Home Seller And Buyer: Negotiate Lower Real Estate Commission With Agent

Want to pay less commission to the agent who sells your house? Apparently, all you have to do is ask.

According to a new survey from Consumer Reports (September 2008), many real estate brokers are willing to negotiate their commission rates with sellers who try to haggle.

Consumer Reports found that 46 percent of sellers surveyed had attempted to negotiate a lower commission rate with the agent they hired to sell their home. Roughly 71 percent of those who tried succeeded.

Those who didn’t haggle were more likely to develop a bad case of seller’s remorse, and nearly a third said they should have been more aggressive when negotiating their agent’s fee.

Full-service agents who ask for a 5 to 7 percent commission to sell a home will say they provide more service for the money. But the Consumer Reports survey of more than 14,000 buyers and sellers found that paying less won’t hurt the quality of the service.

According to the survey, 81 percent of those sellers who paid 3 percent or less in commission said that the agent provided a comparative marketing analysis, versus 87 percent of respondents who paid at least 6 percent of the sales price in commission to the agent.

Nearly three-quarters of those surveyed said they were “very” or “completely” satisfied with their broker, and most of the larger real estate chains and independent brokers earned reader scores of 79 or higher.

“Finding satisfying real estate services shouldn’t be too hard. All of the major chains and independent brokers scored very well in our survey,” said Amanda Walker, senior project editor of Consumer Reports. Her suggestion: “Shop by personal recommendation or commission split.”

But talking about money is hard to do, especially when it’s the fee you’ll be paying your listing agent. Also complicating matters is the tough real estate market playing out in many metro areas around the country.

While the survey may have taken into consideration many markets and different types of properties, what goes on locally is what matters. Even if the survey shows that many people pay less than a standard real estate commission, some markets may have market pressures that keep commissions higher while others might not.

A home seller in one market might get a real estate agent to agree to a 4 percent commission while a home seller in another market can’t get any real estate agent to agree on anything less than 6 percent. You have to do your homework. If you know that real estate agents in the area are accepting less than 6 percent for home listings then you should have room to negotiate with the agent.

If the average number of listing days on the market is over 120, you may feel funny asking your agent to take less while knowing that he or she is going to have to work harder and for a longer period of time to get your house sold.

Still, you should ask, because more than a third of sellers were able to get the agent to reduce his or her commission.

Here are some ways to approach the subject:

Interview at least three agents from three different types of realty companies.
Let each agent know you’re speaking with other agents about possible representation. Competition will naturally force the issue of compensation to the forefront.

When you talk to each agent, be sure to ask what is the typical commission structure for a property of your size and type.
Getting some baseline information will help you figure out your negotiation strategy. Be sure to ask if the commission is negotiable. All real estate commissions should be negotiable, so the answer you should get should be “Yes”

The more expensive your property, the more leverage you may have.
Agents tend to be more flexible when it comes to more expensive properties because their share of a small commission is still significant.

Is your property easy to sell?
Even in a tough market, there are still some homes in particular neighborhoods that will sell quickly because they’re so desirable. If you’re lucky enough to live in a property that way, you may be able to negotiate a lower commission.

Ask about a two-tiered commission structure.
Agents who are less willing to simply slice their commission, may respond better to a two-tiered commission structure that pays them perhaps 5 or 6 percent on the first $100,000 or $500,000 (depending on where you live and how pricey your neighborhood is) and less on anything above that amount.<

Make sure whatever commission you pay is split equally between the buyer’s agent and seller’s agent.
Your agent may agree to a 5 percent commission, but might split that fee unequally with the buyer’s agent, keeping 3 percent for himself and giving the buyer’s agent the rest. You’ll want to make sure (get it in writing) that the commission will be shared equally. At the very least, you need to have a conversation with your agent to understand how and why the split is being adjusted. In some cases, the listing agent will recommend that the listing agent take less to give more to the agent that brings in the buyer.

Check out a discount broker.
Discount brokers might take a 1 percent commission, while you pay 2 ½ or 3 percent to the buyer’s agent. It may be a lot better to pay four percent commission than 6 percent.

If you find that you can’t stomach the idea of paying a full commission, and the agent you really like won’t take less, you have two choices: Find another agent who is willing to negotiate, or try selling on your own first. The Consumer Reports survey found that while just 17 percent of owners sold by owner, almost all of them received about what they originally asked for the property.

Even if you pay a commission of 3 percent to the buyer’s agent, you’ll put more money in your pocket at the end of the day.

Finally, just because the survey shows that many people get discounts, many others may not. So, you’d likely benefit from acquiring some in-depth knowledge about your market: whether there are lots of agents competing for business, whether there are agents in that particular market advertising discounts on commissions, whether the home is in a rural or urban area, or whether the home is in a vacation resort. Each of these factors and many others might affect an agent’s willingness to reduce the commission on the sale of a home.

Aug. 7, 2008.


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