April 4, 2010

Saving money doesn’t mean stiffing your real estate agent

by

Today I read an article on Yahoo! whereby Elisabeth Leamy, the Good Morning America consumer correspondent, is the expert being quoted about savings on big ticket items.  While I generally agree with her that it is best to try and save when you make those large purchases, I take exception to her suggestion regarding cutting real estate commissions.

I have a problem with Ms. Leamy’s suggestions regarding buyers negotiating with real estate professionals.  I agree with her that mortgage lenders/brokers often have ‘flexibility’ (my word, not hers) in some of the fees they charge.  I know this first hand having been involved in the real estate business for over 10 years.  I also know escrow companies are willing to discount their fees, in certain circumstances.

With regard to real estate professionals; however, there seems to be an assumption that they don’t do much.  In this day of the internet and online home searching it is very common for the public to think a real estate professional just shows up, opens the house, gets you to sign the papers and then walks away with a handsome check.  This is not how it works. With all the short sales and foreclosures there is a lot more work to be done.  (Note to Ms. Palmer who wrote the article: Realtor® is a trademarked term used only by those who are members of the National Association of Realtors. Not every person who sells real estate is a Realtor®)

Keep in mind, though, that the buyer does not normally pay the real estate commission.  Real estate commission is often paid by the seller, to the seller’s broker/agent who then splits it in some manner with the buyer’s broker/agent.  Negotiating with your agent, as a buyer, will not save you a dime if you’re not paying the commission.

I understand that Ms. Leamy was trying to make a point about saving large amounts of money in places that maybe you wouldn’t think.  Her point is taken.  However, if you’re not sure what the person is going to do for what you will be paying then ask what you’ll get for your money. You can’t just assume that because the final amount is followed by a few zeroes that it isn’t warranted or earned.  Most real estate professionals work very hard and if your house doesn’t sell they get nothing regardless of how much time or money they have already invested.

So, if you are going to negotiate your real estate sales fees, do so with knowledge and pay for the services you are getting.  In real estate, I can pretty much guarantee you that if you cut your agent’s commission you’ll be geting less services.  They may not want to tell you, but rest assured that you will get what you pay for.

I wish Ms. Leamy would have suggested seeking discounts for brokerage fees or other fees associated with the management of mutual fund, 529, IRA and 401-K accounts.  Like real estate professionals, they work on commission and often you as the consumer don’t really know what you’re getting for the fees you pay.  I wish she would have suggested shopping around for a mortgage before buying a house so you can get the best rate, which over the life of a 30-year mortgage would save tens of thousands of dollars.

Instead, I think she picked a group that while large and represented by a national association are often just sole practitioners trying to make ends meet.

So, now I’ll get off my soap box and put the horse back in the barn.  I hope my little rant did not offend anyone, especially Ms. Leamy. Nonetheless, if you’d like to share your thoughts please do.  Do you have suggestions on how to save on big ticket items?

Sara

Comments on this entry are closed.

Previous post:

Next post: