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Did you know that real estate commissions are negotiable? Many people assume that they can not negotiate these fees, but the reality is that it’s perfectly acceptable to ask your agent to lower his or her commission fee. Before you start the negotiating process, however, it is necessary for you to understand a lot of about how commissions are earned. This means, you may be in a position to work out a fee that’s fair to both you and the agent.

Determining the Split

One part of commission process involves agreeing upon a split. Since solely real estate brokers will receive a commission, the agents who work for them should comply with receiving a certain share of the commission. Whereas some brokers simply split the commission 50/50 with the selling agent, others can pay the next split to their additionally productive agents. Furthermore, if the listing broker as well as the selling broker are different, the commission might have to be divided between the listing side additionally as the selling side before it’s shared with the agent.

To understand the method higher, it is useful to look at an example. If an agent sells a home for $200,000 and receives a commission of seven percent, for instance, four percent of that commission might go to a listing broker while three percent goes to a selling broker. This implies the selling broker receives $6,000 while the listing broker receives $8,000. The agent who sells the house might receive half of the selling broker’s commission. Whereas this might come to $3,000, the agent could also have to pay a franchise fee of eight percent. This suggests the whole earned commission is all the way down to $2,760. From that, the agent should additionally pay overhead expenses while conjointly putting money away to pay for taxes and to place toward social security benefits. When all is said and done, the entire “profit” from that sale will be slightly more than $1,300. If an agent only sells one or 2 homes per month, this doesn’t quantify to a very enticing annual salary.

Beginning the Negotiation Process

Currently that you just understand how the commission method works, it is time to let the negotiating begin. There are plenty of bargaining chips that you’ll be able to use to encourage an agent to come down on the commission. Some of these embrace:

* Asking the agent to represent you in selling your home as well as the purchase of your new home, because the agent can be in a position to earn a commission off on both transactions.

* Agree to sell your home and to shop for your new home from the identical agency.

* Offer to provide the agent with referrals that will help generate a lot of business down the road.

* In states where it’s legal, enable the agent to represent a dual agency. With dual agency, the agent represents each the customer and the seller, which means that the agent receives both the listing and also the selling commission.

* Offer to list multiple homes with the same agent. If you have got several properties, an agent may be willing to reduce the commission if you provide that agent with a number of exclusive listings.

* Shop around and find out the fees of other agents. If another agent offers comparable expertise, information and services, however charges a lower commission, use this as a negotiating chip if you’d rather work with another agent who charges a better commission.

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