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Pay Lower Commissions

3 Ways to Pay Lower Commissions

Sellers have more options today for paring down real estate commissions or handling the sale themselves. Here are three strategies that can help put more cash in your pocket.

Gone are the days when selling your home meant a stark choice between paying a hefty 6% commission to your real estate agent or going it completely alone on the For Sale by Owner route. Today, you have a number of options that fall somewhere in between. They include:

  • Negotiating down your agent’s cut;
  • Using a discount broker; and
  • Paying à la carte for the services you need.

All of the options have this in common: They’re designed to keep more money in your pocket.

Commissions have fallen in recent years to an average 5.1% nationwide. And as the market cools, commissions will be under more pressure.

Here’s a quick rundown of how each commission-cutting option works.

Negotiating your agent’s rate

In a typical home sale, agents for buyers and sellers each take a commission of roughly 2.5% to 3%, for a total cost of 5% to 6%, paid out of the seller’s proceeds. But as agents compete with discount brokers and flat-fee services, some are becoming more amenable to reducing their cut to 2% or less. (It doesn’t hurt, either, that record home prices mean agents are often still making a comfortable living on their listings.)

To get a reduced commission:

  • First, ask several agents in your area to prepare a free market report, estimating the sales price of your home.
  • Interview each agent. Tell them how much you are expecting to make from the sale of the house and ask if they will lower their commission to the percentage you want.

If your home is at the upper end of the market, you’re more likely to have luck; Realtors are more willing to come down to 3% or 4% on $1 million homes, experts say. But even if your suburban ranch falls squarely in the middle of the market, there’s no harm in trying.

“No one gets upset with you for asking,” says Kasy Gott, a certified financial planner with Kochis Fitz, a San Francisco financial planning firm.

If you’re turned down, simply thank the agent for their report and let them know you’ll be putting your home on the market with someone else in the next couple weeks. It might be enough to sway them. If not, consider one of the other following ways to cut costs.

Full service at a discount

Sometimes, you can take advantage of discounts and rebates by going with ABQ Realty, a full-service real estate company, that list for only 1% and 3% for buyer’s agent. They also gives buyers a rebate, up to 2% of purchase price, which can be issued in the form of a check or applied to closing costs.

Other companies are offering non-cash rebates, such as frequent-flyer miles. If you use a real estate agent sponsored by LendingTree, for example, you can receive rebates for airline miles or gift cards from Costco or Home Depot.

Ben Shapiro in the Hancock Park area of Los Angeles offers to give a portion of his commission to a local private preschool. It’s worth noting,”however, ten states have enacted laws that forbid brokers from offering refunds, denying consumers the benefits of price competition and driving prices higher than they would be in a more competitive market,” stated on the US Department of Justice’s website.

FSBOs — with help

When real estate brokers told Rosemarie Falcone she should list her Victorian home in White Plains, N.Y., for $650,000, the 49-year-old art director decided she could do better — alone. Falcone listed her three-bedroom house through ForSaleByOwner.com, a national real estate Web site that offers access to the local Multiple Listing Service (MLS) through a local real estate broker who charges a flat fee. After running her first open house and printing marketing fliers, she managed a bidding war between three families and sold the property in April for $743,000.

Falcone only paid about $800 to ForSaleByOwner, saving more than $30,000 in broker’s commissions. “I just thought, ‘My God, this is a no-brainer. I can sell this home,’” she says.

Even better, ABQ Realty offers to list homes on the MLS for only $395. Read Selling Your Home.

If you’re similarly comfortable handling part of the process, there’s no shortage of sites and services willing to help you. Some will charge an hourly fee for services such as advising on price and preparing closing documents. You just need to figure out what part of the real estate transaction you can manage on your own and what help you might want to pay for, such as marketing.

Tips for going it alone

Going it alone — even for part of the transaction — presents its own challenges, of course. First and foremost, you need to have time to show the home. Falcone, who saved $30,000 in commissions, had left her job to start a new life in Florida so she had availability and she likes interacting with new people. Another must: prepping your home for sale, including depersonalizing the space and removing clutter.

Reference: Debora Vrana of MSN Real Estate. “3 ways to pay lower real-estate commission“. Retrieved May 2013
Reference: DOJ's website. "Rebates Make Buying a Home Less Expensive". Retrieved Feb. 2015

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