Some real estate agents resort to pretty clever tricks when they’re chasing after business. One of the better known includes “buying the listing,” where an agent will suggest a higher-than-appropriate list price just to entice you to list with him and then hammer you over the course of the next few weeks to drop the price.
Then, there’s the agent who will discount his or her commission in the hopes of getting your business. Now, there’s nothing inherently wrong with offering a client a deal ― except in a business where negotiating skills are paramount to the success of the process. You won’t see your lawyer, for instance, discount his or her fees. Not that I’m comparing real estate agents to lawyers. I am comparing their primary function when dealing with their clients.
The typical commission structure
The typical real estate commission is a percentage of the sales price of the home. Sure, there are some regions that have a higher commission and some that have lower… and, yes, by law, this commission is negotiable.
Half of the real estate fee goes to the listing broker and half of it goes to the buyer’s broker. From there, the brokers divvy up the commission according to the agreement he or she has with the agent. New agents typically make 50 percent of the broker’s share while established agents can make as much as 100 percent, although that’s not common.
Now, the agent will take his or her half-of-the-half of the commission and pay for all the costs of listing your home. This includes everything from the lockbox to the sign to the marketing materials. Depending on the agent’s marketing budget, pretty much all of the commission can likely go to listing expenses.
What’s left is his or her “salary.”
Now, if your boss or your client asked you to take one or two percent less on your next paycheck, are you going to agree to that? Of course not.
So, is it wise to use a discount broker?
Now I completely understand how giving up any of your home’s proceeds can seem like a lot to ask, especially if you’re right down to the wire when it comes to how much money you need to walk away from the closing table with. So using a discount broker is understandably tempting. Not wise, but tempting nonetheless. Here’s why I say that:
When you hire someone to go to bat for you, to represent you in a negotiation process, the last characteristic you want that person to have is weakness, right?
Consider this: If a real estate agent can’t defend her own commission ― if she can’t even negotiate with you on why she deserves what she’s paid ― how can you possibly expect her to defend your asking price and to protect your interests when it comes to buyer demands for concessions?
You really can’t, which is why using a discount broker to save such a tiny amount of money is a bad idea. And, in the long run, when you consider how much money you stand to lose if your agent can’t negotiate aggressively, a 1 or 2 percent commission discount is puny.
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