Commissions

Real Estate Commission Law:
“Notice: The amount or rate of real estate commissions is not fixed by law. They are set by each broker individually and may be negotiable between the seller and broker.”

Despite the flexibility in commission rates as per the law, 93% of home sellers consistently pay a 6% commission. Even amidst recent headlines of multi-billion dollar jury awards for conspiracies regarding inflated home sale commissions, Realtors and their brokerages continue to demand 6% commissions from sellers. So, how can individual home sellers negotiate for a lower commission? Firstly, you must ask for a reduction, timing this request is crucial. Typically, commission charges aren’t discussed until the end of the Realtor’s listing presentation.

The Residential Listing Agreement:
The Use of Terminology:
You’ll quickly observe that everyone remotely involved in residential real estate sales avoids using the word “contract.” Instead, they prefer terms like listing agreement, purchase agreement, or buyer broker representation agreements. Realtors, sellers, and buyers often exhibit discomfort when the term “contract” is mentioned, thus the preference for “agreement.” It’s crucial to understand that despite these euphemisms, these documents are legally binding contracts once signed.

At this stage, present images of your home, starting with its focal points. Progress through each picture to demonstrate to the Realtor the excellent opportunity it presents for them to list your home.

Once the Realtor concludes their listing presentation, they will present the listing contract to you. They may explain that their agreement, crafted by their State Association’s Attorneys, aims for fairness. As the Realtor begins to discuss their standard industry commission rates,

INTERRUPT THEM!
Upon receiving their listing agreement, it might show a preprinted 3% paid to the listing agent and another 3% paid to the selling agent (Buyer’s agent). No, the Realtor isn’t showcasing 3% twice; it totals 3%+3%=6% commission. Sometimes, they might even include a transaction coordinator fee.

Inform the Realtor that you understand that most Realtors charge between 5.5% or 6%. You’re also aware that most sellers pay within the 5.5% to 6% range. Proceed by indicating your knowledge of recent successful lawsuits by home sellers due to inflated commissions. Explain that your home is easily marketable, and you seek a flat listing fee.

When most Realtors argue, “my Broker requires 6%” or “I have to split 6% with the Buyer’s Realtor,” express your understanding but assert that for your easily sellable home, a lower commission is all you’re willing to pay. The Realtor might counter with, “what were you hoping to net out of the deal”? Respond consistently, “I expect you to secure the maximum net for me, regardless of the commission I pay you.” At this juncture, the Realtor may concede, defer to consult their Broker, or simply walk away.

Clarify your expectations regarding the hours you anticipate your listing Realtor to invest in selling your home:
Here’s a breakdown: 0 hours for determining your home’s value (assuming you’ve already established a realistic value), 2 hours for MLS input, and 38 hours for various tasks including home listing setup, managing inquiries, organizing open houses, dealing with offers, and overseeing the contract to completion. Notify the Realtor that if they maintain an updated detailed time sheet, verified weekly by you, and it significantly exceeds 40 hours, you’re open to considering additional compensation. Even though they might offer excuses, inform them they can verify with homesellersrights.org, which offers licensed professional agents at an hourly rate, typically $100.00/hour, a reasonable compensation.

Additional Considerations:
List all the reasons you believe your preparations for the home sale will assist the Realtor in achieving an effortless sale. This includes a well-prepared home, a potential buyers’ list, and informing neighbors about your upcoming sale. The easier you make it for the Realtor, the stronger your negotiation for commission reductions.

Buyer’s Agent Commission:
I predict that sellers will eventually cease paying the Buyer’s agent commission, with the Buyer’s lender covering this cost. This seems evident as no one stands to benefit more from a home sale than the lender. At today’s interest rates, a lender could make up to 3 ½ times the profit from the initial loan amount.

Key Points to Remember:
Since 1988, I’ve observed that most of my sellers have their homes ready for sale. They recognized that by offering a $5000 listing fee, they needed to be prepared for a sale.

Examples from My Experience:
My sellers were typically highly educated individuals who researched me and my agency extensively. They possessed the confidence to identify a good deal and steer clear of potential pitfalls. As consumers, we are naturally cautious about hidden catches. The real estate industry capitalizes on this human trait. However, in the realm of saving commission dollars, the adage “too good to be true” doesn’t apply. There are Realtors and Agencies offering excellent services and affordable fee structures, although they might require some effort to find. If you’re struggling to find them, contact or visit homesellersright.org. They provide additional support by collating MLS data to assist you in finding an affordable Realtor.

Personal Experience:
Whenever I’ve sold my own homes, I never paid close to 6% commission. By preparing both my home and myself, I convinced my listing Realtor to reduce their commissions. In my recent sale in Loomis, CA, I paid a total of 3.5% commission compared to the local average of 5.75%. This decision saved me 2.25%, totaling $11,250.