listed it, here was the strategy, what do you think? Yeah. And part of it, they may look at it and go, yeah, you got to be patient. The day's on market for your zip code is XYZ. And so, but I wouldn't just sit on this and keep lowering the price. Okay. Yeah.

So at any point, so if I, without any views, without any offers, at what point do you, like how much of a, it's not a loss because of how much equity I have, but should I lower it to get rid of it to pay my debt or? No, we just told you. Listen, sit tight on this. I wouldn't even start wringing my hands about price if you do what George says. I think you need to go to Ramsey Solutions.com slash agent. And I think you need to interview two or three and see what they would do if it were their listing.

Okay? They're trying to win your business. I don't have the cash flow to continue to have it fit for a long period. time. So you've got some desperation. Because you're burning through, you're paying the mortgage, the property taxes, the homeowners insurance. Did you have this rented at some point? Yes, it's been rented for about seven years. And what happened? It's how long has it been vacant? About two months now. How long can you float this thing? I can do about one more month because I paid the mortgage for about three now. All right. And did you say you dropped the price

already on it? Yes. You dropped it at 15,000? I dropped it by 15,000, yes. Yeah, I, here's the challenge, Tony. George, I don't know what you think, and we're not the actual real estate pros, but we got them. But Tony, your first response to us

going to talk to our pros, I can't sit on this for a long. Go talk to some pros that we're telling you to talk to and see if you tell them, I am extremely motivated, and you tell them why, they understand, and they're going to give you the best strategy. So you still need to go talk to them,

and that's not going to take you very long, okay? We're not talking like burning sunlight on that deal. But back to this again, I don't know if these pros are going to agree with you on this, but my gut says that lowering the price by 15 more doesn't necessarily move the timeline up when you've got the situation we have in America today. People are just taking longer. Yeah, you need more info about why this property is undesirable and why it's been sitting.

And if this is normal in your area and what can be done to remedies, this is a curb appeal? Do we need to make a renovation? Do we need to take it off the market for a while? I don't know, but we need more info. I want to get George's opinion, Tony, on something else. George, I'm going to go back into the call. All right. So, Tony, you said that you had an investor offer you a low offer. What is the listing price as it sits today? It's $300,000 right now. And this investor offered you $200 for it?

I don't remember, but I know it was like $85,000. less than what I originally... How long ago was that? About three weeks ago. Did you count her? No. Okay. George, if she gets desperate, I'm just...

I want to know what you think here. And I know you don't know what the real estate pros are going to say, but I'm bringing this to you if she's in tough situation and she does have equity. I wonder if she doesn't go back. I'm asking you on her behalf, does she go back to that investor and go, okay, you offered me this, 85 less. tell you what, I'll do a deal if you come up to this and maybe she... My guess is they offer offers.

Probably around 230 then. And maybe you say, hey, I would do it. My lowest I'll go is 270, something like that. And work with your agent on this. Don't do this all solo. And come up with a strategy to where you still win. You're not leaving at a huge loss. And you do need to have some patience.

So you like that. I would at least counteroff. I would at least negotiate with the investor. Yeah. My guess is they go, no thanks. I'm trying to get a crazy bargain, you know, basement bargain deal here. And that's okay, but you never know unless you try. But she's got to know her limit.

You got to know the limit you're willing to think. What do you think is her limit, knowing her debt, what do you think if you were her, that's what I'm trying to do is give her, because I don't want her to be desperate. What did you pay for it? I pay $1.25 in 2014. Okay. So this is appreciated. You've done well.

You're not really losing here. You're not really selling out a loss. You've already gained, you know, equity. The house is appreciated. That's what I'm wondering. What's your bottom dollar? if you're here. Oh boy. If I'm her, she listed at 314, that's the going rate. I probably wouldn't personally take less than $2.90. Okay. But she's struggling. She's going to have to go make some more

money. Or you get a new renter in there for another six-month lease. There you go. And see what the market does, you know? You with us, Tony, on this? I mean, these are your options. Here's the deal, though. I know you're feeling the pressure. The reason I brought George into these what-ifs is I think it helps to have all these options on the table so that you realize you're not without option. With the moment you start feeling like you're in a corner is when you do something dumb. And that's where the agent, if you get with one of these Ramsey trusted pros, they're going to be pulling comps in the area. They're going to be pulling all the data because I like to make a data-driven decision, not just emotion, not because I'm sick of it, because it's been sitting. I want to know

all the facts. And that's what I'm asking you to go do. Yeah. Thanks for the call, Tony. Yeah, George, that's, again, so here's the crux of this situation is that she's in so much debt and the cash flow in the situation. And this is what we see happen all the time. You give advice on us all the time people think, oh, I'm going to get into real estate. They get starry-eyed over some, you know, roided up limp biscuit-looking dude on Instagram who told them everyone should buy a real estate. I know. And then we're in a bind, and we're losing money on these deals. We're stressed out. It's not the rosy picture that was painted for us on social. And that's why we teach the baby steps. Go slow. Pay cash for investment property. I don't care if it takes you five or ten years instead of one.

It's the right way. Because this is a great point, George. She actually has an equity and still stressed out of her mind. Canna get rid of it fast enough? Not worth the stress. Oh my goodness.