Author Topic: Negotiating realtor fee  (Read 658 times)

TightFistedScot

  • Stubble
  • **
  • Posts: 161
  • Age: 31
  • Location: Hogtown
Negotiating realtor fee
« on: March 17, 2017, 06:51:48 AM »
Hey folks,

I am a newbie to selling a house and I need some advice surrounding discussing a % fee with my real estate agent. The meeting is later today.

She is the same agent I used to purchase the home. She was good at negotiating a lower price for me when I purchased 3 years ago, paid for my home inspection, is very responsive, etc. I do trust her, but I also don't want to be paying out 30k for her fees.

I will be selling the house for somewhere in the area of 650k and purchasing a condo for somewhere around 350k. The house will most likely sell in 1 week as there is an extreme shortage of detached homes where I live.

I've heard 4 percent is the standard fee for realtors? How do I negotiate this lower? What should I ask for?
I think relative to the population I have been an easy client for her. I bought my house after only looking for 1 month (and looked at 5 properties), and I'm already selling (to make a big profit) and purchasing again in 3 years!

Yes I have considered selling the house myself  and it is not an option I want to do this time around.

Thanks for your help.

Vindicated

  • Pencil Stache
  • ****
  • Posts: 607
  • Age: 33
  • Location: Indianapolis
Re: Negotiating realtor fee
« Reply #1 on: March 17, 2017, 07:11:07 AM »
P2F, since I'm curious as well.

I was told by a coworker that he once sold a house by finding the buyer himself, then paying a realtor friend to do the paperwork for him $1000 iirc.  Not sure exactly how it would work though.
My MMM Journal: https://forum.mrmoneymustache.com/journals/my-almost-perfect-life-experience/

"One thing alone is certain, that man's slavery grows and increases. Man is becoming a willing slave. He no longer needs chains. He begins to grow fond of his slavery, to be proud of it. And this is the most terrible thing that can happen to a man. - G.I. Gurdjieff

Megma

  • Pencil Stache
  • ****
  • Posts: 511
Re: Negotiating realtor fee
« Reply #2 on: March 17, 2017, 07:38:16 AM »
Hey folks,

I am a newbie to selling a house and I need some advice surrounding discussing a % fee with my real estate agent. The meeting is later today.

She is the same agent I used to purchase the home. She was good at negotiating a lower price for me when I purchased 3 years ago, paid for my home inspection, is very responsive, etc. I do trust her, but I also don't want to be paying out 30k for her fees.

I will be selling the house for somewhere in the area of 650k and purchasing a condo for somewhere around 350k. The house will most likely sell in 1 week as there is an extreme shortage of detached homes where I live.

I've heard 4 percent is the standard fee for realtors? How do I negotiate this lower? What should I ask for?
I think relative to the population I have been an easy client for her. I bought my house after only looking for 1 month (and looked at 5 properties), and I'm already selling (to make a big profit) and purchasing again in 3 years!

Yes I have considered selling the house myself  and it is not an option I want to do this time around.

Thanks for your help.

The standard fee is 6%, not 4. That is 3% for the buyers agent and 3% for the sellers agent; you're paying both. Getting it down to 4% would already be a reduction. On a higher priced house like your, I don't think it's unreasonable to ask for 4% total fee (2% buyer, 2% seller) but I doubt you will get her to accept less than that (buyer's agents could also steer clients elsewhere if the fee is too low). If you get it below 4%, let me know.

I wouldn't tell her that you're definitely listing the house with her but hint you are shopping around a little. I understand you want to use her but you can keep up the ruse and see if that motivates her a little, if it's going to be an easy sale and she will also be representing you when you buy in a few weeks that should be an incentive.

One other thing you can consider is looking for a flat fee agency, they don't work on percentage but handle the listing/sale for you for a flat charge. If it's going sell as soon listed without much work by the agent, this could be a good option. I personally haven't used one but would consider for a higher priced house for sure.
Get cash back on your online shopping from Mr Rebates (hotels, flights, ebay, groupon and more): http://www.mrrebates.com?refid=453502 (referral link, thank you!)

birdiegirl

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Location: Minnesota
Re: Negotiating realtor fee
« Reply #3 on: March 17, 2017, 08:49:56 AM »
One other thing you could offer is to have her represent you for your condo purchase as well.  She might be willing to come down a bit on the commission for your sale if she will also get a commission as the buyers agent on your purchase. 

mishek01

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Negotiating realtor fee
« Reply #4 on: March 17, 2017, 09:46:00 AM »
I am a realtor and I can tell you that Realtors are hardly needed in today's market, especially for most tech savvy individuals who tent to follow MMM. At the right price (you have to know what your property is worth,) and with good pictures on the MLS website even a trained monkey can sell your house. You can look for a flat fee realty listing, or a realtor that would take 1% for them and 2-3% for the buyers agent. If you are a tech savvy individual, and can guarantee to be a very easy client, I can see a realtor taking the deal to make $6,500 with very little work. (I like the idea of letting the realtor know that you will be buying a house through them as well for $350,000, which is another 10k for them. Good luck!

Ensign1999

  • Stubble
  • **
  • Posts: 104
  • Age: 41
  • Location: Northern Virginia/Washington DC Area
Re: Negotiating realtor fee
« Reply #5 on: March 17, 2017, 10:11:35 AM »
Realtors are hardly needed in today's market

I'll second this.  If you have a nice house in a hot market and are willing to price it right, then there should be quite a bit of leeway in the selling agent fee.  You can also set what the buyer's agent gets as well.  I wouldn't be afraid of a buyer's agent steering their clients away from your house either.  So long as it is showing up on Zillow, Redfin, Reator.com ect as being for sale, the buyers are going to know about it and ask their agent about it.  A good agent would rather be the one telling their clients about a new listing rather than explaining why they didn't show it.

My recent experience in a similar price range in a hot market was our agent got 2% and the buyers 2.5%.  Even at these lower percentages, they were walking away with well over 10k each.  We used an agent to list that time as we were limited on time.  If I were to do it again and had more time available, then I might go with a flat rate service to get the house into MLS, pay to have some professional photos taken and get it listed in the popular realty sites.

For buying, I think a realtor can be pretty handy, but it depends on your situation.  If you know the area and have time, then you could find a house on your own and make an offer through the listing agent.  Part of their contract should be something saying they will get a lower commission if they end up representing both the seller and buyer.  This saves the seller money and makes your offer look better.

If you don't have a lot of time and don't know the area, then a realtor can have stuff lined up for you to see and steer you towards areas that meet your desires.  This was our case when we did a short notice military transfer.  We had the quick sale mentioned above and the quick buy on the other end.  Our realtor put us into a good area of town with great commutes and the house we eventually ended up buying wasn't listed on any sites as the sellers had an offer that fell through that he knew about so we were able to put an offer in before it was put back on the market.  This all doesn't mean that your buyers realtor can't make concessions as well.  If we had gone through our bank, they would have provided some pretty large kickbacks to us.  Because this realtor wasn't part of that network, we asked if he would match the banks kickbacks.  He didn't have any problem doing this.  We were a pretty sure bet, so he was choosing between getting a reduced commission or getting nothing.

There is always trade space depending on the market and the circumstances.  The right answer might be a 6% commission split between the two realtors, but in a hot high priced market, I think you can easily negotiate lower for your listing agent and set the buyers agent's commission lower as well.

TightFistedScot

  • Stubble
  • **
  • Posts: 161
  • Age: 31
  • Location: Hogtown
Re: Negotiating realtor fee
« Reply #6 on: March 17, 2017, 11:02:05 AM »
One other thing you could offer is to have her represent you for your condo purchase as well.  She might be willing to come down a bit on the commission for your sale if she will also get a commission as the buyers agent on your purchase.

Yeah that is what I'm thinking. It seems fair.

Given that she had the buyer's commission from my purchase 3 years back (and I bought quick, she didn't have to drag me around the city for a year looking at places).

And if all goes well and she is willing to lower her commission then I will certainly use her for the condo purchase at the same time.

I just read an article published last year talking about some realtors in Toronto slashing some of the commission:  http://www.cbc.ca/news/business/real-estate-agents-slashing-commissions-in-easy-to-sell-markets-1.3054156

And home prices have increased about 20% or more in Toronto since then. That's where I am.


Thanks for your help everyone!

TightFistedScot

  • Stubble
  • **
  • Posts: 161
  • Age: 31
  • Location: Hogtown
Re: Negotiating realtor fee
« Reply #7 on: March 17, 2017, 11:02:29 AM »
Realtors are hardly needed in today's market

I'll second this.  If you have a nice house in a hot market and are willing to price it right, then there should be quite a bit of leeway in the selling agent fee.  You can also set what the buyer's agent gets as well.  I wouldn't be afraid of a buyer's agent steering their clients away from your house either.  So long as it is showing up on Zillow, Redfin, Reator.com ect as being for sale, the buyers are going to know about it and ask their agent about it.  A good agent would rather be the one telling their clients about a new listing rather than explaining why they didn't show it.

My recent experience in a similar price range in a hot market was our agent got 2% and the buyers 2.5%.  Even at these lower percentages, they were walking away with well over 10k each.  We used an agent to list that time as we were limited on time.  If I were to do it again and had more time available, then I might go with a flat rate service to get the house into MLS, pay to have some professional photos taken and get it listed in the popular realty sites.

For buying, I think a realtor can be pretty handy, but it depends on your situation.  If you know the area and have time, then you could find a house on your own and make an offer through the listing agent.  Part of their contract should be something saying they will get a lower commission if they end up representing both the seller and buyer.  This saves the seller money and makes your offer look better.

If you don't have a lot of time and don't know the area, then a realtor can have stuff lined up for you to see and steer you towards areas that meet your desires.  This was our case when we did a short notice military transfer.  We had the quick sale mentioned above and the quick buy on the other end.  Our realtor put us into a good area of town with great commutes and the house we eventually ended up buying wasn't listed on any sites as the sellers had an offer that fell through that he knew about so we were able to put an offer in before it was put back on the market.  This all doesn't mean that your buyers realtor can't make concessions as well.  If we had gone through our bank, they would have provided some pretty large kickbacks to us.  Because this realtor wasn't part of that network, we asked if he would match the banks kickbacks.  He didn't have any problem doing this.  We were a pretty sure bet, so he was choosing between getting a reduced commission or getting nothing.

There is always trade space depending on the market and the circumstances.  The right answer might be a 6% commission split between the two realtors, but in a hot high priced market, I think you can easily negotiate lower for your listing agent and set the buyers agent's commission lower as well.

This is really helpful. Thanks for sharing.

TightFistedScot

  • Stubble
  • **
  • Posts: 161
  • Age: 31
  • Location: Hogtown
Re: Negotiating realtor fee
« Reply #8 on: March 17, 2017, 11:05:49 AM »
I am a realtor and I can tell you that Realtors are hardly needed in today's market, especially for most tech savvy individuals who tent to follow MMM. At the right price (you have to know what your property is worth,) and with good pictures on the MLS website even a trained monkey can sell your house. You can look for a flat fee realty listing, or a realtor that would take 1% for them and 2-3% for the buyers agent. If you are a tech savvy individual, and can guarantee to be a very easy client, I can see a realtor taking the deal to make $6,500 with very little work. (I like the idea of letting the realtor know that you will be buying a house through them as well for $350,000, which is another 10k for them. Good luck!

Good to know! Thanks! Yes TBH I think I could even sell on my own, but I also know it would be extremely stressful for me. This is my biggest investment so I don't want to mess it up.

I may try to sell my next property on my own, after I go through this process with my hand held. :P

Landlady

  • Stubble
  • **
  • Posts: 248
  • Location: WA
Re: Negotiating realtor fee
« Reply #9 on: March 17, 2017, 12:52:11 PM »
Definitely negotiate the % or a flat fee. I work at a Faira, it's free for sellers if you live in WA or CA. Redfin has a 1% program in most big cities. There are options, especially in hot markets. Plus, the cost of customer acquisition is high for agents (sometimes $3,000) and this agent doesn't have to spend that marketing on you if you've already been convinced to sell with them.
Good luck!

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 1390
  • Age: 22
Re: Negotiating realtor fee
« Reply #10 on: March 17, 2017, 01:45:47 PM »
+1 for doing FSBO. My parents have always done this and had success. I feel real estate brokering can be a shady business (not all realtors, but some) and prefer to handle things on my own.

FL_MM

  • 5 O'Clock Shadow
  • *
  • Posts: 19
  • Location: Florida
Re: Negotiating realtor fee
« Reply #11 on: March 17, 2017, 01:59:26 PM »
I sold my last house myself by using a MLS listing service. They added it to the database for a flat fee of $250. I paid 3% to the realtor who brought me the buyer. I did the showings myself on evenings and weekends. It was some work but saved me about $5k.   

TightFistedScot

  • Stubble
  • **
  • Posts: 161
  • Age: 31
  • Location: Hogtown
Re: Negotiating realtor fee
« Reply #12 on: March 18, 2017, 10:24:43 AM »
I sold my last house myself by using a MLS listing service. They added it to the database for a flat fee of $250. I paid 3% to the realtor who brought me the buyer. I did the showings myself on evenings and weekends. It was some work but saved me about $5k.

Nice job! That's inspirational. Something I may try eventually.

The meeting went well. In the current Toronto market the standard is 2.5% for seller and buyer agent but she said she would come down on her end. I'll find out after they appraise the house on Monday.

She works with a partner and the two of them split the commission. But within their commission they pay for the staging, home inspection, and get floor plans drawn up as part of their package for prospective buyers.

Thanks for your help everyone. I'd like to try selling myself but I'm not ready at this point, and TBH I do not feel motivated enough at this point to learn everything required to pull it off.