How to save on your commission when buying or selling a home
I'm starting to realize that the only thing I ever blog about is my work. Of course this is a big part of my life, but there are other interesting subjects that people may find useful. Especially here in the bay area I've found a lot of people complaining about the high real estate commissions that they end up paying when buying or selling a home. Of course this is a function of the ridiculously high prices that people end up paying when they buy houses. Just to put things in perspective, paying USD 1 million for a rather modest house in a good school district like Palo Alto or Menlo Park is nothing unusual here - welcome to the Bay Area! Since the commissions are a percentage of the value of a home the amount of commission goes up to some really high numbers: Typically a seller pays 5-6 % of commission, that equates to 50-60K in commission for the two realtors involved.
When we bought our house a couple of years ago my wife and I already knew where we wanted to live and had even picked out the house by ourselves. So I didn't need the services of a buyer agent and tried to save the 3% buying agent commission. However, the house we wanted (and all the others that we had previously looked at) had their contract written such that a buying agent was required. The whole real estate industry seems like a big cartel to me and I wasn't willing to pay that much money for that little service that I required - call me a stingy German if you like. I looked around and the best I could initially find was ZipRealty who was willing to refund 20% of the 3% commission, that still leaves USD 24K for the buying agent for essentially helping me fill out some paperwork. After lots of searching around I finally found the following web site that allows you to let realtors bid down their commission, pretty cool really:
Through that I found a buying agent who was willing to refund 70% of his commission to me, a nice chunk of money really!
The bottom line: I guess I'll be a bit more picky when it comes to selling my house, since the right pricing and the right marketing can make a difference. But when it comes to buying a house I think paying the full commission when you pretty much know what you want is just a total waste of money - my 2 cents.