The real measure of your wealth is how much you'd be
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Real Estate: Negotiating with Your
Listing Agent
After narrowing your hunt for a listing agent,
you'll be faced with the next task of the home seller: negotiating a listing
contract. These contract negotiations generally fall into two categories:
money—in this case, your agent's commission—and contract terms. Be prepared to
compromise: In a successful negotiation, all parties come away believing that
they've struck a good deal.
Negotiating Fees
A typical fee is 6% of your selling price but can vary from 4% to 10% depending
on area, market, and even an agent's track record. Brokers follow local
standards when setting their percentage, but they are not legally allowed to set
fees. So the good news is, yes, there is room for negotiation. Below are some
examples of strong negotiating points.
An agent may accept a reduced commission if:
- You're in a seller's market (there are more
buyers than houses available), your house is in mint condition, and your
location is to die for. Don't even think about not negotiating. Ask for a 1%
fee reduction.
- Your agent has a buyer before you list. Not
only does (s)he save splitting the commission with another broker, but time
and money are saved on showings, open houses and promotions.
- Your house sells within the first week of
being listed, sparing your agent time and money.
- He or she represents both you and the buyer
(acting as a "dual agent") or represents only you but produces the buyer. In
these cases, the commission isn't shared with a buyer's agent (who normally
receives at least one-half of the selling agent's fee). In a dual-agent
scenario, try negotiating for a 2% lower fee; if your agent produces the
buyer, ask for a 1% reduction.
- The buyer is introduced by a firm colleague,
in which case your agent will be spared the firm's portion of the commission.
- You perform some of the services that would
normally be done by an agent, such as arranging and paying for promotions.
- You know of a likely buyer before you list.
Include the name(s) of the potential buyer in the contract, stipulating that a
commission won't be due if that buyer purchases your home. Your agent may also
try to find another buyer with a higher bid and then discount their commission
so your net profit is greater, which is good for both of you.
- You're close to a sale, but the buyer
won't—or can't—meet you halfway. Real estate writer Ilyce Glink, in her book
100 Questions Every Home Seller Should Ask, suggests asking your listing agent
and the buyer's agent if they'll offer some of their commission to seal the
deal. Expect resistance, but it isn't futile.
Negotiating for higher fees
You may actually benefit from offering a higher commission fee or a bonus in
some situations—for example, if you need to sell quickly or your home is in
poor condition. If an agent has a stellar track record, tending to sell homes
in days rather than weeks, it can be a worthy investment.
If you're selling in a "buyer's market," where there are more houses available
than buyers, consider offering a bonus on top of your agent's commission.
Their loyalty could affect whose house sells—yours or your neighbor's.
Negotiating Terms
Paying your agent at closing. If your agent performs as stipulated in the
contract and brings you a buyer who is "ready, willing and able" to close at
full price and with your terms, you may owe the agent's fee even if you
decline the buyer's offer. To avoid paying two commissions—the second being
when you do accept an offer—ask to strike this clause from the contract. Amend
the contract to state that the broker will be paid by the proceeds of the sale
upon closing. This protects you in case the buyer bails for any reason.
Selling to a "return customer." If your house doesn't sell during the period
covered by your listing contract, but you later sell to a buyer who was found
by your agent, you may still owe the agent's full commission. This
post-expiration period is called the "protection period," often described as
60 to 180 days after the contract expires. Request that the protection period
be 90 days or less.
Choosing a new firm or agent. If your original contract has expired, you may
end up choosing a new agent or firm. If you then sell to a buyer who was shown
your home by your first agent, you could end up paying a commission to both
agents unless you add a protective clause to your contract.
Canceling your contract. Request the right to cancel your contract. You can
make this request more palatable by offering, say, a two-week written notice
to terminate if you do so for any reason. If your agent really messes up (i.e.
lies, steals, cheats), you should be allowed to terminate immediately (it's
called "terminating for cause"). In the latter case, you won't be liable for
the commission, but you might still owe the agent for costs and possibly a
penalty fee.
Negotiating Tips
Start at the beginning. During your first telephone contact, ask agent
candidates if their full fee is negotiable if justified by special
circumstances.
Put all agreements in writing. Include every change or addition you and your
agent agree upon in your contract. Enough said.
Ask questions before you sign. Ask your agent to rephrase any language in the
contract you find confusing. If the agent's explanation is clearer than the
contract phrasing, strike the paragraph and rewrite it in your agent's words.
If you still feel like you're in over your head, consult a real estate
attorney before signing.
Be confident. Etiquette has a place at every negotiating table, but there's no
need to be timid. Your job is to get the best deal you can. Your agent may be
resistant, but rest assured that he or she is familiar with the process. This
isn't personal, it's business; and it can be fun.
Don't deal yourself out of a sale. Bargain, but within reason. A good agent
will be working hard for you. If he or she ends up having to choose among
house showings, you don't want to be neglected in favor of a higher-paying
client.
Home Buying & Selling Advice
Related Articles:
Table of Contents:
-
Should
you buy a home?
Renting vs. Buying:
-
Steps to buying a home
-
What is a
Mortgage and do you needed?
-
Different types of Mortgages
-
More Mortgage
Choices
-
0 to 5% down
with FHA and VA loans?
-
Cosigning: The Pitfalls
-
Qualifying for a
Mortgage
-
How much of a
mortgage and a house can you afford?
-
Finding a home with FSBOs & Real Estate Agents.
- It's closing
time: Title and the keys please!
-
Tapping your home
equity: Refinancing
-
Tapping your home equity: Home Equity Loans
-
Frequently
Asked Questions (FAQs) on Real Estate & Mortgages
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