OfflineReal estate commissions are negotiable
Real estate consumers who choose to negotiate commission rates charged by agents are mostly successful in lowering the amount they pay -- and customer satisfaction does not appear to be related to cost.
That's according to a survey released Monday by Consumer Reports, based on responses to an annual questionnaire of 3,753 readers who sold or tried to sell a home, 4,029 who bought one, and 7,368 who both bought and sold a home in the past few years.
In all, 9,141 responses were received from those who sold or tried to sell a home using real estate agents from 2004-07, and the total doesn't include those who bought or sold homes without a broker.
Some companies were more willing to negotiate fees than others, the survey revealed, and there was a 71 percent success rate for sellers who attempted to negotiate a lower commission price.
In a typical real estate transaction, the seller agrees to pay a commission rate to the listing broker that is a percentage of the home's selling price.
The listing broker shares a portion of this -- typically about half of the commission though this can vary -- with a broker that is representing the buyer's side of the transaction.
Agents involved in the sell-side and buy-side of the transaction share a portion of this commission with the brokers, and the agent share can vary based on company, experience and productivity.
The survey found that 46 percent of sellers actually attempted to negotiate for a lower commission rate.
"Sellers who paid commission rates 3 percent or lower were just as satisfied with their brokers' performance as those who paid 6 percent or more, suggesting that haggling can't hurt," Consumer reports announced -- and there were no statistically meaningful differences among rated companies in customer satisfaction.
RE/MAX and independent agents "appeared to be a bit more willing to deal" in offering lower commissions to sellers, the report revealed -- about 77 percent of sellers who attempted to negotiate down the commission rate were successful when working with RE/MAX.
About 67 percent of Century 21, Keller Williams and Prudential agents agreed to lower fees at the request of sellers, the survey found, and 64 percent of Coldwell Banker agents lowered their commissions in response to seller requests.
"We found that paying an agent a lower commission rarely had any effect on the sales price," according to the report, which is published in the September issue of Consumer Reports magazine.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I am a Realtor in Phoenix. My listing rate starts at 1% below the normal rate of 6% (listings bring potential buyers and sellers). I will reduce more if seller is going to do additional business with me (buy a home after sale of their home), or they are not expecting me to spend alot of money on marketing. Buyers agents will probably not show a listing if their commission is lower than the normal (3% for my area). Most Brokers will not allow agents to go below a predetermined amount, because they are getting a percentage of the listing commission. If agent lists for 4 1/2%, and buyers agent gets 3%, that leaves 1 1/2% for agent to split with broker. An agent working with a good investor will probably reduce their listing rate because they are expecting multiple deals. Spend some time talking with a prospective agent, and let them know what you expect to do, and what you expect of them. Once you understand each other and agree to the others terms, you will have a very productive partner in your investing business.
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
What is the average selling price of the homes in your area? The reason why I am asking this is because we have sold homes in Georgia, Oklahoma, and California. We wouldn't even think about negotiating down from the 6% in Georgia and Oklahoma when we sold because the price of the houses we were selling were $100,000 or less. When you split that up between two realtors you only receive 3,000 each. Then, of course, the brokers have to get their part of the 3,000 so the realtors were stuck with 50 - 70 percent of that. In California, however, where the house we sold was well above 300,000 we negotiated a commission of 5%.
When I work with agents here in Montana I will probably negotiate their commission based on the multiple deal theory you mentioned above. When I purchase the house I am currently trying to obtain, my realtor will get 3% of the deal. If I were to use him to sell the property for me I would ask him for a break on his commission as the selling agent. Fair?
Roni
Average sale price has come down considerably in last year. That is because a majority of the sales have been for REO properties. Non-REO properties are probably averaging around $230K. There is very strong competition for listings here, so commissions are probably averaging close to 5%. I would think that an agent who is getting the 3% buyers commission would be happy to list for 5%. Listings attract buyers, so agents have the potential of picking up additional buyers by having active listings. My listings probably bring me one or two new buyers each. These buyers will probably bring me a 3% buyers commission. I love listings!
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
I was an agent for approx. 6 years and I have to agree with you. First most Real Estate companies will require 6 - 7 percent. When you break it down, 3% to buyers agent, 3% to listing agent. If you are renting space in your company, the broker will take half leaving you with 1.5%. Now pay taxes (since you are considered to be self employed). You are now left with .75%. With the cost of gas, advertising, family time, etc. that doesn't leave alot. I'm glad I got out of the business and got into investing.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
When I first met my realtor, she was strongly encouraging me to get my license. I'm much happier using her as my agent and keeping myself as the investor.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
Looks like you made the right choice sister!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
But I couldn't do it without her.
I'll PM you some of the stuff she goes out of her way to do for me. I feel VERY blessed!
Hey, all you realtors, love you guys!
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
I have AL! He's a gem, I'm SO glad I met him. He's sent me some good resources too. I look forward to working with him... He's definitely changed my outlook on Realtors. But he's an investor too so that does make a huge difference!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
I think the biggest problem that investors have with Realtors is educating them about how investing works. If you come across a Realtor with promise, give them a copy of Dean's book. They will develop an understanding of why you are asking them to do what you want, and show them the potential income they might have by working with you. This book gave me new insight as to how and why investors do what they do. (Be careful though, you may turn them into an investor, and competition for you)
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
Thank you for reading my post,
I am talking with a woman who is a real estate agent and I may go as far as saying she is a broker. Her husband is a GC and a very nice guy. The area I live in is in Queens NY where homes go for an average of 700,000. I currently live in my own 1br condo. So my question is should I deal with her, because she is really trying to get me going with her and using her husband for the reno's and spilting the profits or should I go on my own and try to do the purchase and assigns as well as the REOs and so on and so forth?
You would need to be comfortable with the agreement. You will need a contractor for repairs anyway (check some of his work). You can negotiate a profit split. I would expect the agent to reduce commissions if they were getting a share of the profits. I don't think I would allow the contractor to get both a profit on his work, and a profit on the deal. I probably would cover everyones expenses, then split profits. If you have partners that are finding the deals, negotiating the purchase, making the repairs, and marketing and closing the sale, I would think you have a pretty good deal.
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
Thank you for the response Al.
In a nutshell I believe that's the case. The only thing I am unsure of is exactly what to do with the payment for the work since there will be a split on the profits. Not that I believe people can't get lucky, I just have a hard time getting around the idea of what other then collecting on the commission, the labor and on a split of the profits would be in it for them. When you look at it like that, they're getting their labor paid for so that makes it better then fixing it up themselves and flipping, also she's getting her commission and then on top of it, they are getting a split on the profits. How could I even out the playing field without burning the bridge?
For example, lets say a house goes for 555,000 in an area where the comps go for 900,000. I take on the mortgage and they do 200,000 worth of renovations that would force us to sell the home for 755,000 at least. Even though they are doing the labor, time is money and the 200,000 may be 100,000 more then the materials but time is money so they are spending 100,000 worth of time fixing the house. Now lets say that 6 months go by and we sell the house for 875,000 to get it off quick, we just made 320,000 in six months.
Now, with the 320,000 I give back 60,000 for the profit split of 120,000 and 200,000 for the labor. They end up taking away 260,000 and I'm left with 60,000 which is great but what if we can't sell the property for 875,000?? Do you know what I mean?? They are getting money three different ways and I am getting the money one way. I sound greedy but I'm just looking for your honest opinion here...am I getting greedy complaining here or if not, what should I do to get some more of the 260,000 in my pocket??
Thank you
Brad
Pay expenses only on everyones contribution, then split profits. No partner in the deal should be allowed to make a profit for their contribution, as well as receive a share of the profits. The agent is making her money in commissions. If she wanted a portion of the split, she would need to add her commission to the income. I believe the partnership is between the contractor and you. To determine the net profit, you would need to deduct all expenses. Expenses would include materials, sub-contractors, loan interest and fees, and whatever other expenses are incured. After these expenses were deducted, what is left would be split between you and the contractor. If he wanted to make a profit on the repair work, then he would not be acting as a partner. I hope that made sense.
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
Ha! I must not be as tired as I thought I was. I think that's a great way to work it out. That sounds fair to me, although I'm still not sure what everyone's bringing to the table here. You're finding the deal, the realtor is selling it and the contractor repairing is that right? Hey, I'm tired and working on one brain cell... LOL!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Makes perfect sense, this way I can establish exactly who is who and my part as the investor.
Is it a good idea to set up a LLC for myself before I go forward with this?
Thanks
Brad
Well the way I see it, is the wife is the agent who is going to find the deal, the husband is the GC who will fix the place up, and I'm the one who from what I can gather who holds the mortage until the job is complete...so I'm the person who is putting my credit on the line as well as my money until the job is complete. Then the wife is going to sell the place.
She lives above one of my Aunt's so I am stopping by her apt during the next week to talk with her again, but from the last convo we had that's what I believe she was getting at. That was about two weeks ago and in the btw time I bought the book so now I have alot more info as well as sources of info, i.e you awesome people. When I talk to her next week I am going to present Al's plan and see from there what we can do.