97.5%: How to save yourself from leaving thousands of dollars on the negotiating table

I got an email today from a buyer who interviewed me and a couple of other agents over the weekend. I gave him a run down of my superior service and how that would bring added value to his home purchasing experience and gave him a run-down of what to expect on his up coming journey of home purchasing and gave him my Home Buyer Handbook.

His email today said essentially that one of the agents offered to give him a rebate and wanted to know if I would match that offer beyond my offer to help pay for his closing costs. That was all he was interested in; nothing contemplating the differences in level of service or experience or anything else for that matter regarding the different Realtors, just money. And to a certain degree, I can understand his views, but he needed to ask more profound questions.

This particular buyer was considering purchasing a $400,000 home, and his primary focus was on trying to extract a little over a thousand dollars from any agent to give him a sense that he was getting a good deal.

But I would argue he is focusing in on the wrong area of the transaction in seeking value. Trying to get value by locking in on the agent’s commission is akin to focusing in only on the single tree rather than seeing the entire forest: he needs to see the bigger picture.

The average agent commission is 2.5% of the purchase price. When you are in the market for a home in the $400,000 or less market (which happens to be the most popular buy in the South Bay), where most of these listings are getting multiple offers due to very high demand, not leaving any money on the table in dealing with the listing agent is of paramount importance [see the graphs for an illustration of the market in San Jose area]. This is where experience, negotiation skills and networking skills come into play; this is where agents demonstrate their true value to stand out from the crowd. Simply faxing in an offer and hoping it is the best offer will not get the job done. I believe everyone has heard of the saying: you get what you pay for. That statement is very appropriate here.






It is a mistake to focus only on the 2.5% of the commission to extract your true value; the other 97.5% of the purchase price is where you can truly gain or lose significant value. You may save a few hundred dollars by getting an agent to give you some rebate; but you can easily lose a few thousand dollars if your agent is not experienced or is too focused on doing quick volume business and not looking out for your best interest because they have to churn clients. Ultimately, you will end up paying for quality one way or another.

You may certainly disagree with my assessment of the situation here as everyone has the right to try to pay the least money for services. But take a moment to consider this: Is it always a good idea to look for the cheapest service available? There will be a wide range of fees that Realtors will charge; but a good Realtor, like any other profession, will command a fee that is commensurate to their skills and experiences. Look at the entire picture; don’t just look at getting a few dollars back when making the most expensive purchase of your life; look at not leaving any money on the table.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com