Tips and Traps When Negotiating Real Estate: Negotiate the Commission

Negotiate the Commission

I have a good friend who to this day is fond of recalling the first time he ever listed a house with an agent.

“She came in, we talked a little while, and then she said she wanted a 7 percent commission. I was flabbergasted. I knew that other agents in the area were charging only 5 percent. She was 2 percent higher. When I began to protest, she wiggled her finger at me and said, ‘You’ve got a miserable little house in a crime-ridden neighborhood. You should be glad I’m willing to list it at all!”’

There’s usually a pause in the story at this point where I’m sup­ posed to ask, “So what did you do?” He’s a good friend, so I usually go along.

“Why, I threw her out! I told her I didn’t need to sell. We lived there another five years and then I sold it myself for twice what we paid! Now that’s getting a good deal.”

I suppose this story is supposed to have several morals, one of which is that agents are greedy know-nothings and another is that my friend is a real wheeler and dealer. The truth of the matter, how­ ever, is that I knew him when he lived in that house and it indeed was small, miserable, and in a terrible neighborhood. I can under­ stand why an agent would want a bigger commission to sell it.

Further, because he didn’t list, he had to live there another five years until all real estate took a big hike in price and any fool could have gotten twice the purchase price of five years earlier.

My own moral here is that negotiating the real estate commission with the agent doesn’t necessarily mean you will want to lower it. You may want to raise it to get a quicker sale!

TRAP

Beware of any agent who says that the “fixed” or “standard” or “regular” commission is a given amount. In all parts of the country, the rate of commission paid to a licensed agent to list your house is entirely negotiable between you and the agent. There is no set rate. It’s whatever the two of you agree upon.