If you’ve been lucky enough to own a home for at least a few years, then you’re most likely in a very good position.
First, there’s a good chance that your home has appreciated alot and you have a good amount of equity. Secondly, you probably also benefited from a lower interest rate when you purchased your home. If not, you may have refinanced your mortgage when interest rates were only around 3% from 2020 to mid-2022.
Thirdly, when you bought the home, there’s also a good chance that the seller’s agent shared their commission with your agent. Therefore, you did not have to pay for your agent’s commission.
In other words, congratulations, life is good.
But life happens. Maybe your family is growing and you need more space. Maybe you need to relocate to a new school district, or maybe relocate for a new job opportunity. Perhaps you’re getting older and need to downsize now that the kids have left the house. Whatever your reasons are, you now need to sell your home.
We’re assuming that you already know about the basic stuff to prepare for a home sale. Things like repairing any damages to the home, decluttering, painting etc…and working with a good realtor.
But nowadays, there are two major things that you should be aware of. Here’s what’s changed in 2025.
A Snapshot of the Current Real Estate Market
Put yourself in the shoes of a homebuyer. It’s no secret that home affordability is pretty much at an all time low. Remember that there are two sides to every coin.
You, as the home owner, have benefited from low interest rates and an increase in the value of your home. However, this has made it much harder for the average person to afford a home. Keep this in mind.
When selling your home, you want as many people as possible to consider buying your home. This creates competition. Competition leads to demand for your home. This means that your home will ultimately sell for a fair price, and you will reap the rewards of all of that home equity you’ve built up over the years.
The New Home Builder
Things are tough for the average homebuyer, but home sellers are facing competition as well. Your competition is from
- Other existing homeowners
- New Construction Home Builders.
These large home builders, like DR Horton, Toll Brothers and Lennar, know that many potential homebuyers are struggling to afford a home so they’re offering incentives to make it easier to buy one.
The most important incentive that New Home Builders are offering home buyers is a lower interest rate.
If you’re a homebuyer, and you have to pay, for example, a 7% interest rate on your mortgage to purchase an existing home VS only a 5.5% interest rate on a new home, what would you do?
Secondly, if you get the added benefit of being the only person to live in a brand new home, what would you do? A lower interest rate plus a brand new home? That’s a great deal for many potential homebuyers.
That’s a real competitive advantage for the new home builder and is the first major factor that you should be aware of. New home builders are professional sellers. They do this for a living. They know what it takes to sell a home.
So, how do you compete with new home builders? Ask your realtor about seller’s concessions.
Existing Home Owners (Resale Homes)
Secondly, you probably heard about the big lawsuits that rattled the industry last year and potentially hurt many homebuyers. Basically, all you need to know is that buyers now have to potentially pay for the commission of their real estate agent.
The details are different, depending on the state, and even the brokerage, but essentially the buyer signs an agreement to work with a realtor for a defined period of time, and agrees on a compensation/commission as well.
This compensation could come from either the seller’s agent sharing their commission with the buyer’s agent, or from the buyer paying the buyer’s agent directly.
The realtor’s commission is a certain percentage. Everything is (and always has been) negotiable. That percentage could be 1%,2%, 2.5%, 3% etc…
Now, why are we telling you all of this? Why does this matter?
Because some sellers think that their best strategy is to only pay their agent a certain commission, and to make the buyer pay for the commission of their own agent. This strategy will backfire 9 out of 10 times.
Historically, the seller’s agent would share their commission with the buyer’s agent. For example, if the sellers agent was being paid a 5% commission from the home seller, they may offer 2% of that 5% commission to the buyer’s agent.
In other words, you, the home seller, didn’t have to pay for your own agent’s commission when you bought a house. Secondly, you had a lower interest rate on your mortgage. Thirdly, the home price was probably alot less than what it is today.
Now, imagine the perspective of the homebuyer today. The homebuyer has to cover a mortgage with a higher interest rate, deal with higher home prices, cover a down payment, cover the closing costs, pay for their inspection, attorney, home appraiser…Phew.
Now imagine that in addition to all of these expenses, they are being asked to pay for their agent’s commission as well. How does this affect you? Let’s use an example.
Homeseller – Strategy
If a homebuyer is shopping for homes and narrows the choice down to 3 homes, here is what they may be thinking.
Home #1 – $400,000. New construction. The builder is offering seller’s concessions to lower my interest rate so I am saving a ton of money. I also get to live in a brand new home. However, maybe the location isn’t perfect.
Home #2 – $400,000 – Resale/Existing home – The seller’s agent is sharing their commission with my buyer’s agent. I like this home and I can only afford it if I don’t have to pay for my agent’s commission.
Home #3 – $400,000 – Resale/Existing home – The seller’s agent is NOT sharing their commission with my buyer’s agent. This is most likely because the seller offered the seller’s agent a commission that is too low to be shared with the buyer’s agent.
I like this home and I like my agent. I really need her to guide me and represent me. However, I can’t afford to pay another $10,000+ dollars directly out of pocket to my agent.
As a buyer, your decision on which home to eliminate is obvious. You will likely not choose Home #3. It may be in the perfect location, and have the perfect amenities, but you simply can’t afford it. Remember, home affordability is at an all time low. It’s hard out here for a buyer.
The home seller has now significantly reduced demand for their home. Less demand for a home typically leads to less competition. Less competition means your home may potentially sit on the market longer and ultimately sell for less.
Homeowners, you have a good thing going for you. It’s perfectly fine to want to make money on your home sale, but don’t get greedy.
Listen to your realtor and as always, feel free to contact us should you need a recommendation for a good realtor.
Gideon is a licensed real estate agent. He he holds an undergraduate degree from Northwestern University and an MBA from New York University.
He’s passionate about business, real estate, digital marketing and making sure that black people increase our collective net worth.
License #:10401336627