The smartest home sellers know that holding out for a too-high price will result in a property that sits on the market for months and then, eventually sells for less than the asking price. Pricing a home appropriately for today's market is essential for a sale, but homeowners can find other ways to increase their profit margin even when selling at a reduced price. (For related reading, also take a look at Top 5 Signs of a Bad Real Estate Agent.)
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Rather than focusing entirely on the price, sellers should look at the bottom line: Their net profit. Home sellers typically pay the commission of the real estate agents involved on both sides of the transaction. While commissions vary by agency and location, in general they are about 5 or 6% of the sale price or about $12,000 on a $200,000 home. Each real estate agent will typically earn 2.5 to 3%, splitting the overall commission.
One of the quickest ways to keep more of the profit from a home sale is to find a way to pay lower fees.
1. Negotiate the Commission
Every home seller should interview at least three real estate agents before choosing someone to list the home. As part of the interview process, don't be afraid to ask for a discount on the commission. While some sales agents will agree to the reduced commission, others won't. A lot depends on the price range of your home and how quickly and easily the agent believes it will sell. The more you know about your own market and how to price your home, the easier the agent's job will be. A Los Angeles Times article recommends "pre-staging" your home to make an agent more eager to list it, and therefore possibly more willing to reduce the commission.
2. Work with a Reduced-Fee Real Estate Agent
Several discount real estate brokerages have opened in recent years, including ZipRealty and Redfin. Both companies charge reduced fees to sellers while keeping the buyer's agent commission at the standard market rate, which saves approximately 25% of the overall commission fees paid by the seller. Actual fees vary by market conditions, but these companies and other discount brokerages can save sellers thousands of dollars in fees while still providing full services to their customers.
3. Flat-Fee Listings
While some homeowners want to sell their home on their own and are confident they can handle showing the home and negotiating with potential buyers, they may be concerned about marketing their home to buyers and to real estate agents. Flat-fee listing services allow homeowners to have their property placed in the Multiple Listing Service (MLS) used by Realtors. Listing the home on the MLS exposes the home to real estate agents working with buyers who may be interested in the property, and will usually include placing the home on real estate websites visited by potential buyers. Other than the fee of a few hundred dollars, the sellers would only pay the commission of the buyer's agent.
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4. For Sale by Owner (FSBO)
Homeowners can also choose to sell their home completely on their own, creating their own marketing materials, advertising, showing the home and negotiating terms. A wide range of services are available for FSBO sellers, including flat-fee MLS listings, access to real estate agents for advice and websites with FSBO listings, all at various fees. If the buyer works with a real estate agent, the seller can negotiate the terms of the sale, but generally will need to pay the buyer's agent commission. ForSaleByOwner.com says that about 20% of all home sales are direct transactions between a buyer and a seller without any real estate agent. (for more on selling your home on your own, see 9 For Sale by Owner Mistakes.)
5. Dual Agency Sales
Dual agency refers to a scenario in which the same real estate agent represents both the buyer and the seller. In some states, dual agency is illegal; in others, agents must disclose this relationship with both parties. If your listing agent works with buyers and sells your home to someone he is already working with, this could be an opportunity to request a discounted commission since this one agent is earning the entire commission. But be wary of encouraging a dual agency situation, because it can be difficult for the real estate agent to fairly represent the interests of both the buyers and the sellers.
In addition, a real estate agent may be less interested in showing your home to her buyers if she knows she will earn a lower commission on that transaction. It's best to discuss the possibility of dual agency when signing on with a listing agent to be sure you both understand the ramifications of this type of situation.
The Bottom Line
If you choose to reduce your commission fees, be aware that you may find yourself selling your home for less than you would with a traditional real estate agent. Carefully weigh the pros and cons of working with a real estate agent and evaluate your market. Make sure you have the time and ability to handle some of the home-sales tasks on your own, such as showing the property, negotiating and checking out the buyer's ability to finance the purchase before making a decision about selling on your own. (Find out why you may need help selling your home in 5 Reasons Why You Still Need A Real Estate Agent.)
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