Is agent commission negotiable?

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Dear Steve,
When choosing an agent to sell your home, is the commission negotiable? Our house is in fantastic shape and should sell pretty quickly, despite the market. Also, are commissions dropping with this cooling market?
— Shawn

Dear Shawn,
Yes, real estate commissions are negotiable by law. In fact, all real estate fees are negotiable.

Real estate commissions, which are typically split between the buyer’s agent and listing agent, have dropped in recent years from the old standard of nearly 6 percent to a national average of just under 5 percent, surveys and agent polls indicate.

In May, the U.S. Justice Department hammered out an antitrust settlement with the National Association of Realtors, or NAR, designed to spur competition and bring down commissions. As part of the deal, NAR can no longer withhold the information on the multiple listing service, or MLS, from such discount online brokers like Zip Realty and Redfin.

Some discount brokerages, I might add, now offer commission rebates of 1 percent or more, although they may not offer the full range of services others do.

Additionally, many agencies and independents have taken to offering simple fee-based “a la carte” services in home transactions to scare up business.

There’s a caveat here. Typically, when you get too much below the 5-percent commission mark, agent motivation tends to diminish sharply unless you are selling a desirable higher-priced home. In some of the toughest markets, sellers are actually offering bonuses to agents if they can scare up a buyer in a set time. In other words, if you go too cheap on a commission, you may get what you pay for — or even less.

Also realize that a sizable chunk of agents are working for brokerage houses and can’t cut their fees without permission, and sometimes penalty. Agents offering lower commissions often have to sacrifice a commensurate portion of their shares, which run from a quarter to a half of the total commission, to the brokerage. Many agents pay additional franchise fees on top of the commissions they have to kick back.

If you really think your sale will be a walk in the park, consider adding a stipulation to the listing-agent contract that would lower the agent commission if the house sells before paid advertising is used, or if multiple offers arrive in the first few weeks. However, this approach can also serve as a disincentive for agents to move quickly.

Some of the top-performing agents say they base their commissions on who sets the price for the home, the agent or seller. For instance, if you were to set your price significantly higher than what the agent feels is its true market value, then the agent has to spend more time and resources trying to sell it and hence, will charge a higher commission.

Whatever you do, be sure to ask the agent who he or she feels is the target buyer for your house and how and when the marketing will be done. Then get that plan in writing. Also, be sure to do a Better Business Bureau search on the agent or agency as part of your hiring process. Some agencies are struggling to stay in business and service has waned.