TOP DRAWER ARTICLE

Real Estate Commissions
by
HL Carpenter

If you’re thinking of buying a home or selling the one you’re living in, but you hate the idea of paying a five or six percent commission, here’s some good news: Realtors are willing to negotiate. Some are even doing away with commissions.

A booming market is one reason for the change. Another is increased competition from Internet competitors. A third is a recent Justice Department lawsuit against the National Association of Realtors.

So before you sign that contract, take a look at a few of your options:

The traditional route: Your full-service Realtor receives a set commission. A first time buyer or seller might be most comfortable with this choice, which offers help every step of the way. Even so, if the transaction is simple and straightforward, the Realtor may agree to a lower commission – but you’ll have to ask in advance.

A discount firm: There are discounters that provide only a limited menu of services. Others advertise as traditional full service realty companies, but offer lower fees due to heavy use of technology, which makes the process more efficient. In some cases agents receive a salary and bonus instead of a commission.

Fee for service: With this option, your Realtor charges an hourly rate or flat fee depending on the type of professional support you want. If you’ve bought and sold several houses and feel comfortable doing some of the work yourself, you may be able to cut costs even more.

Rebate: Some companies offer to find an agent for you. If you use that agent, part of the commission is rebated to you.

For sale by owner: When you chose the do-it-yourself selling option, you pay fees for supplies, listing and advice up front. That means you’re out the cash whether or not you’re successful in selling your home. But the fees are usually quite a bit less than those of traditional firms.

Originally published September 2005.

Last update: January 8, 2011