Real Estate Investing: Agent Commission
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Real Estate Investing: Agent Commission

Most good agents will ask a minimum commission below which they will not work. It's important to understand that there is no "set" or "fixed" or "standard" commission in real estate. First, of course, find out how much the agent wants. Then, either agree to the amount or find another agent who is willing to work for less and tells you so right up front.
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Can I ask an agent to cut the commission?

Most good agents will ask a minimum commission below which they will not work. They may say, for example, that they are worth a full 3 percent (the half of a 6 percent commission that a seller's or buyer's agent usually gets) and they don't want to work for less. It's important to understand that there is no "set" or "fixed" or "standard" commission in real estate. If you then badger them to cut their rate, you're asking them to work for less than they feel they are worth. Some honest agents will simply refuse. They know their value. Other may grudgingly acquiesce, but you may have poisoned the relationship between you. They will surely resent what you did, and then you'll always be wondering if they are doing as good a job as they should. Advice is to do one of two things if you want to pay less. First, of course, find out how much the agent wants. Then, either agree to the amount or find another agent who is willing to work for less and tells you so right up front.

Do I want to work with discount agents?

When it's time to sell your investment property, you surely won't want to pay anymore than necessary in commission. If that's the case, you'll want to consider two alternatives: selling it on your own or selling through a discount broker. Today there are agents in almost all communities who will work on a discount basis, some with very steep discounts. That means that selling agents will work for as little as 1 percent (instead of the selling agent's typical 3 percent commission). Keep in mind, however, that these agents are not likely to be the sort who you want and need when you first start investing. The reason is that these discounters sometimes compensate for a lower commission by providing a lesser service. If you're going to use a discount broker, be sure you get in writing exactly the services that will be performed. And be sure that these are what you want and need.

Agent "Buy First" Policy

You don't want any agent who buys all the good properties for himself or herself and leaves the tailings for you. Contrary to what many newcomers believe, a good agent will usually present the best deals to his or her clients. That provides the agent with a steady stream of cash from commissions. And positive cash flow is one of the hardest and most important things to get in real estate. Be wary of an agent who says, "Of course, I always save the very best properties for my clients." No one is that altruistic. A savvy agent will certainly present some of the best to his or her clients. But that agent will also pick some cherries for himself or herself.

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