Real Estate Investing

Many people tense up at the idea of shelling out a hefty real estate agent’s commission (even if statistically it usually brings a higher house price, making it well worth it). You can legally negotiate your agent commissions, and furthermore, consumer advocates encourage you to do so!

As with most negotiating, it never hurts to simply ask for a discount of half a percentage point or even a full point. With the standard commission at six percent, half a point can make a tremendous difference - particularly among higher priced homes. It is also easier to negotiate commission rates on the sell of a higher-priced home, because a smaller percentage will still be a considerable amount of money.

It is typically easier to negotiate commission levels with a full-service real estate agent. However, it is more difficult to do so when there’s a glut of unsold homes on the market? Realtors are working much harder and literally earning every penny of their commission during these times, and will probably be much less willing to negotiate.

If the commission is just too high to pay, you can look at alternative forms of assistance, like the plethora of Internet resources available today for FSBO. You can also pay a few hundred dollars for an MLS listing or a few thousand dollars for realtor assistance only with certain aspects of selling your home, like holding open houses or helping with the closing.

In a June study by the Consumer Federation of America, only 36 percent of people polled said they knew much about real estate agents and their roles in home selling. An even smaller percentage said they knew realtor’s commissions could be negotiated.

Once consumers are aware that commissions may be negotiated, the key is research, education and approach. Negotiated commissions should not affect the amount being paid to the buyer’s agent. For example, a standard six percent commission would be split evenly between the seller’s agent and buyer’s agent. If the seller’s agent agrees to lower the commission to five percent, three percent should still go to the buyer’s agent and only two percent would go to the seller’s agent.

In addition to negotiating commission, you could also negotiate services, like a percentage point discount in exchange for handling some of the marketing. The ultimate key to successful negotiation, as always, is in the approach. According to The Hartford Courant:

“The truth is, sometimes consumers get a little foolish,” said Steve Murray of Real Trends. “They call up the full service guys and say, ‘I’m not paying full commission.’ What they should say is, ‘Convince me why I should pay full commission and understand I’m skeptical.’”