Lowballing agent commissions and higballing asking prices!

Many asked me this year if there is a way to lowball a real estate agents' commission. My answer is very simple, "You get what you pay for!" If you were in need of a doctor and you were about to go into surgery, would you lowball the doctor? If you were about to go on trial and your liberty was at stake, would you lowball a lawyer? The same holds true for the services you receive in your homebuying and/or selling experience! In my opinion...If an agent is quickly willing to drop their commission without hesitation, it tells me this:

1.) The agent is not confident in the value she/he adds to the transaction.

2.) How will the agent respond to counteroffers when it comes time to represent you and your negotiation power?

I would certainly want the agent that has a firm stance on what they will offer you and what they will bring to the table for their fair share of the pie in a sale or purchase.

With that being said, I don't believe that lowballing is appropriate. Selling a home and bringing a buyer to the table is hard enough. By lowballing an agent, you are undermining what they do. Agents perform invaluable functions throughout the entire home purchase/sale experience. Many FSBO's think they can do it on their own, only to find out that it is not as easy as they think. The old saying holds true, "you get what you pay for!" If you want to discount the commission, your home may not get marketed to its full potential, the way a standard 6% listing would!

Another few questions I pose are...

Is it worth saving on the commission if your home sits on the market for an additional 6 months as a "For Sale By Owner", with your mortgage payments still there to be made?

Many agents' clients make the same mistake while listing their home. They think that their home can be sold for the same as the "Johnson's" sold their home for last year, which is NOT TRUE! The market constantly changes. Appraisers will use "recent comparables" to determine the value of a property, which will be evaluated by the bank's underwriter when determining the approval of a home loan. Is it worth taking the risk that your home sits on the market (and possibly decreases in value..yes it happens) for an additional few months to justify the difference in your asking price? Some stubborn homeowners are starting to reassess their asking prices, recognizing the mortgage payments still come in while the home is vacant or on the market. 

This is why it is important to have a straightforward real estate agent and lender representing you, that will tell you how it is, regardless of making you feel "warm and fuzzy!" Many end up shooting themselves in the foot because, "they know best or have an angle!"

Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.caloan.com/

Blog: http://www.caloanblog.com/

"You find the perfect home, we'll find the perfect loan!"