Four Ways to Pay Less Commission when Selling Your Home
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Four Ways to Pay Less Commission when Selling Your Home

In our challenging economic times, many of us are trying to keep our spending to a minimum -- at least until we see evidence the economy is turned in a more positive direction.

When it comes to selling a home, though, not everyone has the luxury of waiting.  Job loss or transfer, marriages and divorces, deaths, retirement, failing health, growing families, empty nesters – homeowners in all of these situations have reasons to sell sooner than later.  Life’s circumstances don't always occur at the best times to sell, but selling is still the best option.

Further, today, many home values are “underwater.”  That is, the home is worth less than the outstanding mortgage -- or it will be after the seller pays a big commission. Many are on the brink of foreclosure and sellers are intent on avoiding foreclosure by trying to sell their home first.

Most knowledgeable home sellers recognize that listing their home with a Realtor® will gain them more exposure to more buyers than selling their homes “by owner.”  The only advantage to selling by owner is this:  It might cost less than paying a Realtor to sell your home.  (Some studies indicate that FSBO sellers, on average, get less than if they had listed with a Realtor and paid a commission.)

When you are deciding whether to list with a Realtor or go it alone, remember this:  Real estate fees are negotiable. Just because one or two agents tell you their commission is X% does not mean all Realtors charge the same.  Nor does it mean there are no options to paying a commission based on the sales price of your home.

Here’s a cautionary note, however:  Do not choose your Realtor on the basis of what commission he or she is charging alone. Choose your Realtor according to what you need.   Marketing?  Service?  Knowledge?  Experience?  Low Price?  Follow-through?  Status Updates?

Imagine the range of retail stores, from Wal-Mart to Kohl’s to Macy’s.  Each of them offers something different to the consumer.  Wal-Mart has great prices but Macy’s has much better customer service.   Kohl’s is in the middle with fairly good quality, mid-range prices and friendly service.  Different Realtors offer different things to consumers as well.

In most cases, deep-discount brokers are working on volume.  In order to make a living, they need to list a lot more homes and don’t have time to follow up with their home-owner clients on a weekly – or even monthly – basis.  There may be little or no money in their budget for marketing your home and no time to do open houses.  Some Realtors offer a full range of services, from providing market analyses to showing up with boxes of doughnuts on moving day.

Most home sellers want something in the middle:   Most are quite happy with excellent service and exceptional marketing.  They’d just as soon skip the doughnuts.

Here are several ideas that may help you mitigate the pain of paying commission:

1. Barter for Goods & Services. This is very popular today because so many sellers have lost equity in their homes, some Realtors are trading their services for a jet ski, a used car, or professional or trade services.

A barter agreement could reduce or eliminate commission altogether, depending  on the value perceived by both parties. Be sure to get the agreement in writing,  however.  It is important to know what you are paying for, even if you’re paying  for it with a big-screen TV or the pool table you haven’t used in years.

2. Ask to Pay a Lower Commission: Sounds too easy, doesn’t it?  Sometimes just asking will get you the commission rate you want or can afford.  Any good Realtor will weigh several factors in deciding whether or not to reduce the commission:  a) Is the home highly marketable and will it sell within a short time (thereby reducing my marketing expenses)? b) Do I want part of something or all of nothing; c) Will this home be a good listing to generate other business?

3. Buy Down Your Commission Rate:  You can “buy down” the interest rate on a mortgage by paying some of it upfront, can’t you?  Why not commission?  Most agents would reduce their fee if a homeowner was willing to pay some portion of the commission upfront.

Why?  The biggest reason Realtors charge what they do is the risk they take on  when they list your home.  Realtors shell out all the money for yard signs, key  boxes, internet web sites, color brochures and those little boxes in the yard, virtual  tours, Multiple Listing Service fees, newspaper and “homes for sale” magazines, cable TV ads, etc.

Then what happens? The listing contract runs out without selling.  That’s right.  In  most markets, only about 50% (or less) of the homes listed on the MLS actually  sell.  So, after spending hundreds – even thousands – of dollars on marketing a  home, the agent chalks up half of them as a loss.

If a homeowner has a stake in the success, there is a much higher likelihood the home will sell.

4. Negotiate a “Flat Fee” Agreement. Flat Fee agreements can take many forms.

a) Flat Fee – A pre-determined fee for Realtor services.  Flat fee agreements are helpful when limited services are required.  For example, a buyer finds a home and just needs a Realtor to “write it up.”  However, both sides need to be a little cautious here because “just writing it up” may not be all that is required to complete a fully-executed buy/sell agreement. In a flat-fee agreement, both parties should agree to what the fee covers, in  terms of services provided (and not provided), maximum number of hours  the fee covers, and when & how the fee is going to be paid.

b) Flat Fee Plus Hourly Rate – An hourly rate is established at the outset for time required beyond what is agreed to in the initial contract.  If the terms of the flat fee agreement state that the seller will be responsible for ordering title insurance, for example, but when he receives it, realizes he needs the Realtor’s help to clear title defects, the hourly rate would take effect.

c) Flat Fee Plus Commission – A flat-fee agreement which features a base rate but also offers the additional incentive of a percentage of the home’s sales price.  Often, the Flat Fee Plus Commission agreements are linked to the home’s time on the market or the final sales price.

So, there are some ways you can reduce the sting of paying commission when you sell your home.

Remember this, though:  The very best agents will negotiate a fee arrangement based on their realistic assessment of what the job will require.  If a seller wants to “test the market” (price the home at the top of its range … or above!), the agent will be less willing to adjust his or her fees.  If the home is in marketable condition and priced right, the agent will see a high likelihood of getting paid and may feel taking the listing at a reduced rate is worthwhile.

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Good job

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