After several years of diligently saving money, I’m nearly ready to purchase my first home. Because I’ve been thinking about buying a home for so long, I know exactly what I want my house to look like. I desire a place that has three bedrooms and three bathrooms. I also need a quiet space to set up my home office in. I want a massive, walk-in closet in my master bedroom. My master bathroom needs to have double vanities, a tiled, walk-in shower, and a Jacuzzi tub. On this blog, I hope you will discover how to set priorities during your new home search. Enjoy!
If you do not have a lot of equity in your home and do not want to owe money when you sell it, you may need to negotiate the commission rate with the real estate agent you hire to help you sell your home. Negotiating with a real estate agent is not an easy task, but it might be worthwhile to try. If you can get a lower rate on the commission you must pay, you may be able to at least break even on your house when closing day arrives.
Step 1: Know The Numbers
Before you even talk to a real estate agent, you should fully understand the financial state of your home. To do this, you will need to know the following things:
Finding out the amount you owe is the easiest step, and you can do this by looking at your most recent mortgage statement or by calling your lender. To find out the value of your home, you may need to get an appraisal of your house, and this will cost money. Another option you could take instead is looking up the value of the house on a home value website, such as Zillow. The difference between your home's value and the amount you owe is the total amount of profit you will make when selling the house; however, this amount does not take into consideration any of the fees involved.
Your portion of the fees to sell your home will vary, but you should figure on spending at least 2% to 4% of the price of your home. For example, if your home will sell for around $150,000, you may need to spend between $3,000 to $6,000 on closing costs. These costs do not include the real estate commission fee, though.
As you calculate these numbers, it will give you a good idea as to how much you can afford to pay a real estate agent in order to break even on the sale.
Step 2: Talk To An Agent
After you know this information and have a good idea of how much you can afford to pay an agent, you should present your information to a real estate agent. Real estate agents typically charge 6% for their commissions, but this percentage can oftentimes be negotiable. If you explain that you do not have a lot of equity in the home and show the agent your paperwork that proves it, the agent might be willing to come down on the rate.
One fact that may help you with the negotiations involves the way commissions are split when a house is sold. If a house is listed with a 6% commission, the agent that lists the house will receive 50% of the commission amount, or 3% of the selling price. The agent that actually sells the house will receive the other 50% of the commission amount, or 3% of the selling price. So, if the commission on a house sale was $5,000, each agent would receive $2,500. Of this money, each agent may have to pay their brokerage firm (the company they work for) 50% of the profit. In other words, each agent may make only $1,250 when selling your house.
By knowing this, you could use the strategy that sometimes works with agents. You could agree to list the house with the agent if he or she will drop his or her own portion from 3% to 1% or 2%. This method is sometimes a good way to handle this issue, and it would save you some money if the agent agrees to it. This method would also give other agents a normal incentive to show your house to prospective buyers. If you drop the entire commission percentage, many agents may avoid showing your house to buyers, simply because the sale of your house would result in a lower commission.
If you would like to learn more about real estate commissions, talk to an agent with a company like Celia Dunn Sotheby's International Realty today.