How to Negotiate

When it comes to business everything is negotiable. If you happen to live in an area where only the seller pays the agent’s commission and you happen to be the buyer than you’ve got nothing to worry about. But in some places and countries both the buyer and the seller have to pay a commission to the agent which is usually about 2% on either side. Very often the real estate agent will ask you to sign an agreement to pay the 2% commission as the buyer before they show you any property. This is probably the best time to negotiate the rate.

If you’re rolling in money that 2% may not be a big deal but 2% on a $400,000 home amounts to $8000 which is no small piece of change to pay. Remember there are also legal fees and taxes to consider. So you may want to try to bring the agent’s commission down. The best time to negotiate that is up front. If you can agree on a slightly lower rate of say 1.5% (this will save you $2000 on the above mentioned example which could cover the cost of painting the house) it's best to do so up front.

The danger of negotiating the agent’s rate after you’ve seen a property you like and are ready to make an offer on is they may have several other client’s who are also interested. On a $400,000 purchase $2000 is a drop in the bucket but as far as the agent is concerned it represents a quarter of their fees and they’ve want to get all of it so they make put you on the backburner hoping to get the same offer from someone willing to pay them more for their services. Ultimately the price is the same for the seller so they won’t care wither way but you could blow the deal over a few thousands dollars.

Negotiate on the commission up front with the agent so that everyone knows what they are getting into before serious offers are being made on the property that interests you.