How to negotiate the best listing commission

How to negotiate the best listing commission

Listing commissions are negotiable, but not always competitive. If your agent has to pay 25%-40% in referral fees, they cant offer you a competitive listing rate.

As a homeowner, you can actionably control some costs, but not others. For example, mortgage interest is your highest expense, but this massive cost is largely out of your hands (although there are actionable ways consumers are able to save on the mortgage fees.)

You can save genuine equity when picking the right real estate agent instead of selling a home with a single offer from a private investor, such as an iBuyer. In 2019, US homeowners have about $15 Trillion net equity saved into their homes from the overall value of all homes of about $31 Trillion. As a homeowner, your hard work, cost of insurance, taxes, and mortgage interest all went towards building this net equity. This is why when selling your home, it is imperative that your equity is not lost due to excessive transaction fees. One of the best ways to save equity is to properly negotiate listing rates with multiple agents before hiring one.

1. Seek transparency first, negotiate the listing rate second

If you amortize a “standard” commission over the first five years, it is the largest homeownership expense line item, alongside with mortgage interest. As a home seller, negotiating the listing rate is important because it directly affects your net equity. Your mortgage company does not care how you sell your home, because they will receive the same amount of the remaining mortgage. Transparency is essential when negotiating a listing rate with a real estate agent because in the current broken real estate representation market you are consistently subjected to “standard” 6% listing rate and 25%-40% referral fees associated with it. The fact that a lot of agents are willing to pay 25%-40% in referral fees to gain your business. This also means that when you are able to work with an agent subject to 0% referral fees, you win. HomeOpenly estimates that US consumers spend about $10-$15 Billion in excessive commissions each year, largely due to hidden referral fees.

The first thing you should ask your real estate agent is if they are bound by a Referral Fee Agreement with another broker or a referral network. If a broker has a Referral Fee Agreement that means that you are effectively hiring two brokers at once – someone else gets 25%-40% in referral fees and your agent only keeps 60%-75% of their commission. Such agreements do not allow for legitimate savings – as a consumer, you will either suffer a reduction in service quality or pay an exigent commission rate, there is no third option. When there are no referral fees involved, your home selling experience begins with transparency.

2. Higher commission rate does not lead to higher sale price

Uncompetitive agents often imply or state directly that a higher rate results in a higher final home sale amount. There is absolutely no evidence for this. In fact, there is no evidence of agent quality based on the past MLS transactions either. Each home is unique and each sale circumstances are unique. However, there are agents who are able to sell your homes for a higher amount and charge highly competitive fees for their service. This is the agent you want to work with. HomeOpenly is a platform that helps consumers to truly discover such agents locally.

The current market conditions largely define the value of your home. As a seller, you can firmly assume that your home will sell for what it will sell. A competitive agent who offers an exceptional service simply helps to facilitate your transaction by addition of quality. Once you negotiate a competitive rate with an agent, by default, you are cutting down on one of the largest expenses of selling a home. This action alone raises the net amount of your hard-earned equity.

3. Beware of a dual agency commission structure

A home seller negotiates a listing commission with a listing agent, but the buyer pays all closing costs with their final offer (the buyer is the only one writing the check at the end of the transaction.) Think about this statement for just a moment, because it is very important to understand why the dual agency can work for you, or against you, as a seller.

A real estate agent who offers you a commission agreement that does now allow for a lower fee when representing both sides of the deal subjects your transaction to agent's personal interest - money. The reason for this is simple: if an agent has a set fee (for example 6% listing rate), regardless if a buyer’s agent is part of the transaction, this agent will look for a way to sell your home to an unrepresented buyer in self-interest in order to collect the entire commission amount, instead of having to split it with a buyer’s agent. In this scenario, if two legitimate offers are made by a represented buyer and an unrepresented buyer, but the agent will have a very big incentive to recommend that you work with an unrepresented buyer. This situation is not ideal for you as a seller.

However, if your listing agent is willing to take a lower fee for representing both sides of the deal, a self-represented buyer has an advantage working with you. A self-represented buyer in this scenario is able to make an offer that may be less than a represented buyer’s offer, yet it would still make sense to accept it. A self-represented buyer saves a significant amount in buy-side commissions, but also requires the buyer to accept the potential downside of dual agency representation. Having a buyer's agent represent a buyer may help her make a more educated and a sufficiently reasonable offer, which leads to closing the entire transaction sooner.

4. Check for all three: Service, Quality and Price

When working with a real estate agent, it is important to find one who meets all three marks with flying colors. HomeOpenly aims to connect you with such agents in an Open Marketplace online experience. Picking the right real estate agent is one of the best things you can do as part of your home selling experience.

View Real Estate Agents Offering the Best Listing Rates and Flat Listing Fees


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Published on July 12, 2019