How to Save Thousands When Selling Your Home

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Two forces — technology and a shortage of homes for sale — are cutting into the high commissions that real-estate agents traditionally charge. For home sellers, at least, who pay the fees of both buyer’s agents and sellers’ agents, these changes can add up to some serious savings.

Average savings: $3,693

A survey by the Seattle-based real-estate company RedFin recently found that:

Sixty percent of people who sold a home in the past year said they got a discount on the commission they paid to their real estate agent. The average discount was 41 percent off the typical commission.
Among people who bought a home in the past year, 46 percent said their agent gave them a refund, rebate, closing cost contribution or other form of savings of more than $100, with the average savings amount in that group being $3,693.

Redfin gathered the results from a SurveyMonkey Audience of 2,000 recent homebuyers or sellers in eight U.S. markets. (Redfin clients were not among those polled.) Everyone who responded to the survey used a broker of some type. Redfin, founded in 2004, charges sellers 1.5 percent of the sale price to list a home and promises to rebate a portion of the buyer’s agent commission when a sale closes.

Sellers have clout

The shortage of homes for sale in many places gives home sellers unusual leverage. Some are using that to negotiate lower fees.

“Not only do tight markets create more competition between agents, they also tend to increase sales prices and decrease the amount of time it takes to sell a home — two factors that are probably making it easier for an agent to accept a lower fee,” reports Bloomberg.

Homes that sell for higher amounts generate larger commissions — and probably create some additional wiggle room for agents to cut fees. Likewise, a seller who plans to use the same agent to sell their old home and buy a new one probably has extra leverage in bargaining.

But you don’t need to do two transactions or sell an expensive home to score lower fees, whether through negotiating with an agent or by using an alternative service that cuts the costs of selling and buying homes.

Breaking with tradition

Also, technological change put in motion by the internet finally is lowering consumers’ costs. With sites like Redfin, Zillow, Trulia and others to put listings directly online, homebuyers now have easy access to the catalog of homes for sale. In the past, they could learn about homes for sale and market statistics only by working with an agent.

Consumers now can choose among full-service agents, discounted agencies or services that perform individual tasks such as listing, pricing, showing, advertising and marketing, drawing up contracts and appraisals — to name a few.

Steve Udelson, president of Owners.com, an online marketplace in Luxembourg, tells The Washington Post:

“The direction of the market now is to bring in the missing piece of the transaction and save money by just paying for that part. The market is gravitating to a la carte services in the same way that investors have started to gravitate to buying and selling their own stocks online.”


“Fifteen percent of people who sold a home in the past year used a limited-service agent,” according to Redfin. The Post gives an example of how these services work, describing the experience of Mandie Sellars, who sold a home in Raleigh-Durham, North Carolina, using a company called SoloPro, which says it works with 1,500 agents in 40 states. It charges no commissions. Instead:

She paid $25 for email alerts so she could find a property, $50 for the property showing, $100 for an agent to present her offer and $800 for a transaction coordinator. SoloPro will give her a rebate of 3 percent of the purchase price — the equivalent of a typical buyer’s agent commission — at her closing, which she estimates to be about $5,700.

The Redfin survey showed that just over half of respondents (52 percent) said they prefer a full-service agent paid by commission.
The logic for many people who bring on experienced commissioned buyer’s agents is that these professionals can save them thousands of dollars through negotiations with sellers — more than covering the cost of their commission — by providing a level of hand-holding that a lower-cost competitor could not afford.

Here are eight tips for successfully negotiating a discount with an agent:

1. Understand how fees work

Before you try negotiating with an agent over fees, it helps to understand the agent’s pay structure and incentives. Traditionally, a seller pays as much as 6 percent in fees. Half usually goes to the buyer’s agent and half to the seller’s. For example, on a $300,000 home transaction, the seller would pay $18,000 in agent fees — $9,000 to the buyer’s agent and $9,000 to the seller’s.

But that doesn’t mean your agent gets the entire $9,000. Agents split commissions with their licensed broker. According to the Post:

Although commission splits between agents and brokers vary by company, a typical split allows the agent to keep 70 percent of the fee. Agents often are required to pay fees to their broker in exchange for services and office space.

Homeowners using his service can sell a home for as little as $400 to $500, Udelson told the Post. Even so, a seller whose buyer used a commissioned agent still must pay the buyer’s agent’s commission. All this is useful information if you are thinking of negotiating fees with a full-service agent. Remember that an agent’s share of the pot may be smaller than you realize and may include costs you can’t see.

2. Just ask

Despite the perception that 6 percent is the standard fee, agents can and do negotiate. As real estate columnist Kenneth R. Harney writes in the Los Angeles Times:

… 6% isn’t the real number. The average commission rate nationwide on home sale transactions hasn’t been 6% since 1992, when it was 6.04%, according to Real Trends, an industry publishing and consulting firm that obtains confidential transaction data from brokerages annually. In 2005, at the height of the housing bubble, it was 5.02% and in 2013 it was 5.38%.

You won’t know if you don’t try. Ask respectfully. One Realtor told another L.A. Times writer that, of course, agents will resist cutting their fees. And many will decline to do it. But Orange County agent Kellie Jones expressed amazement that some people are afraid to ask:

Jones, a pragmatist, said she would cut her commission “if I think I am not going to get the listing unless I do so.”

3. Shop around

Agents come in all shapes, sizes and colors. They have different situations and agreements that allow some to be more flexible on price than others. Don’t stop at the first (or second or third) agent you speak with. Keep looking.

4. Be respectful

Defensiveness and accusations will not help you make your case. Be appreciative of the work an agent does to make a living and negotiate with a respectful attitude.

5. Be realistic

It’s not reasonable to ask a full-service agent to drop her fee to the level of, say, a discount brokerage like Redfin. If you can negotiate a discount of one entire percentage point, you’ve done great. Also, sellers can shoot themselves in the foot by dropping the buying agent’s commission. That discount will be visible on your property’s listing to all agents and some — many, perhaps — may hesitate to show your home to buyers, even though ethically required to, if it seems a waste of their time.

6. Do your homework

You’ll be in a better position to win something in this negotiation by learning all you can about the local real estate market. Come up with a compelling argument about why you should pay a smaller fee. For example: “My research shows that homes in this ZIP code stay on the market just 45 days on average and they sell for above the initial asking price (see online listings for these and other statistics). That tells me it’s easier and faster to sell this home, requiring less of your time. You’ll probably spend less time and effort marketing it and showing it, and you can move on to your next transaction faster. I think that’s worth a lower fee.”

7. Be creative

Put yourself in the agent’s position and propose a deal that appeals to his self-interest. For instance, you could suggest that the agent drop the fee if the home sells within a short period of time — a month or 45 days, for example.

8. Be prepared to give

Winning a negotiation rarely — if ever — means coming away with your entire ask. It means holding firm on some items and giving on others to reach a middle ground that satisfies both parties.

What’s your experience buying and selling properties? Has it changed much with the technology? Share with us in comments below or on our Facebook page.

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