Let's Make a Deal (on Real-Estate Fees) Source: The Wall Street Journal Online TERRI CULLEN ©2001 After months of trying to sell his three-bedroom home without an agent, Eric Barker finally gave up. It was just too exhausting, he says. "You can save a lot of money by selling a house yourself," says Mr. Barker, who lives in Stockbridge, Ga. "But it's almost like a full-time job if you don't have the resources and contacts to help you quickly make a sale." What also convinced Mr. Barker to change his mind: A real-estate agent agreed to lower the commission in return for his listing. He eventually signed. Mr. Barker stumbled on a little-known fact about residential real estate: There is no set fee for broker commissions. Most agents will tell you they charge a "standard" 6% of the selling price (some charge even more if the house is below a certain price). But in truth, that amount very often is negotiable. How Low Can You Go? Guidelines for negotiating a lower commission: 6%-7% Agent represents only you in the transaction, and shares the commission with another agent: 5%-5 1/2% Agent doesn't represent you exclusively and shares the commission with another agent: 4%-5% Agent represents only you and doesn't share the commission at all: 3 1/2%-4% Agent doesn't represent only you and doesn't share the commission. Source: The Consumer Federation of America Many full-service brokers, under siege from cut-rate discounters and Internet-only brokers that charge commissions as low as 2%, will discount their fee depending on whether the agent represents you exclusively or has to share the commission with anyone else (see accompanying chart). A smaller number of full-service firms have gone a step further: abandoning the fixed commission and charging fees for a range of different services. These include everything from simply listing your home to negotiating the sale contract. For consumers, the savings can be huge. On a $175,000 house, for example, the difference between a 6% commission and 2% is $7,000. Full-service agents typically will negotiate down one percentage point, to 5%, unless the market is experiencing a buying frenzy. But with the housing market currently showing signs of cooling, consumers may find they have more leverage as agents compete for your business. Here's a look at several ways to reduce commission costs. The Agent's Role Sellers should ask prospective agents whether they will represent their interests exclusively and not represent the buyer in the transaction as well, according to the Consumer Federation of America, a nonprofit association of consumer groups in Washington, D.C. Commissions typically are split between the listing agent and the buyer's agent at the settlement, or closing. But when the listing agent also serves as the representative for the buyer, the commission isn't split between two brokers. (Agents are required, however, to hand over a predetermined amount, often a third of their take on the deal, to their employers). Sellers shouldn't hesitate to request at least two percentage points off the commission quoted -- or 4% compared with the typical 6% rate -- if the agent also represents the buyer. Sellers also should ask up front to pay a lower commission if the agent doesn't have to share the commission with another agent -- for example, if the eventual buyer is working with a broker who charges a flat fee for services. "You want to try to negotiate the best price for the services you're receiving," says Stephen Brobeck, executive director of the Consumer Federation of America. "But on the other hand, if you drive too hard a bargain, your agent may do nothing more than list your house on the Multiple Listing Service and drop a sign on your front lawn." Smaller real-estate firms tend to be more open to negotiation in a weak market, Mr. Brobeck says. And they often give much more individual attention than you might see at a larger agency with many clients. If the agent agrees to a reduced commission, be certain the rate agreed upon is included in the listing agreement. Fee for Services Fee-for-service brokers are just that. Rather than pay a standard 6% commission, buyers and sellers are offered a menu of real-estate services, each with a specific price.