Three tips before you sign a listing agreement with a Denver real estate broker:

1. Real estate commissions are negotiable
2. Split the commission in two on the listing agreement -- delineate the commission to be paid to the listing agent separate from the fee to be paid to the buyer's agent
3. Haggling on the total percentage isn't necessarily a good idea

Now let's get into the issue in more detail. The first thing you need to know is that real estate commissions are negotiable. The standard commission is 6%, but after negotiating, most people pay closer to 5%. The second thing to note is that there are actually two parts to a brokerage fee. The first piece of the pie goes to the listing office, the second to the buying office. That means that a 5% commission may be split 50/50, or it may be divvied up 2%/3%, for example.

Perhaps more important than the total commission is how the pie is sliced. Make sure that the buyer's agent fee is generous. Listing agents put your house on MLS, place a sign in your yard, handle offers, give advice and perform many other services to you as a seller. However, it is the buyer agents who provide the foot traffic. They are the people who actually bring potential purchasers to your doorstep.

If a real estate broker scans MLS for houses to show to a buyer, they look at the commission they will make when the deal is done. If your listing displays a buyer's agent fee of 1.5% and another home shows the buyer's fee as 3.5%, that agent may not even show your home to his buyer. He may pass it by. If he does choose to tour your home with his buyer, he may encourage the buyer to purchase the other home because, of course, he stands to make more money. While this isn't ethical, it happens every day.

If you plan to put your home on the market, pay close attention to the line on the listing contract that delineates the commission structure. Most real estate agents will put a single percentage on that line, allowing them the freedom to split it up any way they choose. Instead of a single percentage -- say 5.5% -- make sure that the compensation is broken into two parts -- 2%/3.5%, for example. Also be sure to delineate which commission goes to whom. This is as simple as writing the details in the blank line reserved for commission on the listing agreement.

How to Save Thousands of Dollars When Listing Your Denver Home

Another benefit to breaking the real estate commission into two parts is realized if the buyer is unrepresented. Many people on the hunt for a home do not necessarily use a real estate agent. They may drive the streets of a neighborhood they like, grab a flyer and call the agent on the sign (your agent) to arrange a showing. A neighbor may even tell them that your house is for sale, knowing they are looking to move into the neighborhood. Realize that many buyers are not represented by real estate agents. If the commission structure is not separated into two parts on your listing agreement, your listing agent could get a windfall bonus. That real estate agent will be paid the entire commission, even though there was no representative on the purchase side of the transaction. If this happens, you will wind up paying thousands of dollars that you would not have paid if you had taken the time to split the commission in two on your listing agreement. We're talking about a lot of money. If half of the standard 6% commission is earmarked for the buyer's broker, that amounts to $9,000 on a $300,000 home.

Also realize that haggling on real estate compensation is not necessarily the way to go. There is nothing wrong with paying the standard 6% brokerage fee, and many of the best agents demand the full fee. These professionals may spend money to market your property, and in general, they provide a lot more service than just slapping a listing on MLS. A good agent will take quality pictures of your home and place the maximum number of pictures on MLS, for example. They may also arrange to have their weekly sales meeting at your home so that dozens of agents are personally familiar with your property. Top producing real estate agents are definitely worth the full commission.

Instead of negotiating on the total percentage, one strategy is to leave the commission in tact and negotiate on the split instead. A 2%/4% or 2.5%/3.5% may be preferable to dickering on the total percentage. A standard brokerage fee that is generous to the buyer's agent will likely result in higher foot traffic and possibly a higher sales price. If you obtain a higher sales price or incur less time on the market, you will have more than made up for what you would have saved by haggling on the real estate commission. Less time on the market = fewer mortgage payments … and headaches.

If you need a good Denver real estate broker, give me a call. After getting to know a few details about the home you plan to sell, I'll be happy to put you in touch with a solid real estate agent who can help you. I do not receive any compensation for this. In fact, it's against the law. However, I will be happy to do what I can to point you in the right direction.