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How Can I Negotiate Real Estate Commissions?

Oct 23rd, 2008 02:49
sayal khan, Taksh Verdhan, Ansheel, David Cowgill, Daniela Pellicciotti, Tania Glover, http://www,ecnomyreference.com/

Real Estate agents commonly work for 6% commission.  While I don't 
want to negate the hard work of an agent, that 6% just may be the only 
profit you receive, so it may be in your best interest to negotiate 
those commissions:
1. It's your right
The average real estate commission has come down from 6 percent in the 
early 90s to about 5 percent on average. But remember, no matter what 
the going rate is, you should be able to haggle. By law, commission 
must be negotiated. Otherwise it's known as price fixing. If you 
manage to negotiate even a one point difference in commission, you can 
save thousands of dollars.
2. Gather your strength
The truth is, now is a great time to drive a hard bargain. The 
Internet has created even more competition in an already crowded 
arena. You naturally have a negotiating edge. However, if your house 
is in good condition in a desirable location, you have even more of an 
To get the most out of your bargaining, you should get at least three 
or four commission estimates from agents and use that information to 
pit agents against each other. To really do your homework, get the 
agent's qualifications and take note of any weaknesses in their 
record, like a disciplinary action or a very inactive selling period.
3. Negotiate elsewhere
When it comes to tough negotiations, you may want to step outside your 
home. We're taught to be polite to guests in our homes, says Brad 
Inman of Inman News.
"It's tough to play hardball when your ten-year-old son is in the next 
room," he says. You may want to take your negotiations to your office, 
or a friend's home.
Don't forget, you can negotiate the marketing plan. You can bargain 
about everything from the quality of the photographer to the frequency 
of open houses to the types of advertising you expect.
4. Try the laddered approach
Think incentives. Using a laddered approach with your agent can help 
keep your agent on their toes. In the laddering approach, you would 
offer your agent a bonus or an increase in their commission if they 
sell your home for a specific target price. But remember this may take 
some delicate negotiations since most agents aren't eager to do 
business this way, says Inman.
5. There are different Listing Agreements you can negotiate
Many Seller don't know there are different types of Listing agreement 
that can be negotiated with your real estate professional. Depending 
on the restrictions of the agreement sales commission can be 
negotiated quite a bit. 
Exclusive Right of Sale (most common) - In this type of Agreement", 
the broker is given the exclusive right to market the property and 
represents the seller exclusively. However, the brokerage also offers 
to co-operate with other brokers and agrees to allow them to show the 
property to prospective buyers and offers a share of the total real 
estate commission.
Exclusive Agency - An alternative form, "Exclusive Agency", allows 
only the broker the right to sell the property, and no offer of 
compensation is ever made to another broker. In that case, the 
property will never be entered into an MLS. Naturally, that limits the 
exposure of the property to only one agency.
Open Listing - This is an Agreement whereby the property is available 
for sale by any real estate professional who can advertise, show, or 
negotiate the sale. Whoever first brings an acceptable offer would 
receive compensation. Real estate companies will typically require 
that a written agreement for an open listing be signed by the seller 
to ensure the payment of a commission if a sale should take place 
5. There are alternatives
If you don't want to use a full-service real estate agent to sell your 
home at all, but you would still like some help in selling your home 
there are alternatives.
You can turn to discount brokers, who may charge commissions of 3 
Take care to keep your profits in mind.  Often we get so excited about 
a sale we forget the money made until it's too late.  Don't forget 
your profit or you'll be in business for just a short time.
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