Did you know that real estate commissions are negotiable? Many people assume that they cannot negotiate these fees, but the reality is that it is perfectly acceptable to ask your agent to lower his or her commission fee. Before you start the negotiating process, however, it is important for you to know more about how commissions are earned. This way, you will be better able to determine a fee that is fair to both you and the agent.
Determining the Split
One part of commission process involves agreeing upon a split. Since only real estate brokers can receive a commission, the agents who work for them must agree to receive a certain percentage of the commission. While some brokers simply split the commission 50/50 with the selling agent, others will pay a higher split to their more productive agents. Furthermore, if the listing broker and the selling broker are different, the commission may need to be divided between the listing side as well as the selling side before it is shared with the agent.
To understand the process better, it is helpful to look at an example. If an agent sells a home for $200,000 and receives a commission of 7%, for example, 4% of that commission may go to a listing broker while 3% goes to a selling broker. This means the selling broker receives $6,000 while the listing broker receives $8,000. The agent who sells the home may receive half of the selling broker's commission. While this would come to $3,000, the agent may also need to pay a franchise fee of 8%. This means the total earned commission is down to $2,760. From that, the agent must also pay overhead expenses while also putting money away to pay for taxes and to put toward social security benefits. When all is said and done, the total "profit" from that sale will be slightly more than $1,300. If an agent only sells one or two homes per month, this doesn't amount to a very attractive annual salary.
Starting the Negotiation Process
Now that you understand how the commission process works, it is time to let the negotiating begin. There are several bargaining chips that you can use to help encourage an agent to come down on the commission. Some of these include:
* Asking the agent to represent you in the sell of your home as well as the purchase of your new home, as the agent will be able to earn a commission off of both transactions.
* Agree to sell your home and to buy your home from the same agency.
* Offer to provide the agent with referrals that will help generate more business down the road.
* In states where it is legal, allow the agent to provide dual agency. With dual agency, the agent represents both the buyer and the seller, which means the agent receives both the listing and the selling commission.
* Offer to list multiple homes with the same agent. If you have several properties, an agent may be willing to reduce the commission if you offer to provide that agent with a number of exclusive listings.
* Shop around and find out the fees of other agents. If another agent offers comparable experience, knowledge and services, but charges a lower commission, use this as a negotiating chip if you would rather work with another agent who charges a higher commission.
Author Resource:-
Ryan Lynch is part of the top notch marketing team for an Austin
mortgage lender and a group of Austin Realtors that proudly serve the
capitol city. Their office is conveniently
located in West Austin and they are ready to help.
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