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How to Get What You Want from the Realtor

Are They Worth the Commission?
People are sometimes taken aback when they learn that Realtors typically charge the seller a 6 percent commission. That's $18,000 for a $300,000 home. In a hot real estate market, homeowners chafe at the number, reasoning that the Realtor is merely juggling offers, signing some papers, and collecting a check. Why not just sell the home yourself and pocket the $18,000? Meanwhile, sellers in a slow market worry that they're getting too little for their home in the first place and wonder if it might not make more sense to stick a "For sale by owner" sign on their front lawn and do the legwork themselves.

There are pros and cons to selling a home yourself. Actually, there's just one pro: you get to keep the commission. The cons mostly have to do with your knowledge of the real estate industry (or lack thereof), your time, and your ability to negotiate. The typical real estate transaction has the potential to cost naive sellers thousands of dollars, because buyers undoubtedly will be using an agent, and that tilts the playing field in their favor. Any number of expenses and events are negotiable – closing costs, appraisals, the items that will stay in the house, the date the new owner will take possession, repairs, and much more. If you don't know what's negotiable, you won't know what to ask for.

Of course, if you have the time to research the process and you live in an area where the housing market is fairly healthy, there is nothing stopping you from listing your home yourself and hiring a property attorney to handle the contract. There are books and Web sites aplenty to help you through the process.

Understanding how the commission is handled may help you decide whether or not to go it alone. In most cases, the seller's agent and buyer's agent split a 6 percent commission. Each agent then splits that 3 percent with his or her parent company. (The cost of advertising and marketing the home comes out of the money that goes to the seller's company.) This means that an agent who sells a $300,000 home makes $4,500, not $18,000. It's still $18,000 out of your pocket, but it sheds a somewhat different light on value of the work the Realtor will be doing for you.

Is there any wiggle room in the commission? Sometimes. If you're a seller in a sluggish market, you might want to find an agent who is willing to pay an extra half percentage point to the buyer's agent in order to spur interest in your house. If you're a seller in a hot market, you might offer your Realtor 5 percent instead of the standard 6 (or even less, depending on the asking price of your home). "I'm more apt to negotiate if it's a big transaction and they're going to sell their house and buy one from me," says Rhonna Robles.

The general perception is that Realtors are rolling in money during a hot market, but that is not always the case. Yes, the Realtor will make more on the commission when a house sells, but a hot housing market is usually a tight housing market. There are fewer homes to divvy up among hungry Realtors. Most real estate transactions involve people who are selling a house and buying another one, which means that your Realtor undoubtedly has clients who are in the buyer category. This can translate into months of unpaid work for the Realtor for that particular client. In a hot market, it's not uncommon for 10 Realtors to bid on a single house; nine will walk away with nothing. A 5 percent commission on the sale of your house might sound just fine to a Realtor whose client roster happens to be heavy with buyers.

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From Say the Magic Words by Lynette Padwa. Copyright © 2005. Used by arrangement with Penguin Group (USA) Inc.

If you'd like to buy this book, go to Amazon.

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