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How To Negotiate A Real Estate Agent's Commission
One of the coolest things about investing in real estate or buying your first home is that everything is negotiable. This is particularly true when it comes to a real estate agent's commissions. Although the traditional real estate agent's commission is 6% of the selling price of the house, this number is not fixed in stone. Although some agents will not negotiate with you, many will. In this difficult real-estate environment, negotiating a real estate agent's commission is becoming more and more popular. Pricing Your Home to Sell The first thing to remember is that the real estate agent does not get paid unless the house sells. This may seem like common sense, but it's critical to know when negotiating the commission. Real estate agents like to represent homes that are priced to sell in their particular marketplace. Therefore, taking the real estate agent's advice on how to price your home should allow it to sell quickly. Priced to Sell If your real estate agent knows you are a serious seller with a properly priced home, he or she will be more likely to lower the commission in order to get your listing. This is for two reasons: first off, the real estate agent knows a properly priced home will sell faster with less effort than one that is overpriced. This allows the real estate agent to accept lower commissions since it will likely be easier and take less work to sell the home. Next, getting paid something is better than not getting paid anything. If the real estate agent understands you want to sell your home quickly, they are likely to lower their commission instead of risking you taking the listing to another agent who will. The same thing applies to the buyer's side with a buyer's agent. Be ready to move on a house by being prequalified for a mortgage or have cash to quickly deploy on a good deal. Your buyer's agent will be more likely to lower their commission if they realize you are a serious buyer. How to Approach the Negotiation Now that you understand why a real estate agent will lower his or her commission, what is the best way to go about having this happen? Well the only way is to ask. Remember to ask in a tactful and respectful manner. Don't act like a know-it-all, particularly with a popular and successful agent. The general tact is to ask for a 1-2% discount on the commission. Explain to the real estate agent that you want to sell fast and need to save the extra money for your needs. If the real estate agent balks at your offer, simply find another successful agent who is open to what you wish to pay. Always remember that there are various flat-fee real estate agents in every marketplace. If you are truly interested in paying the least amount of commission and are willing to give up some hand holding or other services, these flat fee brokers may make the most sense for you. The Bottom Line A real estate agent's commission is entirely negotiable and it is becoming more and more popular to do so. However, not all real estate agents are willing to negotiate. If you follow these steps you'll have a good chance of getting the most for your money. Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/01/investopedia64620.DTL#ixzz1cehDWbQT
Realcomp asks Supreme Court to hear listing case
When Realcomp II Ltd. set up its policy in 2001 on how it handles real estate listings from nontraditional real estate companies, the multiple listing service expected some controversy. But the organization's leaders had no idea that after 10 years -- and $2 million in legal fees -- the fight still would be going on. And after losing a fight with the Federal Trade Commission and losing in the U.S. Court of Appeals in April, Realcomp CEO Karen Kage wants to continue the fight before the U.S. Supreme Court, petitioning the high court to take the case, although the court so far as not responded. "I know the chances are slim, but we've gone so far with this case, we have to try to take this final step," she said. "It's a matter of seeing this through to the end." At issue is how a multiple listing service should handle the new breeds of real estate listings. Under a traditional brokerage contract, called an "exclusive right to sell," a real estate agent is the exclusive agent for selling a home. When that broker sells the home, he or she keeps a portion of the commission, which is usually 6 percent to 7 percent. Particularly with the rise of the Internet, business models have emerged where an agent charges a flat fee to list the home on the MLS, then gives the seller the option to sell the home on his or her own -- with no commission given to a broker. The company is called an "exclusive agency" listing. Realcomp's policy has always allowed exclusive agency listings on its MLS. But when Realcomp feeds public websites such as realestate.com or trulia.com with homes for sale, Realcomp tried to exclude the exclusive listing agencies' clients. The worry is that consumers will use the MLS, through websites, to complete deals without the use of real estate agents. Another worry is that a buyer, who is represented by a real estate agent, will find such a listing and strike a deal directly with the seller. In that case, the buyer representative gets cut out of the deal, said Douglas Hardy, president of Farmington Hills-based Century 21 Today Inc., chairman of the Birmingham office of SKBK Sotheby's International Inc. and president of Realcomp. "When we promote a listing, and an agent shows that house, there is a guarantee of compensation," he said. "If a buyer's agent sends the listing to their client and the client knocks on the door, they get cut out of the deal. That's just not a core tenet of what an MLS is supposed to do." But the Federal Trade Commission found that the exclusion is a policy that "injured consumers by explicitly limiting the publication and marketing of nontraditional listings, thereby eliminating certain forms of competition without cognizable and plausible efficiency justifications." In October 2006, the FTC made that argument in going after seven MLS boards across the country over their policies on handling listings from exclusive agency contracts. Six of them, including Troy-based MiRealSource, later settled with the FTC, agreeing to change their policies. Realcomp, however, appealed the complaint. In 2007, the FTC's administrative law judge dismissed the complaint. However, the FTC reversed its opinion in 2009 when the initial decision was appealed to a different FTC administrative law judge. The next step was the Court of Appeals, which also denied Realcomp's claim. In April, the court refused to overturn the FTC rulings. It found that there was a drop in exclusive agent listings in the MLS during the time period when the policy was in place. "Realcomp's website policy unreasonably restrained competition in the market for the provision of residential real estate brokerage services in Southeastern Michigan and the Realcomp MLS," Judge Karen Nelson Moore wrote in the decision. It is extremely rare for the Supreme Court to pick up any case, and would be unlikely for this case, said David Ettinger, chairman of the antitrust and trade regulation practice group at Detroit-based Honigman Miller Schwartz and Cohn LLP. "The Supreme Court has very specific rules on what it will hear," he said. "Typically, it is to settle a significant issue of law." A topic of whether the workings of an MLS harms competition is the kind of case the Supreme Court would not likely hear, Ettinger said. It's a last-ditch effort, ending a costly fight with legal bills near $2 million, Kage said. Norman Lippitt of Birmingham-based Lippitt O'Keefe PLLC is representing Realcomp in the Supreme Court attempt. Farmington Hills-based Foster Swift Collins&Smith; PC represented Realcomp in the FTC and Court of Appeals cases. While much of the cost has been covered by an insurance policy Realcomp took out with the National Association of Realtors, the Chicago-based advocacy group also has supplemented the insurance policy payout with contributions to the defense. Ralph Homen, associate general counsel for NAR, said the policy that Realcomp had been using was one that was supported by NAR at the time. He said the national group isn't interested in supporting any one group of real estate agents over another, but is interested in clarifying the policies. Homen said that a small change in the controversial policy has since been made: The physical address of the exclusive agency listings is restricted from listings. In that circumstance, a buyer needs to go through the broker that listed the property, and it supports the original intent of an MLS, being a tool for licensed real estate agents. "The FTC hasn't told us that we can use this policy," he said. "But they are aware of it and they haven't told us to stop either." The ongoing case is just part of the tense relationship between traditional real estate agents and new business models. Ian Wylie, owner of FSBO Michigan LLC, said limited service real estate firms like his draw fear from traditional real estate agents because people realize it's not as hard as they think to sell their own house. "They try to scare people, telling them how hard it can be," he said. "Just go to a title company, they'll walk you through the whole transaction, and might actually appreciate not having the real estate agent in the way." Wylie's Vanderbilt-based company offers services in metro Detroit and around the state. "I understand the anger; the real estate agents developed the system that we have," he said. "But it's a system that costs people a lot of money that they don't need to spend." Kage said the case has brought her a lot of attention in the industry and is a hot topic at real estate events. But Realcomp remains the only firm involved in the fight. "I won't say people call me crazy, but they give me the "God bless you, thanks for fighting' speech," she said. Daniel Duggan:
New service bypasses agents, offers free home appraisals
Property value information that was once jealously guarded by real estate agents is now being provided free to anyone with an Internet connection who cares to know what their home, or their neighbour's, is worth. Zoocasa.com, a real estate search site, has partnered with Centract Settlement Services which has one of the "largest national databases of residential real estate prices and information in Canada," according to a news release. The service went live earlier this month. Users can plug in a street address, the number of bedrooms, bathrooms, style of home and the year it was built, and Zoocasa comes up with a "Zoopraisal" for the property. Zoocasa uses Centract's database of real estate sales information to provide home price estimates based on factors such as size, neighourhood and sales history in the area. "Knowing the current price of your home is the kick-off point for many Canadians as they consider making their next move," said Butch Langlois, president of Zoocasa in a news release. The estimate also offers additional data such as detailed neighbourhood demographics. What it doesn't take into account is the thousands of dollars in new windows a homeowner may have installed last year, for instance, or those prized granite countertops or new cedar shakes -- factors that can vastly improve the value and marketability of a home. Still, the new service could represent a game changer for real estate agents who have traditionally had a corner on such information. Andrew la Fleur, a real estate agent with Re/Max in Toronto, said the new service is part of the "ongoing evolution of real estate in Canada." He said a similar service has been available in the U.S. for about five years. "Quite frankly I'm shocked it took this long to come here," he told CTVNews.ca, adding that real estate agents will have to adapt, just as they have to other recent changes to their profession. "In the end I don't think it's going to hurt the real estate agents who are professional and who are expert in their area but I think it will force some of the part-time agents or discount brokers to re-evaluate their business models," he said. "It will overall give the consumer more choices and more options and that's a good thing." Last year, federal Competition Commissioner Melanie Aitken successfully fought to give private home sellers access to the Multiple Listing Service (MLS), which is the primary service through which homes are bought and sold in Canada. Real estate agents have had to adjust, with many now offering a flat fee service for helping a homeowner list their property on MLS, with the homeowner then handling showings and the actual sale of the home. Traditionally, selling and buying agents split a commission of 5 per cent of the sale price. Zoocasa's business model is built on advertising, with real estate agents and mortgage brokers paying to have their ads posted on the website. The appraisal service is provided free of charge. Centract, which provides the data used to make the estimate, is an appraisal company owned by Brookfield Residential Property services. The service is designed to give people a better idea of a property's value, rather than replace the work of a professional appraiser, Centract said. In a sophisticated urban market like Toronto, where la Fleur said people are "obsessed" with the value of properties in their neighbourhood, most people likely already have a good grasp of what their home is worth, or what they'll have to pay to get into their dream home, regardless of what a computer-generated estimate tells them. "I think most people here are more sophisticated than a computer model," he said.