When To Negotiate The Real Estate Commission?

When To Negotiate The Real Estate Commission?

The process of selling a home involves a series of expenses that must be taken into account in order to know exactly the amount that must be paid for them. In addition to taxes, if you carry out the operation with the advice of a real estate agent, one of the expenses will correspond to the fees of the same. Therefore, we want to present you with a series of circumstances in which you can negotiate the real estate commission. Sky Marketing is here to help, so keep on reading. 

What is Real Estate Commission?

When we talk about real estate commission, we refer to the amount of capital that a certain real estate agent charges for his services as an intermediary. In a simple way, it is about what you will have to pay if you want an agency to manage the process of selling or renting your home.

Despite not having a legal regulatory framework, when a person hires the services of an agency, they sign a real estate brokerage contract. This document contains the detail of the amount that will be counted for the sale of a property and the payment time, among other things.

On the other hand, it is highly likely that agencies charge a percentage when providing their services to the purchasing party. Depending on the contracted agent, the details of what they will charge are found in different documents. In some cases, they may be included in the visit sheets. They are documents signed by those who visit a home for the first time and who are considered potential buyers. Others, for their part, make a document as a commitment to the commission. It works as a kind of proof that certifies the comparator’s commitment to pay the real estate commission.

Who is responsible for paying the real estate commission on the sale of a home?

In most cases, the real estate commission for the sale of a property is borne by the owner, that is, by the person who sells the property. When the operation is managed by a real estate agency, it charges a percentage of the total sale as a fee. The payment of the commission is made when the entire buying and selling process has been completed, or at the time of signing the lease contract.

However, many real estate companies usually charge another percentage to the person who is going to buy the property. Therefore, clear information is always recommended in this regard so that the sale does not run the risk of not being finalized at the last minute.

Currently, a new housing law is being debated in the government. Within one of its new points, it is regulated that the real estate commission runs yes or yes on behalf of the owner of the home for sale. In other words, the possibility of the buyer is responsible for the said expense is impossible.

As it is not approved, the real estate market continues to govern in the same way as always.

Real Estate Commission: Everything You Need To Know

Next, we tell you how to negotiate the real estate commission if you are wanting to put your home up for sale, like in Al-Jalil Garden

Different cases to negotiate the real estate commission

As we mentioned at the beginning of this article, the real estate commission is part of the set of expenses to pay when listing a home. Agencies that work in a traditional way usually establish a percentage of between 3% and 7% as part of the fees to collect. For their part, real estate agencies that provide online services via the internet do not usually charge this type of commission but rather fixed management fees.

Therefore, in this section, we present three possible situations where you can negotiate the real estate commission with the agency chosen to sell your home.

  • If they make you sign an exclusivity contract. In this case, you can negotiate to grant the full right of sale in exchange for a lower percentage of fees to pay.
  • When the real estate company recommends lowering the cost of housing. Since you will receive a smaller sum of money, you can negotiate to pay less money for the commission.
  • High demand area.  If your home is located in areas with high demand from buyers or in cities that are highly attractive to foreign clients, whether due to tourism, landscapes, climate, etc. If this is your case, you can negotiate the real estate commission.

When the agency proposes you to sign the exclusivity by contract

With the signing of an exclusivity contract with a real estate agency, what is established is an agreement through which the sale of the home can only be carried out by said agency. In most cases, the clause is integrated into an order sheet that is carried out when the agency’s service is contracted.

Although by signing the exclusivity with a real estate company we are granting it the sole right of sale, it is possible to be able to negotiate some internal aspects of the contract in question.

One of the best-known ways is to negotiate the reduction of the real estate commission in exchange for the exclusivity contract. For example, if the real estate agency proposes a 4.5% fee, propose to lower it to 4% in exchange for granting it the exclusivity of sale. In this way, both parties benefit from the agreement. The agency makes sure that the sale will not be managed by any other real estate agency, and the seller saves a part in commission.

Another way to negotiate the real estate commission is that by accepting the exclusivity term they allow you to pay the fees on the same day of the operation. That is, the payment of the commission is transferred to the signing of the sale contract.

Main points of real estate exclusivity

Being a private document, exclusive contracts can integrate the requirements that each agency deems pertinent. However, there are common points that are present in the vast majority of agreements of this nature.

Knowing them will allow you to negotiate the real estate commission in the best way.

Explosive clause

It is precisely specified that another person or another real estate agent will not be able to manage the sale of the property.

Total sale price of the property

In this part of the contract, the exact sale price of the property is specified. There is the possibility of specifying that it is subject to modifications due to negotiations.

The durability of the contract

It is established how long the exclusivity of sale with the agreed real estate will last. In most cases the periods are for a quarter, half a year or a full year. This is data that must be visible and detailed. In the case of not having exactly a pre-established time, it is not advisable to sign the exclusivity.

The tacit extension clause

It is the point of the contract in which it is specified that, in case the agreed terms expire and not wanting to continue with the services, the owner must notify his decision several days in advance. Otherwise, the exclusivity contract is automatically renewed. If the contract is for 3 months, you must notify 15 days before if you wish not to continue with the services provided.

Percentage of the real estate commission

The exclusivity contract must detail what will be the price that the real estate agency will charge for its fees.

If the location of your home is in a high demand area

Another of the key points to be able to negotiate the real estate commission is to know if your property is in a high-demand location. There are areas where a greater amount of real estate sales. The cities of Madrid and Barcelona are clear places where operations of this nature can be carried out in a short time.

If a home is located in one of these areas and also has a good state of conservation, it will be easier for the real estate agency to sell it. Therefore, it is a great opportunity to negotiate the decrease in the fees to be paid for the management.

Something similar happens when the property for sale is located in another city where the real estate agency is based, but for which there is a high demand for interest. For example, if a home is located in a city in which there is great demand for the purchase of real estate by foreigners.

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In cases in which the real estate company recommends lowering the price

Typically, real estate agencies appraise the home and offer a certain initial sales price as a test on the market. However, as time progresses and the house does not receive any inquiries from potential buyers or visits, it is very likely that the agency will recommend you lower the price of the property.

When this happens, what you receive for the sale of the house will be much less than what you were expecting. In turn, and on many occasions, it may be that the suggested sale amount does not cover future investment projects that you had planned. Like, for example, buying a new, larger home that you would finance with a mortgage. Or reinvest the money in another type of financial product.

What you are wondering is if there is a possibility of negotiating something. Yes it is. One of the things you can negotiate is the real estate commission when the agency suggests lowering the sale price.

For example, and in a simple way, if the agreement with the agency was 240,000 euros with a commission of 5% for the management service, you can request that the percentage of fees be 4% in the event that the price of the property decrease to 220,000 euros.

This means that the money that you do not earn by not selling the house at the initial price you save by reducing the fees of the manager. Another aspect will be whether or not the real estate company accepts the offer. That is, it is in the capacity to be able to do it or simply reject it. If they do not accept it, they have the possibility of consulting with some other agency and negotiating the different aspects that are relevant to you. Remember that you can only make this type of inquiry if you have not signed an exclusivity opposite.

At what point in the operation will the real estate commission be charged?

Depending on each real estate company, the time of payment of the fees may vary. In general, the agency will charge its commission in case of:

  • If the apartment is sold to a person who has been contacted through the management agency.
  • When the buyer is a relative of a person who has been contacted by the agency.
  • If the buyer is a company and one of its members contacted the real estate.
  • In the event that the apartment is sold, in any of the cases mentioned in the previous points, with the exclusivity period expired.

If you have any questions after reading the article, we invite you to leave us your query or comment at the end of the post. From the team of Kingdom Valley Islamabad, they will respond as soon as possible with the precise information.