Cut Home Sale Costs With Lower Realtor Fees

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Real estate agents are coming up with a host of imaginative ways to make up for the loss of homebuyer’s tax credits. But is there something wrong with this picture?

Some agents are offering financial incentives of their own to offset the loss of the $8,000 first-time homebuyer's credit, which expired April 30, along with the $6,500 credit to homeowners who were trading up.

Century 21 offers participating sellers a chance to win $8,000. The problem is, the odds of winning are pretty slim, as there will be just 21 winners nationwide over three months. Coldwell Banker has a program that offers a little extra sales help for sellers who offer price cuts of up to $8,000 on deals signed by July 31.

Other real estate agents, the story says, are urging sellers to offer incentives, like appliances or cash toward closing costs.

OK, it all makes sense. After all, it is a buyer's market. Sellers need to be realistic.

The problem with this picture is that the real estate agents could participate as well, by cutting their commissions. That would make it easier for sellers to reduce asking prices, improving the odds of landing buyers.

To many real estate agents, the suggestion is blasphemy. But the standard 6% commission is not carved in stone. Commissions are negotiable. Of course, that doesn’t mean the agent has to settle for less, but the seller can give it a try. Agents are pretty hungry in today’s slow market.

As a seller, keep in mind how the system works. Typically, the seller hires an agent, giving an exclusive right to list the property for a given period. Though that, too, is negotiable, six months is common. If the listing agent produces a buyer, the agent and the agent’s firm get the entire commission. At 6% that would be $18,000 on a $300,000 home.

But in many cases, if not most, the buyer has an agent as well. Often the buyer’s agent has learned of the property through the Multiple Listing Service, and may have visited the property on a “caravan,” a tour of homes for local agents.

In this case, the commission is split, 3% for the seller’s agent, 3% for the buyer’s. But the entire amount is paid by the seller. Each agent may end up with 1.5% after splitting the take with his or her employer.

So, imagine you negotiated a 5% commission instead of 6%. That would save you $3,000 on that $300,000 home, enough to provide a nice incentive for buyers. For them, it could be up-front money to help with closing costs.

Of course, a smaller commission gives the agent less incentive to sell your house, but that effect might not be too severe. In a two-agent transaction on a $300,000 home, each agent, after cutting in the boss, would make $4,500 with a 6% commission, $3,750 at 5%.

And there’s another option: You could forgo an agent and try to sell the property yourself. You could spread the word that you’d pay 3% to any agent who produces a buyer. Buyers’ agents would have the same incentive as if you had an agent of your own, but you’d save $9,000 – enough for a pretty generous homebuyer’s incentive.

In fact, the Internet is full of services that will help you sell on your own, and even get your property on the all-important Multiple Listing Service for a few hundred dollars. Just search “For Sale by Owner.”

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