When a client mentions they are thinking about selling their home, what advice do you offer?
Most financial advisors go beyond just managing portfolios, but many are unaware of the value they can add by educating clients about the home-selling process, particularly in the wake of the National Association of Realtors' loss of a multibillion-dollar class action lawsuit last spring.
Financial advisors don't need to be real estate experts to provide meaningful guidance. By offering clients basic education and actionable advice, they can make a significant impact on the home-selling process while reinforcing their own value as a holistic financial partner.
Here are three key strategies advisors can share.
Shop around for agents
Data from the NAR shows that
READ MORE:
But interviewing multiple agents does more than just lower costs, it also helps homeowners better understand their
Advisors who encourage clients to shop around for a real estate agent will empower them to get more information, enabling more informed decisions and better results.
Commissions are negotiable
One key outcome of the National Association of Realtors class action is that home sellers are no longer required to pay the buyer's agent commission.
Ironically, sellers were not required to pay the buyer's agent a specific amount even before the ruling — offering even $1 would have satisfied the requirement — they just had to disclose the amount they were offering to all parties.
Yet sellers have historically paid the buyer's broker the same percentage as their own agent, not because they had to but because they didn't realize they had a choice — a problem that persists today.
READ MORE:
Rethink compensation incentives
Advisors can also help clients rethink how agents are compensated. Traditionally, real estate agents are paid a fixed percentage of the home's sale price. But with online home valuation tools and easier-to-search listings, most homes now sell within a predictable price range.
For example, consider a home worth around $1 million. If it's listed at $900,000 it will likely sell quickly, regardless of the agent or their strategy. On the other hand, even great staging and the best agent might not push the sale price up to $1.1 million.
Given this, paying a fixed-percentage commission incentivizes agents to produce a quick sale rather than maximizing the sale price.
Advisors can suggest clients use variable commission structures to better align the agent's interests with the client's goal of maximizing the sale price. In the case of a $1 million home, a variable commission might pay 1% for sale prices up to $950,000 and 20% for proceeds above $950,000.
This structure motivates agents to work for higher sale prices and rewards them based on their performance. By contrast, a flat-percentage commission rewards mediocrity by "paying" underperforming agents almost as much as high-performing ones.
Combining variable commissions with competition among agents can yield even better results. A homeowner could interview multiple agents and ask each to propose terms for a variable commission. This allows homeowners to simultaneously weed out less skilled agents, negotiate fees, financially incentivize their agent and hold them accountable.
Advisors who help clients optimize their home-selling strategy strengthen client relationships, build trust and position themselves as comprehensive financial partners who care about their clients' overall financial well-being.
