Realtor Fees
How to Handle Realtor Commissions
When Selling For Sale by Owner
Realtor fees - First, some quick facts before we get into how to handle this important subject.
- Real estate commissions are Negotiable.
- Two or more real estate agencies may Not set a commission rate between them.
To clarify, lets use some examples of the above.
A) If Henry from ABC Realty tells you that he charges 6% commission and is not allowed to negotiate from that and his office does not have that policy in place, Henry is just a big fat liar.
B) If ABC Realty has a policy that all their salespeople will charge a 6% commission unless they have permission from their broker to do otherwise, ABC Realty is completely in their right to do so and have therefore not broken any laws under the Competitions Act.
C) If ABC Realty, XYZ Realty, DoeRayMe Realty and WeSellEveryHouse Realty have a meeting and decide collectively to establish a set commission rate of 6% with no negotiability, they are in deep trouble if this is reported and proven.
This is also known as price fixing.
And now, to the good stuff that may concern you later as a for sale by owner, selling your own house.
Realtor fees may come up when you are for sale by owner. On the rest of this page we will cover the following:
- When a Realtor approaches you and say they have a purchaser.
- Why you should never sign a "listing agreement" when for sale by owner.
- Keeping certain information from a Realtor and why.
Let's look at each of the above.
I have a Buyer
Will you Pay Commission Fees of x%?
When you are for sale by owner, you may be approached by a Realtor who tells you that they have a buyer. Here are a couple questions to ask yourself first.
- If the answer is no, how do they know that they have a buyer?- If the answer is yes, then you can take this much more serious.
- If this has happened and you are able to find out, this is great information for you to have. Why? You are in a stronger position to negotiate Realtor Fees.
When the real estate agent approaches you, pay close attention to Body Language. Listen carefully to what they say and how they act.
Are they nervous or failing to make eye contact? If this is the case, there is a good chance the buyer approached them after they viewed the property with you.
Ask the Realtor lots of questions about "their" purchaser. If this real estate agent hasn't seen your property before, ask why he or she thinks your property is suitable.
Ask them if the purchasers have been qualified yet for a mortgage. If they say yes, which they probably will, ask where. See if they squirm.
Ask them directly if the purchaser has already viewed your house without them. Watch how they react. Don't be shy here. You are in the driver's seat and they know this.
Of course you always have the option right off the start to say, "No, we are not paying Realtor Fees."
Never Sign a Listing Agreement
It is my recommendation that you never sign a listing agreement with a Realtor when you are for sale by owner. Real estate agents may approach you to sign a "24 hour" or a "48 hour" listing or some other time frame.
Be careful. By signing one of these forms, you could find yourself paying Realtor Fees even if you found the buyer yourself during the time frame.
I'm not saying that many real estate agent would take advantage of this, but play it safe.
What you should agree to, if you decide to cooperate with a real estate agent, is a Flat for a specific amount of compensation.
The paperwork for this type of Realtor Fees should specify:
- The time in which the buyer has to make an offer on your property and the offer being accepted.
- The amount of these flat fees in an exact amount. An example might be; $1,000.00 plus any taxes that might be applicable.
Let me explain. You knew I would right? ;-)
When you are for sale by owner, you represent yourself. The real estate agent represents the buyer. If you agree to a certain percentage instead of flat fees, this could be felt to be a conflict of interest between the Realtor and the buyer. Huh?
The reason is, the higher the sale price, the higher the Realtor Fees would be and therefore this could be interpreted as not looking after the best interest of the Realtor's client, which in this case, is the buyer.
Another problem with entering into a "listing agreement" with a Realtor is, the Realtor is now in a legal contract with you and has promised to represent you as a client.
Now it just gets messy. The Realtor has entered into a A Dual Agency Agreement (explained on this page) with 2 parties, that have totally different objectives. There was absolutely no reason to do this.
The "Flat Payment" agreement with a set amount of compensation, eliminates all these problems.
If there is any Realtors reading this and you weren't aware of this solution, I hope this helps you out when you are trying to sell a for sale by owner property.
When you are negotiating flat fees, a good idea is to take the upper hand. Look the real estate agent straight in the eye and say something like this.
"Mary, I'll be happy to pay you a flat remuneration of $1,000.00 upon completion of the sale of my property to your buyer."
Now, don't say a single word and don't argue. Just wait patiently for a positive response. The amount of course is up to you.
If they come back and say their Realtor fees are $5,000.00, you might respond in this way. "Well Mary, I guess unfortunately we can't do business. I do appreciate you stopping by though."
Then....you got it! Don't say a word and wait for Mary to speak again after an awkward silence.
For a refresher on some negotiating techniques, you can go to Real Estate Negotiation
Do NOT Disclose
When a real estate agent gets involved with you, the for sale by owner and wants Realtor Fees, be careful what you say!
For example: Probably not a good idea to say, " We are asking $275,000.00 but we are negotiable with that price."
Why? Because the Realtor will not only tell the buyer this, but actually they are obligated to disclose this information if they are representing the buyer.
There are no secrets between you, the Realtor and the buyer unless you are in an agency agreement. Even then, be careful what you say.
To be safe, may I suggest that you do NOT, tell the Realtor anything you would not tell the buyer, if they were standing right in front of you.
The exceptions are what you may be legally obligated to disclose, such as defects to the property.
The Realtor may be a very nice person and make you feel they are your best friend. Some are genuinely caring people and some may not be when it comes to a real estate transaction!"
Negotiating the Realtor Fees
If for some reason you decide to list with a Realtor instead of continuing for sale by owner, keep one thing in mind. Realtor Fees are negotiable.
The real estate agent you talk to first may not be flexible, but another Realtor may well be more willing to negotiate a commission.
If the Realtor tells you something like the following: "If you list with a lower commission rate, none of the agents will show your property", do me a favor. Report that Realtor to your local real estate board and complain. Thank you.
For More Information about Using Realtors
For Sale by Owner Realtor Types
How to List on MLS Using Flat Fees - While For Sale by Owner
How to Find a Realtor that will Represent You
Go Full MLS While Still For Sale by Owner
Understanding Real Estate Agency
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by Douglas Cameron
