“I am not a proponent of arbitrarily cutting one’s commission, but this idea can work out positively for you and your client under certain circumstances.
“We often have a lower income client or one with a slightly higher debt ratio. Each of these circumstances limits their ability to qualify for enough purchase price to find a home or at least a home one would want to live in or purchase.
“Agents should check for a service called ‘Acorn Housing,’ a non-profit, free housing counseling service located in many cities (www.acornhousing.org). One program lowers the interest rates by 1/2 % on zero-down loans and 3/4% on 3% down loans. In addition, mortgage insurance (MI) is waived.
“Depending on down payment, this program permits a buyer to purchase between $13K and $20K more house which will earn the selling agent approximately $390 to $600 more commission (3%) based on these respective increased purchase prices. It also separates you from the ‘Other Agents’ who appear to work for ‘their buddy loan officers’ rather than their CLIENT!
“If you still need more purchasing power, use a rate buy-down by reducing your commission by 1/2% and get another 1/2 percent (or more) from the seller. A slight price increase with seller giving this back as a point item for buy-down is also an option. In other words, use at least one point to buy-down the rate and usually get about $5K more purchase price. Your client will be ‘delighted’. You have likely put them in a better home and neighborhood for their children. You perhaps gave up a couple of hundred on the commission reduction but you gained and amount above that with the ‘special program’. MOST LIKELY, YOU WILL FIND THE HOME THEY WANT MUCH FASTER, and move on to the next transaction, a move to your advantage. Also, your client is more likely to give you a referral. You have something to offer beyond ‘isn’t this a pretty kitchen’?
“I believe you will concur this is one of the few ways a small commission cut is not a loser for you, the agent! By the way, if Acorn Housing is not in your area check with Bank of America for their ‘Communities’ loan. They will reduce their FHA rate about 3/8% in the right income range. This gives you two choices if the credit score demands FHA for approval. Other banks offer similar programs.”