Real estate commissions are negotiable. But you wouldn’t know it by looking at listing contracts. According to RealEstateWitch, Wisconsin home sellers are paying an average rate of about 6.0%, one of the highest rates in the country.
Ask any broker, and they’ll probably quote their commission as 6.0% of the sales price. So why aren’t the rates being negotiated? There are two reasons in my opinion. (1) Brokers are well versed in handling the commission negotiation question. (2) Consumers accept the argument against negotiating commission.
The Consequences of Unnegotiated Commission
Bloomberg reported commissions would top 100 billion dollars in 2021. Is this a problem or a success? It depends. Homeowners pay broker commissions out of their home equity. The commission is calculated on the sales price: $400,000 X 6% = $24,000. But the commission is paid from home equity savings. Assume your equity is $100,000. Let me ask the question another way. Is paying 24% of your savings for one service the best you can do?
The Three Costly Mistakes
The spring market is on in Madison. Thousands of people will sign listing contracts this year. Most will make three mistakes that cost them thousands of dollars. Avoid them and increase your aftersale profit by thousands of dollars.
1) Promise to pay a buyer broker a 3.0% commission to represent the buyer in negotiations against you. Listing brokers will lock commit you to promise to pay a buyer’s broker top rate commission when you sign a listing contract. You can negotiate up from there, but not down. The time to negotiate buyer broker commission is after you see the offer terms.
2) Promise to pay a 6.0% commission to the listing broker to procure a buyer without exploring options. Alternatives to full-price commissions are indeed few and hard to find, but they’re out there. Before committing to any level of service and price, the wise homeowner will explore options.
3) Blinded by the bright light of a high price. After years of working with multiple offers on single homes, you would think the strategy of offering the highest price and renegotiating later would be well recognized and avoided. There are always new agents and easily dazzled homeowners willing to take a chance on the bright shining price. You can negotiate a ridiculous price; just make sure there are no escape clauses that let the buyer renegotiate a better price a few weeks after acceptance.
Essential Real Estate brokers guide homeowners to negotiate wisely. We believe you should have options to keep the advantage on your side and reduce your selling costs where possible. Every dollar you save is home equity money, and you need it for whatever you’re going to do next. To learn how to use our strategy to increase your profit, contact me at www.TMeyerRE.com