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In a real estate transaction, there’s always some level of negotiation. If you’re on the selling side, you may be considering negotiating not only with prospective buyers, but also with the person you’re working with to seal the deal: your real estate agent.
If you’re looking to save some money, here’s what you need to know about negotiating your agent’s commission, and how to agree on a rate you both can feel good about.
How real estate commission works, and who pays for it
The average real estate commission rate has gone down of late to just under 5 percent of a home’s sale price, according to Real Trends, a real estate research and consulting firm. This fee is typically paid by the seller at closing, and it’s typically split down the middle between the seller’s agent and the buyer’s agent. (So, for a 5 percent commission, each agent would earn 2.5 percent.) In the past, rates have been closer to 6 percent. Five or 6 percent might not sound like much, but when you’re talking about a $350,000 home, it can add up to tens of thousands for the seller.
Agents and brokerages can have unique commission structures, however, with some offering flat fees or other incentives. Because of this, there may be opportunity to negotiate the rate if you’re looking to save on the cost of selling your home.
“There are agents and brokerages that reduce, discount or coupon their services,” explains Kevin Van Eck, executive vice president of Innovation and Education at @properties, a brokerage in Chicago. “Each agent along with their brokerage can determine where they set commissions based on the value and success created.”
Is your agent’s commission negotiable?
Often, yes, there is a bit of room for negotiation. As you prepare to list your home for sale, you may be meeting with a few listing agents to find the right one for the job. Ask each agent about their commission rate and what exactly you’ll be getting for that price. Consider not only how the agent plans to market your home, but also their skill in pricing it, experience, resources and track record.
“It’s OK for a seller to ask about the commission, but the best time is after talking with the agent and understanding their experience, how they will create exposure for the home and the value they bring to the table,” says Van Eck.
You can weigh what you learn against the services of a discount broker, as well. Just keep in mind that the discounter’s offerings may be limited compared to those of a full-service agent.
How to negotiate real estate commission
Once you understand exactly what you’ll be paying for, you will be in a better position to successfully negotiate. Here are some tips:
- If you’re able to offer the agent more than one listing opportunity, that might be a compelling argument for a reduced commission. “If [you’re] a real estate investor who is looking to offload several properties, I would definitely talk about the commission,” recommends Dana Bull, an agent with Sagan Harborside Sotheby’s International Realty in the Boston area. Bull adds that most agents welcome repeat business.
- If you don’t have another listing opportunity of your own to offer, you can try leveraging your ability to get the word out about your agent to others in your neighborhood or network. This might be especially impactful if you know your agent is looking to build their business. “I can’t just slash my commission, but I might be willing to give a slight discount if the client offered some sort of other strategy to get more business after the sale,” Bull explains.
- If you have a home in a sought-after area, or a buyer already interested, or an unusually high sale price, your agent may not need to do as much as they normally would to make a sale happen. If neither party can foresee the need for additional services — “if an agent is coming in to basically just do some hand-holding, keeping the transaction on schedule and assisting with paperwork,” Bull suggests — that might be another good reason to propose a slightly lower rate.
You may be considering skipping the commission conversation entirely and selling your home yourself. If so, be aware: An experienced house flipper might be skilled enough to list a home without an agent, but for most homeowners, the for-sale-by-owner (FSBO) route can be more challenging, more costly and more time-consuming in the long run.
As in any negotiation, it takes both parties to be willing. Negotiating your agent’s commission can work in your favor, but an agent can walk away if they don’t necessarily need your business. Keep in mind, too, that it can make sense to pay more for additional services instead of negotiating the commission down, Bull says. These might include higher-end marketing, home staging or additional mailers, for instance. Ultimately, it’s important to find an agent you can speak with openly about cost, and who you trust to do the best job to sell your home.