Are Commissions Negotiable?
In some areas of the country there
is a certain percentage that real
estate agents expect to earn as a
commission.This commission amount is
a certain percent of the sales
price.Or, some companies will charge
a set fee for their
services.However, just like anything
else in real estate, this amount is
negotiable.When completing the
listing agreement, you and your
agent will agree on the amount of
the real estate commission.
How and When Listing Commissions are
Earned
Your listing contract specifies a
listing price. Your agent’s job is
to bring a "ready, willing and able"
buyer to present an offer. If you
reach agreement with the buyer, then
the agent has done his job and
earned the commission. Once the sale
has closed, the real estate broker
gets paid from the proceeds of the
sale.
If the buyer proves unable or
unwilling to conclude the sale, the
house is placed back on the market
and the agent has to begin earning
his or her commission all over
again.
However, if the seller backs out or
does not accept an offer that meets
the price and terms of the listing
agreement, the listing broker has
still earned the commission. They
may want to be paid, even though you
did not actually sell your home.
Therefore, it is very important to
carefully consider every detail when
completing your listing contract and
accepting an offer to buy your
property.
"Hot Market" Under-Pricing Sales
Technique – Commission Issues
During a "hot market" there is a
certain marketing technique which,
though very effective, could cause
trouble because of the way the
contract is written. This is the
practice of "under-pricing" the
home. In a hot market, a home that
is under-priced gets a lot of
attention from other Realtors, and
they all start showing your home to
their clients. Often, you get into a
situation where multiple offers are
presented and the price starts going
up because of the frenzy. You end up
selling the house above your asking
price and perhaps above what you
could have received if you had
priced it traditionally.
However, the technique does have the
potential to backfire, so you should
build safeguards to prevent having
to pay a commission "just in case."
You see, the listing contract
usually states that if an offer is
received that meets the terms
presented in the contract (including
price), the real estate agent has
earned his or her commission – even
if you decide not to sell. A
reputable agent would never attempt
to collect a commission if they were
using the "under-pricing" technique
and it backfired, even if they are
technically entitled to one. For
that reason, in the "additional
terms" space on the listing
contract, you should specify your
true target price – when the agent
has really earned the commission.
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