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Wednesday, May 03, 2006

Commission Negotiable—Shh, Don't Tell!

Thanks to the bubble, there are real estate agents lurking under every rock, and web sites slowly creeping in on the home sales action as well. As a result, the sacred 6% commission is not so hallowed anymore:

Here's another trick of the trade: When you sell your house, tell the agent you want to negotiate their commission.

Bill McCabe listed his house with a 4 percent commission instead of the traditional 6 percent — getting the listing agent to drop their commission by 1.5 percent, and the buyer's agent to drop their commission by a half percent.

That saved McCabe $10,000.

Thanks to a glut of agents and discount listing sites on the Internet, broker Johh Hama told me agents are taking cuts — even if they don't like to talk about it.

In times when the seller is also purchasing a property as well as selling a property, where there's two transactions — that's when you're in a prime position to negotiate. But don't expect your agent to volunteer.
Remember the bottom line in real estate is it's all about money.
Indeed, and in this blogger's opinion, the smart money is getting out of real estate right about now. Despite what the addicted-to-6% agents may be screaming, there are times when land is a bad investment. After the fastest run-up in history, it's quite likely that now is one of those times.

(Connie Thompson, KOMO News, 05.02.2006)


Anonymous said...

A friend that sold through Ziprealty recently paid just under 4.5% total commissions.

Anonymous said...

Isn't it unethical for the buyer's agent to refuse to show a place based on the lower commission? That's clearly self-serving and not in the client's best interest.

meshugy said...

When I sold my condo last year a realtor from the East side tried to get in an offer before we listed it. Since he would be both the buying and selling agent he offered to do the whole thing for 4%. But I felt that the price his client was offering (190K) was less then what we'd get on the open market. Even after they upped it 20K.

So we listed it with a well established realtor...I tried to talk her percent down. She was actually pretty offended by that...I don't think Seattle realtors are used to uppity customers. Apparently on the East coast it's more normal to negotiate. Anyway, we just went with the normal 6% deal and ended up selling the condo for way more then the cut rate guy was offering.

But I still think it's worth trying to talk realtors down....especially selling agents. In a market as hot as this they basically do nothing.


don't want to offend said...

The RE agent was offended? Heavens NO! Wouldn't want to "offend" an RE agent by suggesting a commission cut!

Much better to sacrifice tens of thousands of dollars than to risk offending.

Seriously people, if you are still out there shopping for a house at the top of the bubble, any money you can possibly save yourself will be worth the trouble, embarrasment of "offending", whatever.

T.S. Farmhand said...

This is T.S.'s wife. I just posted this on raincity in response to Ardell's extraordinary personal attacks on us, but no doubt it will be deleted. Here it is for posterity (and sorry if this isn't the right place for this post):

ARDELL–You called us whiners. You said, without anything in our posts indicating that this was the case, that we were scared of ugly carpet. And now you suggest that my husband’s not man enough to step up and paint a house for his wife and child. How dare you be so presumptuous and self-righteous? You have no idea, NONE, what our financial situation is. You admit that California is unaffordable, so you clearly believe that there’s a line where property becomes unaffordable, but you’re unwilling to consider that others may place that line differently than you do. Any post that smacks of insult towards you is deleted promptly, but you’re permitted to post a highly personal post towards me and my husband.

I am so perplexed by what the posture of this blog is towards its readership. Galen: how can you permit Ardell to lodge personal attacks against your readers like this?

Ardell: you have revealed yourself to be so deeply unkind and unthoughtful. Do you consider the other expenses that families have? Are you aware of what day care can cost in this town ($1800 a month at a center I talked to recently)? Perhaps your age makes you think that a woman shouldn’t work and that daycare therefore shouldn’t be an issue. You posit that I am a woman who wants a house in which to raise her children and that my husband’s dragging his feet about repairs and keeping me from my dream. Again: how dare you?

The Tim said...

T.S. Farmhand,

I agree, Ardell's post was way over the top - extremely insulting and self aggrandizing. I was so disgusted with it that I decided it wasn't even worth dignifying with a reply. I appreciate the stand you took with your comment though, and I empathize with your situation, since it is very similar to my own.

If you and T.S. would ever be interested in getting together with my wife and I in person feel free to drop me an email (my address is in my profile).

S Crow said...

TS Family -

I'm not an agent, but my wife and I own an escrow company in South Everett, Legacy Escrow Service, Inc. We close home sale and refinance transactions.

From our family to yours, do not get discouraged. It really bums me out when people get frustrated. There are just as many good reasons to rent as there are to buy a place you can call home.

We work with scores of agents, so if you would like a resource when the time comes, please let us know. Our company is highly customer centric and we want homeownership to be a reality for many people, but achieved in a smart and reasonble way both personally and financially. The dialogue between agents and clients is sometimes fragile, and the smart agents who read comments over at Rain City Guide will take the discussion as a learning experience on where to bridge the gaps that are prevalent and have been ongoing for many years. To see more of it, browse the new blog they started last week. More of the same spicy dialogue.

Although difficult, try not to take stuff personally. The discussions on both blogs are great ways for the Realtors to understand the sentiment and needs of potential homeowners. I share the frustrations you have, as I am a consumer too. Personally, I've dealt with multiple offer situations and other transaction battles.

I can tell you that there are VAST differences in levels of support, service and experience from both the loan officers and agents that work in our communities. We see it in every transaction we close.

If I can give you any advice on home purchasing: be patient. We made offers on three different homes after looking for MONTHS(I know some agents reading this will roll their eyes at me, but so be it), before stumbling upon the home we now reside at. Get financing that works for you (I have lots of resources)and keep us in mind for closing your transaction, when the time comes. We are on average 30% less than title companies and NEVER expose our clients to escrow junk fees. :)

Anonymous said...

TS Family & everyone else in Seattle who has no interest in buying at the bubble top:

Have you all noticed a trend in the past several months? RE agents are getting testy. They are getting downright rude. They are getting angry.

Why do you suppose that is?

Hint: They know the market's shaky, stumbling, tumbling, crashing, whatever you want to call it.

If they were confident about the market they would pay you no mind and go blithely along their way.

The fact that you are "upsetting" them speaks volumes.

Pay them no mind. Go blithely along your way.

Rent til those prices tumble. Secure your own and your childrens futures by not wasting precious money on a depreciating asset.

Eleua said...

Anon 12:18


You nailed it. RE agents getting testy is a sure sign of the top. IF the market was fundamentally healthy, they would just laugh you off and go about selling homes. When you point out that their gravy train is about to come to a screeching halt, it gets under their skin - they also know it is.

I've bloviated on this forum for weeks about how this market is going to crash. It will.

Most of the people on this forum (sans meshugy) believe the market is fundamentally unhealthy and expect anywhere from a 20% - 80% decline in RE prices.

RE agents believe that prices are increasing and the market is healthy, from their point of view (rising prices) - that's true

Both are right.

Back up 6 1/2 years...
We had the tech bubble, and those of us that called it a bubble were social lepers. One of my coworkers traded options, and was making about $80K+ per month. After looking at his brokerage statements, I told him that he had better plan for a violent and deep reversal. He laughed me off. It was the Autumn of 1999, and he was making more money than he could spend.

I told him about options strategies on how you can capture the upside, while limiting your downside exposure. He seemed interested, but didn't do anything. His "system" was buying out-of-the-money calls on kinky tech stocks, while selling in-the-money puts to finance it. I don't know what collateral he had to put up in case of a margin call, but he was essentially making $80K/mo with no money down.

6 months later he was ruined. 4/5/00 alone was enough to do him in.

Techie WERE going up in price, while the fundamentals showed there was danger ahead. Mr. Magoo had juiced the FED funds to the point that we had free money (lending standards, anyone?), and it seemed like the party would last forever.

Juniper Networks was "special" and "immune" from the bubble bursting. It climbed as all other techs sank. It went to $244 and was at $5 less than 18 months later. Bubbles are all inclusive. If you boom, you bust.

Seattle's RE agents are testy, because they KNOW what awaits them.

They will be cutting each others' throats very soon. The 6% fee is going the way of the airline pilot profession.

seattle price drop said...

Ameriquest closed all 26 of it's Puget Sound offices yestyerday.

Read about it on the KIRO website:

< /A >""> Click Here < /A >

seattle price drop said...

Whoops! Got a ways to go in figuring out how to do that!

Anyway, check out the article at the KIRO site (minus all the gibberish).

Al the offices were closed without warning.

The Tim said...

Hey, thanks for the tip spd. I hadn't seen that one yet, and it's probably deserving of its own post.

For reference, here's how you make a link: <a href="">Google</a>

Eleua said...

Re: Ameriquest

It would appear the REIC is starting to eat itself.

43 Real Estate agencies on Bainbridge Island. Over 270 agents. How much longer?

T.S. said...

Thanks guys. Unfortunately my wife took it pretty personally, but I've tried to convince her that it's no use arguing back and forth on that blog (or any blog, to be honest). The stakes are too high for the realtors, too high for buyers, too high for people with 110% mortgages -- these are white-knuckle times for everyone.

I'm just amazed that anyone would think that taking out huge and/or risky mortgages is the responsible, family-man thing to do right now. I agree it might pay off IF property values continue to make unprecidented gains, but is it a prudent risk? Not all that long ago the "right" thing to do was to work hard and save up your money, and to avoid unnecessary debt at all costs. I have a feeling that that philosophy will come back into vogue shortly. My grandfather, for instance, has paid for everything -- cars, tractors, property -- with cash since the Great Depression. I'm not saying that's a great idea either, but it has its advantages (like, for instance, a huge amount of money built up by the end of his life--and he was a farmer).

Anyway, they've circled the wagons over at RCG, and I find the whole thing rather bizarre and certainly unprofessional. I wasn't interested in stirring up the pot, honestly, and regret leaving any comments whatsoever. Lesson learned!

Eric D. said...

Good post on Calculated Risk -Gas is now at the highest real price than at any other time since the Arab oil embargo and the Great "D". Another reason to secure your finances and keep as much cash as you can for a while.

Dukes said...

I don't know if anyone remembers some of my prior exchages with realtors, but they go to show that they have been testy for awhile.

I haven't posted any in awhile because I was bashed on this blog for doing it.

Here is an oldie, but a goodie, this realtor wasn't "testy" but he was using the old sales tactic of "better get in now":


Hello, I am quite curious as to why this seller seems to think that 345K is a fair price for this tiny house. I looked up its history, I see some work has been done, but this house was bought for 140K in 2002, now the owner is trying for the utmost greed in selling for two hundred thousand more than what they purchased it for?

Real estate is slowing all across the country, there were approximately 150 price reductions in the last 24 hour period here in Seattle alone. I think you should start advising clients like this one that they must be realistic in setting their prices. Plus the area is not good at all. I am interested in buying but will not pay ridiculous prices for a little shack like this.

Thank you


Good luck buying in Seattle the prices are going up about 2% a month. I know because two of my own properties have doubled in value in the last two years.

The longer you wait the more you will pay.

Me again:

You are absolutely wrong Scott. As a matter of fact what you just said to me is ILLEGAL under the Washington State Board of Realtors guidelines. I was in financial services for years and have had my real estate license. You CANNOT guarantee price increases. And if what you say is true, why are we seeing so many reductions.

I am going to report your conduct to the Board, it is this type of scare tactic that has led so many fools/sheep into buying overpriced homes.

The Tim said...

Dukes - I actually kinda enjoyed those emails.

Anonymous said...


Don't worry about "stirring the pot".

honestly, it's best to get this stuff out in the open.

It's true that realtors in Seattle are starting to flame. People need to know that and understand why. ie: the party's winding down.

it was a good long run, so long that it began to seem it would last forever.

consider the testy dialogue as your contribution to the "public's right to know".

Buyer Beware!

John Doe said...

Anonymous said...

Isn't it unethical for the buyer's agent to refuse to show a place based on the lower commission? That's clearly self-serving and not in the client's best interest.

This is exactly what is behind lawsuits for realtors organizations to release their full MLS to buyers. Things like knowing how much of a buyer's agent incentive they are offereing as well as getting full listing details would be extremely valuable bargaining tools for a buyer. Consumer advocacy groups are all over this one, but since it clearly puts the seller (and the realtor) at a disadvantage, this is being fought tooth and nail.

Mental Milly said...

I have sold 3 houses in the last 10 years and have nevr paid 6%. I was suprised when i saw this article. I didn't think anyone paid a Real Estate Agent that much. It has always been negoatable.

seattle price drop said...

Welcome back Dukes and thankyou Tim for the link lesson.

Anonymous said...

Dukes said...
I don't know if anyone remembers some of my prior exchages with realtors, but they go to show that they have been testy for awhile.

Juvenile antics. Don't like it, don't buy it.

Jackson Wallace said...

I inherited a decent chunk of cash about two years ago and went
house shopping. Other than one property which got away from me before I was preapproved, I've seen some interesting things.

I was preapproved with little income for 400k in house, but I did have a good chunk in the bank and stellar credit. I went through the state housing education program and then countrywide was immediately in my face with their ARM loans. They really were biased in favor of these loans over the 30-year fixed. I found that pretty odd, and I also wonder if anybody who gets kicked out of their house will sue the state over promoting this kind of robbery onto the undereducated lower income people it was supposed to serve.

If I had had twice the money I probably would have bought, but I've been so digusted at the insanity of the market and with people outbidding each other for shacks, that I started reading on the web and found bubble blog sites, and was convinced last year that it was a bubble after all.
Finally, my gf and my mom have come around and finally agree that maybe it isnt the best time to buy, but it wasnt easy let me tell you.

Now, I'm hoping I may be able to buy in a central neighborhood after all.
As a personal anecdote, most of the people in my age range have already either inherited homes, or have no hope of ever affording them because wages are not that great. I dont know who all these retiring boomers think they're going to sell to and cash out their retirements. You could find fixer houses in Shoreline in 2001 for 200k still. It needs to go back to that level.

The way things are unravelling in other areas of the country, and the level of accumulated debt and wasted equity is brewing, I'd say a good ole heinous panic is coming. By definition, a panic is excessive and horrifying, and when things start going down, everybody wants to wait for the bottom, so it pushes them either further down. People start freaking that their values are collapsing, so they jump in at a fevered pitch. I personally want to see the boomers squirm. But it will kill the rest of the economy so maybe not.

Anonymous said...

Don't worry about it- this economy is dead anyway.

And I've often wondered myself about these "buyer education classes" that Seattle pretty much mandates for first time owners.

Everyone that I know who's been was SHOCKED at the amount of loan the "educators" insisted they could take on.

I'm not big on lawsuits in general, but this particular thing I could perhaps get on board with.

Tim Dunn, Realtor said...

Hi, I'm a realtor, and you don't have to bargain with me - I list for 1.5%, and give up to a 1% rebate to my buyers. See, or call 425-344-4719 , or e-mail me at

But, sellers, FORGET offering buyer's agents less than 3%. It is a rookie's move. They will steer buyers away from your home.

It isn't even unethical for them to do this, as long as they disclose to the buyers that they won't represent the buyer when sellers offer less that they are willing to work for.

And if you think being a realtor is easy money, try being a realtor. The reason realtors don't usually bargain very much is because most realtors give a huge cut to the brokerage firms.