My Thoughts on Real Estate Brokers

It’s a whole new ball game these days. In my opinion, hiring a Real Estate Broker was the only and best option to sell your home 5-10 years ago. However, with the advancement of technology and the World Wide Web, everything has changed. These things have led to eliminating the “middle person” and helping home owners save thousands of dollars on the sale of their home.

Think about it. What is the primary objective of a Real Estate Brokers? It’s simple, to match buyers and sellers and to get a piece of your profit. Now, what is the primary objective of a Lawyer? Lawyers are deeply involved with the arduous task of handling detailed paperwork. People believe they need Real Estate Brokers for all the paperwork involved, which, unfortunately, is a common misconception. Be smart and hire an experienced lawyer for all the paperwork and erase the “middle person.”

The internet has changed the way we live. It has changed the way we buy clothes, buy holiday gifts, furniture, purchase cars and access information. People can book an entire vacation in the comfort of their own home, by using the internet. This has changed many industries, including the Real Estate Industry, because it saves us time and money. Real Estate Brokers have had a monopoly for years by using the MLS system, which is a system that only allows brokers to access.

Of course, not everyone has the time or patience to go through the selling process, which in many cases a Real Estate Broker may be helpful. However, if you have time to spare and the ability to show your home to a potential buyer, I’d recommend being a spoke person for your own home (FSBO). Do you know that the average Real Estate Broker earns 5-6% commission? Let’s take a look at a quick scenario:

• Let’s say you sold your home for $500,000.
• The Real Estate Broker charges a 6% commission
• $500,000 x 6%= $30,000
• $30,000 in the pocket of the broker NOT YOURS!!

The next question is what would you do with an extra $30,000?

Now, let’s look into this scenario a little deeper. For the record I’m not a licensed tax adviser and don’t give tax advice, but think about that $30,000 from a tax stand point. The Taxpayer Relief Act of 1997 states that if you sell your home, up to $500,000 of capital gains is excluded from federal taxes for married couples who file a joint tax return. For those filing separate or single-filer returns can exclude up to $250,000. In order to qualify for this exclusion, you must have lived in your home as your primary residence for two of the past five years. With that said, and using the example above, let’s take a look at what this means to you:

• If you bought your home for $250,000
• Sold it for $500,000
• That’s a gain of $250,000
• (includes the $30,000 you keep from not using a broker)

That $250,000 gain is TAX FREE to you, the seller!

Keep this in mind as well. If I’m in the 35% tax bracket, I would have to make $46,153(35% tax bracket) in work earning to get back that $30,000 (tax free) that the broker has in his/her pocket from the sale of my home. Again, I strongly recommend speaking with a licensed tax adviser about your situation, but think of the savings. To summarize, I encourage all homeowners to keep the 5-6% commission for yourself and sell on your own, preferably at BrokerFreeRealEstate.com