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  Are Commissions Negotiable?

Listing Commissions and Related Issues

Are Commissions Negotiable?

In most areas there is a "customary" percentage that real estate
agents expect to earn as a commission. Usually, it is six percent of
the sales price. In some areas it can be as high as seven percent.
However, just like anything else in real estate, this amount is
negotiable. When completing the listing agreement, you and your
agent will agree on the amount of the real estate commission.

Cut-Rate Listing Commissions

With the advent of the web, a lot of agents are offering "cut-rate"
commissions. Most of the time, lower commissions are tied to a lower
level of service. If all you want is to be listed with the Multiple Listing
Service and a sign in the front yard, then a cut-rate commission may
be right for you. If you want an agent who will actively promote your
property to other agents and spend money on advertising, then you
probably are not going to get that level of service with a reduced
commission.

At other times, the lower commissions are offered when you agree to
tie in to other services offered by the broker, such as agreeing to use a
specific lender, escrow, settlement, or title company. The broker (not
the agent) will probably have some type of ownership or profit
participation in those businesses.

The problem with agreeing to tie in to these other companies is that
they do not have to be as competitive in pricing those other products or
services. Sometimes they are priced in a way that allows them to earn
back the income lost by offering a smaller real estate commission.

Another common practice when you see an ad for a reduced
commission is that the compensation is lowered when you agree to
buy your next home through the same agent or broker. Usually, the
reduced commission is not really being offered on the sale of your
existing home but on the purchase of your next one. The ads are
usually unclear on this.

As a result, when you see an offer for a lower commission, you should
analyze what you are giving up by accepting such an offer. It probably
will not be readily apparent in the advertisement. Be sure to ask lots of
questions.

copyright 2000 by Terry Light and RealEstate ABC, revised 2002

 

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