“All we need is the REALTOR® to lower their commission…”

We’ve heard it time and time again; “We are so close to where we need to be on this house. Why can’t the REALTOR® lower their commission to make the sale?”

The reason…

The commission is written into the terms of the Listing Agreement between the seller and the Brokerage. This is a contract which provides compensation to the brokerage for providing a service and is typically based upon the amount of marketing and expertise the seller’s agent brings to the selling party.

Typically, the listing broker will offer a buyer’s agent a percentage of the commission offered by the seller.   There seems to be a thought process by buyers that if they purchase a home using the listing agent and not having their own buyers agent that they will “get a deal”.   What they don’t understand is that the listing agent is still going to earn the commission as per the contract with the seller, and that they may cost themselves more money in the long run by not having their own representation. 

If the buyer is not represented, the REALTOR® would be acting as a dual agent, which in reality can be more difficult for the REALTOR®.  Besides having to make sure that they are being fair to both parties in negotiations, they have to do twice the work with scheduling home inspections, working with the buyer on financing, etc. 

REALTORS® only receive compensation when a home actually settles which can sometimes be a long process.   So when you really think about it, is it really fair to ask someone to reduce their paycheck for your benefit?  This also holds true when negotiations may come to a standstill between a buyer and seller.  Sometimes they look to the REALTORS® to pitch in to make it happen.  Again, as a professional, would you appreciate someone reducing your pay?

Keep your budget in mind when searching for a new home.  If you are looking at houses where you are asking for an agent to reduce their commission, you may be out of your price range.  Remember that a buyer’s agent will help guide you to the houses that fit within your budget.

Home Ownership and Your Income Taxes

We’ve all heard the classic reasons to buy a house; “It’s the American Dream,” or “It is yours to change and decorate to how you like.”

 

Those are some emotional reasons, now for a practical benefit:  

Tax Breaks!

When the beginning of the year rolls around, and it is time to reconcile with Uncle Sam, you will be thankful that you own rather than rent. 

All of the mortgage interest you paid during the year is tax deductible up to a $1,000,000,000 mortgage!  When you itemize your tax return you can deduct the interest paid during the year.

For a loan payment of $1,200 per month you could save somewhere in the neighborhood of $3,700 in taxes for the year. Check out this Alllaw.com article about the Tax Benefits of Owning a Home including some great examples of how a mortgage can help your tax situation.

Did you know that even a home equity loan has tax breaks associated with it? As you begin to pay down your loan and the value of your house increases, you create more equity. You can then borrow against that value to pay down other bills or do home improvements. That loan interest, in addition to your mortgage, is also tax deductible.

If you are currently renting and are in a position to purchase a home, you may want to stop giving away your tax deductions to the landlord. You know he/she is thanking you every year when they are reconciling with Uncle Sam.

If you had extra money coming your way from the IRS after doing your taxes this year, how would you spend it?