The Art of Negotiating a Real Estate Commission

First and foremost in this turbulent economy, you need to be aware that there is no standard real estate commission. Not only is there not a standard, it is in violation of anti-trust laws to set standard real estate commissions. So why are they so high? Because, people accept them at that higher rate.

Now, don’t go running out to the discount brokerage companies, or the flat fee companies, that’s not what this is about. We are talking negotiation. In order to negotiate, a win/win scenario for both your pocketbook and the real estate companies bottom line you need to be informed. You will need to do a bit of homework, such as interviewing, checking out company websites etc. You are looking for not only commission information, but what services these companies can and do provide for their commission.

In the interview, you might ask what type of advertizing they do and how often you can expect to be included in that advertizing. Do they do multi-media advertizing? Such as flyers, T.V. ads, newspaper ads, magazine or home buyers publications, do they offer radio and internet advertizing and possibly the most important, do they advertize to their competitors? Do they do open houses, a word here about an open house… If I were selling my house today, I wouldn’t allow my agent to hold it open to the public. Why, because in the majority of instances the only benefit to holding a home open to the public is getting potential buyers for your real estate agent. However, holding it open for other agents/brokers also known as a Brokers open, is a great source of advertizing for your home.

Once you have compiled your list of services to be expected from your real estate agents, look at them and give each of them a dollar value. I know it sounds strange, but hang in there with this thought process. What would you be willing to spend for 100 full color flyers, including designing them, doing the photography, writing up a description of your home and putting them in an area accessible to potential buyers? Is it worth $10 a month, $25 or even $100, If you can’t do it yourself, it has a greater value than if you can. I personally charge $75 for 100 color flyers, and I don’t take the photos myself, if I have to go take photos, it is an additional fee. Check the current prices for advertizing in the newspaper, magazines, radio and television. Once you have determined the value of all of the services, figure a wage for your agent, yes they need to be paid for their time, energy and expertise. You now have a basis for your commission. Does it match that of the companies you have interviewed?

If not, you will need to negotiate for this, keep in mind during these negotiations, you are not only dealing with your real estate agent but also the company itself, and most of them do get a percentage of your agents commission. Remember this is supposed to be a win/win scenario, if you cheat your agent out of his/her commission, don’t expect to get the best from them. Be fair, Be flexible, and Be Informed. If the price of your home is $400,000 and your agent is asking for a commission of 7% you would be paying out $28,000 in commission fees. If you could negotiate it down to 6% and keep everyone happy you would be save $4,000. With this money you could offer an incentive to sell your home quicker, and still pocket a little extra change. That is definitely a win to me!

Don't forget to swing by my hub on becoming a real estate agent for some great tips and advice on gettting started in a career in real estate.

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