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Learning to negotiate the buyer’s agent’s commission . . .

From my column in today’s Arizona Republic, a familiar theme. The permanently linked version uses a somewhat longer version of the text.

 
Negotiate agent commission

In past weeks, we talked about using the simple question “How much do you charge?” to negotiate a more reasonable buyer’s agent commission. Buyers traditionally have not known to ask this question, but here’s the really cute part: “Your” agent is not required by law to disclose the amount of the sales commission. You are entitled to know an infinite number of facts about the property and the transaction, but you are not entitled to know how much you are paying for representation.

The buyer’s agent commission is set by the listing agent, generally in consultation with the seller. The listing agent does not have to offer any commission for the buyer’s representative. This is the essential component of an “exclusive” listing – only the listing agent will be compensated upon the sale of the property.

But if the listing agent wants to advertise the home in the Multiple Listings Service (the MLS), an offer of compensation, a “co-broke” commission, must be included with the solicitation of cooperation. This coupling of cooperation with compensation is what makes the MLS work so well as a tool for marketing real estate.

How much will the co-broke commission be? For a resale home, it will usually be 3 percent of the purchase price of the home. For a $100,000 condo, that’s $3,000. For a $1 million mansion, that’s $30,000.

Does it take 10 times more effort to sell a mansion than it does a condo? Ten times more expense? This pricing structure is completely absurd, mostly because, until lately, no one thought to change it.

In fact, the listing agent might be getting 2 percent or less. Why? Because the seller asked the magic question: “How much do you charge?”

Buyers need to learn that they, too, have the power to negotiate the fees paid for their representation.

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Related posts:
  • The buyer can — and should — negotiate the buyer’s agent’s compensation . . .
  • For-sale-by-owner sellers can help move real estate market into new buyers’ world . . .
  • Ask the Broker: What compensation does a buyer’s agent have to disclose . . . ?

  • 2 comments

    2 Comments so far

    1. Dave Barnes October 27th, 2006 9:03 pm

      Greg,

      I can’t believe that the Arizona Republic is still publishing your libertarian drivel.

      If readers follow your advice, advertising revenue in the AR will be severely and negatively impacted. You are a menace to the profits of the very newspaper that gives you a “voice”.

      ,dave

      P.S. Is sarcasm recognizable in blog comments?

    2. Greg Swann October 27th, 2006 9:09 pm

      > You are a menace to the profits of the very newspaper that gives you a “voice”.

      I’ve thought about telling them that, but I’m libertarian enough to expect a man to walk to all four corners of a horse to make sure there’s a leg at each one. If he won’t do that, a verbal disclosure won’t help.