Are Commissions Negotiable?

By Edith Lank

August 21, 2016 5 min read

Dear Edith: I read that a Realtor commission is negotiable. Is this true? Are smaller firms more willing to negotiate commissions? Selling a house is a very complex process! I am learning. — T. Y.

Answer: There is no official or legal rate for real estate commissions. Even a flat fee is possible. Commissions do seem to end up around the same figure in any given community. But then again, so does the price of a quart of milk.

Each office has its own standards. So yes, real estate commissions are indeed negotiable, but that's only if you find a broker who is willing to negotiate.

It is customary to charge a higher rate for certain types of property. It might be possible to negotiate a lower commission on an expensive property that's bargain-priced. Some firms offer reduced fees for more-limited services. That's perfectly alright, as long as you know ahead of time how the company handles advertising (whether it would skimp on it in that case) and which parts of the process you'd have to handle on your own.

Remember that, in most cases sellers sign a listing contract with a brokerage firm, so the agent in your living room might not necessarily have the authority to change the customary commission rates. You'd have to discuss the matter with the supervising broker.

If possible, you want to choose a firm that shares its listings with other companies through a local multiple listing system. Exposure to the greatest number of buyers will bring you the best price. However, agents from other offices may not be motivated to show your property if your listing agent has to share a reduced commission.

Occasionally, a seller negotiates a separate agreement: full commission if the sale is eventually shared with another office, and reduced commission if the property is sold in-house. As for which brokerage firm might be willing to negotiate, I have no idea. Real estate companies don't talk about such agreements, except when they're anxious to prove to the Justice Department that there's been no price fixing and that commissions are indeed negotiable.

Low Down Payment

Dear Edith: My husband and I think buying a two-family house is a wise investment, but we wouldn't have more than 5 percent for a down payment. Is this possible? Our credit is pretty good. Also, my husband is not a veteran. — T. N. R.,

The Federal Housing Association is a federal agency that insures lenders against loss if a mortgage loan goes sour in the future. You would pay the premiums, but the insurance allows lenders to make loans with as little as 3.5 percent down. The program is available for two-family properties if the buyer intends to live in one of the units. So the FHA is just right for you.

(For outside investors or owner-occupied properties with more than two apartments, a 25 to 30 percent down payment would be required.)

In addition, when the lender analyzes your income to see how big a loan you can afford, you may receive credit for part of the rental income you anticipate.

Altogether, your plan is a fine way to start building an estate.

Setting Parent's Estate

Edith: Is a licensed appraiser needed when a property is strictly part of a family transfer? The property is in the name of a deceased parent, and it is to be equally shared by the surviving adult children.

There are several residential properties in our estate, including a family lake house. If petition probate papers have been submitted, what is a realistic time frame for the title of each property to be transferred? Conflicting turnaround times have been given. Also, in the interim, can the property be rented to offset maintenance costs? — J.,

Answer: There's no legal requirement for an appraisal in a family transfer, but of course, one of the parties might want one.

An appraisal by a licensed or certified appraiser is typically required when a new mortgage loan is being placed. For the settlement of an estate, an official appraisal might be required — or a less elaborate one, or not at all. Every situation is different.

Sorry, but I have no idea how long a particular estate might take to settle. This question may better be directed to the lawyer who is handling the estate.

About renting out property during the probate process: I'm not a lawyer, but I'd think the executor would have the authority, or perhaps even the obligation.

Edith Lank will respond personally to any question sent to, to [email protected], or to 240 Hemingway Drive, Rochester NY 14620.

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