The Sun Sentinel newspaper ran a piece this week highlighting a new trend. It appears that real estate agents are now consistently raking in some of the highest commissions ever. So what does this mean for real estate investing?
At the height of the recent boom fueled by real estate investing discount real estate brokerages were popping up all over the place and no one wanted to pay any significant real estate agent fees. In some respect this was good because all sellers really needed to do was stick a sign out front and they would probably have a dozen offers in a couple days. Obviously today that is a completely different story. Now you could say that real estate agents definitely have to earn their money. Though it is a little surprising that they are reporting few objections to paying 6% commissions when things are so tight. Certainly, some high end agents are probably asking even 10% for their assistance today.
There are 2 things that real estate investing pros should take away from this news. Firstly, you shouldn’t have to pay these high commissions, especially if you are throwing an agent regular business every month. You can probably get this down to 3% and even as low as 1% if no other agent is involved. If you are going to list your properties through an agent at anytime you should also go for ‘open listings’ which allow you to sell yourself with no commission due. Make sure that you also negotiate zero cancellation fee.
For those of you in real estate investing who have your real estate license perhaps you should be asking for higher commissions from those you work with as well as leveraging your license and commissions to get more cash back or referral fees which can be used as repair funds.