Commission in real estate – You Can Negotiate a lower Real Estate Commission

The commission in real estate typically runs between three to seven percent with services ranging anywhere from a basic MLS listing to a full blown marketing campaign with all the bells and whistles. As a home seller you must decide which services are best for you and then you must negotiate the lowest commission possible.

However, the challenges and hurdles for most home sellers begin almost immediately as it's difficult to distinguish what the right services are and then figuring out what you should pay for those services.

Let's start out with what is really important in selling houses. In my e-book I quote some very interesting numbers from the National Association of Realtors (NAR). Between the Internet, the MLS, and a yard sign 75% of all homes are sold.

Also, it's vital to know that open houses, homes magazines, virtual tours, real estate hotlines (800 numbers) cable TV, broker open houses and postcards (flyers) to neighbors account for less than seven percent of all homes sold…and that's combined. The true reason for these 'marketing strategies' is to create phone calls for the real estate agent so they have a chance to create a new client relationship.

But, here's where it gets interesting…

The cost to market a home with the programs that work cost less than $1000…a year! This is regardless of the price or location of the home.

The cost to market a home with the programs that work infrequently can cost even less depending on the amount of listings the agents carries per year.

Do you think the commission in real estate might be a little off balance? After all, it's been more than once the real estate industry has been named as one of the top ten most over paid professions.

(Ahhh…but only if you knew the whole story…)

Anyway, now that I've given you a little peek into some of the effectiveness and costs associated with selling a home through a real estate agent, let's put it into some practical use.

Most of the advice I read on the Internet about negotiating the commission in real estate is to 'just ask'. This great and 'valuable' advice is doomed from the start and will hardly work with any real estate agent that is a true professional.

Remember, a true real estate professional negotiates for a living. You're hiring a real estate agent to negotiate the best price the market will allow. A true professional has spent hundreds, if not thousands of dollars on training, seminars, books, tapes, etc. to learn and sharpen their negotiating skills. Is it probable to think a trained, professional realtor (who is expecting the 'will you lower your commission' request) will easily cave in and give up?

Hardly! Unless, of course, you're prepared and you know what to say.

Now, getting back to some practical use.

We know that the out of pocket expenses realtors charge is pennies compared to what's made. We also know that there are only three effective ways to market a home correctly.

During the listing presentation the real estate agent will give a laundry list of things they'll do to market your home. They've been trained to make the list look as long as possible in order to establish more value. But you won't be fooled because you know what's up.

Now agents will either tell you what they charge at the beginning of the presentation and then proceed to impress you with their marketing plan or they will build up the value first and then tell you what their commission rate is.

Regardless of which order they give their polished presentation, be sure to take plenty of notes and patiently wait for the end. If you have questions or clarifications you can ask them now.

After everything is clearly understood, go back to your notes and review what's included besides the Internet, MLS and yard sign. Surely, there will be plenty of items included.

Being polite, thank the realtor for their presentation. Respectfully let them know you have direct information from the National Association of Realtors that specifically states what marketing strategies are effective in selling homes. Let them know that most marketing strategies are really lead generation tactics for the agent and you're only willing to pay for strategies that work.

Secondly, let them know you're also familiar with the associated costs they incur each year as a result of their effective marketing. The goal is to let them know they're dealing with a highly educated home owner and you simply do not see value in the commission they have offered.

Finally, let them know that based on their time, out of pocket expenses and effectiveness of the marketing that you're only willing to pay (whatever). Tell them you have three other Realtors to interview and you will get back with them in the next few days…unless they are willing to agree to the commission you've set forth today. A little pressure is good.

Of course, real estate agents are trained to counter your commission reduction request.

This is only one example and strategy to get a reduced commission. Once you gain a little more knowledge about negotiating and how homes actually sell you'll be in a position of strength. Soon the commission in real estate can be easily negotiated.