Tips For Negotiating Realtor Commissions

 

There is no doubt that selling a house is stressful. With so many moving parts and things to think about, many homeowners hire a real estate agent to help them with the selling process. An excellent real estate agent can handle everything from listing and pricing the property to marketing and negotiations.

However, Realtors who provide these needed services come with a big price, and it’s one that sellers typically don’t like thinking about – the agent commission fees. The real estate commission is one of the highest costs associated with selling a house, as you’re usually required to pay around 6% of the home’s gross sale price in agent fees!

That being said, negotiating real estate commissions is worth attempting. Most agents don’t like it when homeowners contact them and try to negotiate, and only about 1/3 of sellers try but of those who do a lot are successful in lowering their agent’s fees.

Let’s take a look at some of the best ways you can go about negotiating Realtor commission fees.

 

What is a Typical Real Estate Agent Commission?

 

A typical real estate agent commission rate is somewhere between 5% and 6%, and this is typically split evenly between both the agents involved in the transaction. The actual rate can vary, though, depending on location and situation. In fact, standard rates can vary by up to 17%.

Commission rates may be lower or higher in your area, depending on how competitive the market is. If you are in an area where there are a slew of real estate agents and home prices are high and sell quickly, the commission rate may be lower.

On the other end, if your area lacks Realtors, there is a lack of buyer demand, or there are plenty of homes on the market, but they sell slowly, you can expect a higher commission rate.

The Consumer Federation of America released a report in 2019 that revealed how commission rates are often hidden and difficult to pin down from one situation to the next. For example, real estate agents in Buffalo, NY, typically charged 7% commission rates, while those in Atlanta, GA, charged 6%.

How do Real Estate Agent Commissions Work?

 

Real estate agents are typically paid on a commission-only basis, meaning they get paid a percentage when your house sells. However, agents rarely keep the full commission. Instead, the fee may be divided in one of several ways. 

Split With Buyers Agent

When a listing agent splits the commission with a buyer’s agent, the fee is divided equally (usually) between them. For example, if the total commission fee for a sale is 6%, the total is split 50/50, and 3% goes to each agent.

Split With Managing Broker

Realtors may split anywhere between 50-90% of the commission fee with their managing broker. The percentage depends on a few factors, including how long they’ve worked for the broker and how many houses they’ve sold. A new Realtor is likely to settle for a 50/50 split, while a more seasoned real estate agent may keep up to 90% of the commission.

Real Estate Agent Expenses

A Realtor may decide whether or not to lower their commission rate based on the additional costs incurred while selling your home. When you attempt to negotiate a lower commission with your real estate agent, understand that behind-the-scenes expenses affect the fee. These include things like:

• Photography
• Videography
• Marketing (social media, print, etc.)
• Home staging
• Parking
• Gas
• Office expenses
• MLS listing fees
• Licenses
• Taxes
• Association dues

Marketing costs and other expenses can influence how much commission a real estate agent charges you, but knowing about these costs upfront can help you in your negotiations.

We Already Negotiated Discounts With Agents For You. Find One In Your Area.
 

Are Realtor Commissions Negotiable?

 

Most people don’t realize that commissions are 100% negotiable. Still, the fact is that no laws regulate real estate agent fees, and negotiating real estate commission is legal no matter where in the U.S. you are located.

Realtors want your business, so it’s in their best interest to negotiate, and they are usually willing (and expecting) to lower their commission rates. It’s also in the property seller’s best interest to practice negotiating real estate commissions, even if the answer is no, because a commission lowered by even a small percentage can result in huge savings.

According to Zillow, the typical home value is $259,906. If you negotiated a commission rate of 4.5% instead of 6%, you’d save around $3899 in Realtor fees!

Tips to Leverage for Negotiating Real Estate Agent Fees

 

The more you understand the market you’re dealing with, the rate you want, and your needs as a property seller, and you are prepared to justify why a lower rate is fair, the easier it will be to get the lower commission rate.

Do a little market research and gather information about homes similar to yours in the area, how much they’re going for, and how quickly they get sold. You can find local housing market information by using Zillow and other home value estimator tools.

Also, think about what kind of services you need or don’t need from a listing agent. Why pay for Facebook advertising if you plan on doing it yourself? It would help if you also consider getting quotes from multiple agents so that you can get a feel for which ones best suit your needs.

Keep in mind that the real estate agent with the lowest commission isn’t always the best choice. Ideally, you want a Realtor who has experience selling your type of home in similar areas and price ranges.

Additional tips for negotiating real estate commissions include:

Buying a House With the Same Agent

If you plan on selling your old home and buying a new one in the same area, you may be able to use it as leverage and negotiate a lower commission. Most real estate agents will act as your listing and buying agent, as they will earn both commissions. This is an excellent opportunity to negotiate a lower commission on the sale of your home or a buyers rebate on the purchase of your new home.

Although, a Realtor may decide to decline lowering their commission rate because of the extra work involved with each transaction.

Listing Agent Finds a Buyer Not Working With an Agent

When the same agent represents you and the buyer, this is called a dual agency. Dual agencies are not legal in every state, but in places where they are legal, agents earn both the listing and selling fee commissions. This is called double-ending a transaction, and it can increase liability for a real estate agent simply because you are representing two parties but have to be neutral to each of them.

As a dual agent, the Realtor takes on one property for two separate parties who have differing interests. If something isn’t handled correctly, there’s double the ability to sue for damage. Some agents avoid such problems by operating as transactional agents. In this role, the Realtor does not take sides and only assists with the paperwork.

Sometimes sellers ask listing agents if they will lower their commission if they represent the seller and the buyer. You can negotiate this when you receive an offer, but seriously consider discussing the situation before signing the listing agreement.

If you sign a dual agent and negotiate a reduced commission rate, keep in mind that the Realtor should disclose this variable rate commission to other agents so they are aware of the lower cost to the seller during this situation. This really would only make a difference in a multiple offer situation.

Promise Referrals

A referral is a great advertising tool, and word-of-mouth marketing is often more powerful than a colorful billboard sign. It’s worth mentioning to your Realtor that you would be happy to recommend them to friends and family in exchange for a discounted commission. Just be sure to follow through and make good on your promise.

Consider a Less Experienced Agent

As noted above, you should shop around for real estate agents, get to know what each offers, and collect price quotes. Typically, less experienced agents will be more agreeable to lower their commission rates merely because they are learning the ropes and building their business.

Although more experience is ideal, a new Realtor who doesn’t have a lot of sales under his or her belt can still be a great Realtor at a lower cost. Don’t hire an amateur real estate agent only because they’re cheaper, but don’t overlook them either. 

Make it Easy for Them to Sell Your Home

How do you make your home more attractive to listing agents? Make it easy for them to sell. The faster they can sell it, the less effort they need to put into it, which results in higher profit margins for them. Aside from leaving your house readily available for showings, making it presentable, and installing a lockbox, there are a few other ways to make your home easy to sell.

List at Correct Price

Consider what your home’s value is and what the market can handle. Research what similar homes near you cost, price trends, and any renovations you’ve made to your home (which will affect how much your home is worth). Then list at a price that will cause it to sell and not sit on the market unsold. The biggest hinderance to successfully selling your home is being overpriced. Agents know that a home that is priced correctly is the best form of marketing and will sell faster and for less effort. Take advantage of this opportunity to negotiate a lower commission.

Allow Home Staging

Whether you opt for professional home staging or do it yourself, you want to make sure your house is presentable to buyers.

Going the DIY route means clearing the clutter (storage space is a huge benefit to buyers), deep cleaning everything, possibly replacing carpets, rearranging furniture, and taking high-resolution photographs that show your home in its best light.

Don’t forget to stage the outdoor spaces too. You can do this by cleaning off porches and decks, clearing entryways, and decorating with a few colorful plants to give the space the extra “wow” factor.

Flexible Showings

Daily life can make showing your house a challenge, but you need to remain flexible about scheduling showings if you want to make a deal. Buyers need time to find your home and fall in love with it, so be open to various show days and hours for maximum selling potential.

Pre-inspection and Repairs

A home pre-inspection may cost you upfront, but it will save you more money in the long run, as it will keep buyers from demanding much more during negotiations. During a home inspection, a licensed inspector will assess the property’s condition and identify any issues. Afterward, you’ll receive a report that lists what does and doesn’t work and recommendations for repairs. A pre-inspection typically covers:

• Electrical systems
• Plumbing
• Heating and cooling units
• Windows and doors
• Ceilings
• Walls and floors
• Attic and insulation
• Roof
• Foundation
• Structural elements
• Basement

Prioritize the major issues. It’s usually more affordable to fix the more significant problems beforehand than it is to pay for them being done asap, after your home is under contract.

Sell In Off-peak Market

You may be able to get a discount on real estate commission fees if you sell during the fall and winter when there are fewer listings. Because Realtors are typically in need of business during the off-seasons, they are more willing to work at reduced rates.

Keep in mind there are less buyers during off-peak season so your agent may have to work harder and will use that as an objection in your negotiations.

You Have More Than One Home to Sell

If you have more than one home to sell, you may be able to get a reduced commission in exchange for all of your exclusive listings. The real estate agent will consider a few things, including dollar volume, market mobility, and how easy it will be to sell the homes.

If everything is in the agent’s favor, you probably won’t have many problems negotiating for a lower commission rate. However, if your Realtor is at the top of their game with a substantial income backing, they may decline your offer because they will argue that they will sell your home for top dollar, so be prepared for that.

We Already Negotiated Discounts With Agents For You. Find One In Your Area.
 

Why Agents Won’t Negotiate Their Fees

 

One circumstance where an agent might not negotiate fees is if you are going through a large company. National brokerages get a lot of business at the standard commission rate that they don’t need to settle for a lesser rate to secure your business. Or they have policies that prohibit an agent from discounting their commission!

You may also find it hard to negotiate fees if you have a hard-to-sell property, and the Realtor expects to put in a lot of time, effort, and money for marketing and selling your home.

Additionally, your Realtor may fear that word will get out that they take lower rates, and they’ll get stuck with lower commissions (such as 1%) in the future.

Alternatives for Negotiating Realtor Fees

 

The above tips are tried and true ways for negotiating Realtor commission fees, but they aren’t guaranteed, and they don’t work for every homeowner’s situation. Fortunately, there are even more ways you can save money during the home selling process and avoid paying high commission rates.

Discount Brokers

A discount broker is different from a traditional full-service real estate agent in that it openly offers lower commissions or buyer rebates, such as how Refin operates.

Although discount brokers are considered real estate agents, they may or may not give the same level of service. You may have to sacrifice things like professional photography, higher end marketing and advertising, and open houses in exchange for a discount.

A discount broker may list your house, put up a sign, and help with contract negotiations and paperwork, but everything else involved in selling a home will be left to you.

This really all depends on the discount broker and what their plan is so make sure you do your homework before signing up for there service to avoid confusion down the road.

Flat Fee MLS

Flat-fee MLS (multiple listing service) services allow sellers to list their property on a local Realtors MLS database of for-sale homes for a low flat fee. This ensures that the home listing gets maximum exposure to qualified buyers without paying for a full-service real estate agent and the commission fees.

Listing your home on the MLS is a great way to market your home while saving on commission costs. Your home gets listed across various popular local, and national real estate websites, and Realtors that represent buyers in your area get notified when your listing posts to the MLS. Keep in mind, even though you are listing FSBO on the MLS, you still technically are listed with a real estate agent and need to offer a buyers agent commission. So you save at least 50% of the commission, or 100% if you find a buyer not working with a buyers agent.

Full Price Realtors

That’s right, if you don’t want to negotiate commissions with your agent, you can just sign up with them at their full priced rates. One thing we should bring to your attention is although you aren’t legally required to accept a full-price offer on your home, if you are listing your home with a real estate agent, you may still be responsible for paying their commission fee. Check the listing agreement for anything that says the seller cannot reject a full-price offer or anything in relation to commission fees if the full price offer is rejected.

Buy My House Companies

House buying companies buy homes directly from sellers, making the whole process much simpler and faster than going through traditional real estate agencies. Types of house- buying businesses include:

• House flippers: Real estate investors that renovate homes for resale
• Buy-and-hold companies: Purchases houses to rent to tenants
• iBuyers: Companies that use technology and real estate market data to make offers after being contacted by an owner. Opendoor and Zillow Instant Offers are two of the major iBuying companies.
• Trade-in companies: Sometimes offers to buy a new home on behalf of the homeowner, and uses the current home as collateral – other times, allows the homeowner to rent the new property until the old home sells

Home-buying companies provide convenience, quick timelines, and low-stress home sales for homeowners who don’t want to go through the traditional process of selling their property.

Final Thoughts

Getting a discount on real estate commissions is not always a sure thing, but it doesn’t hurt to talk it over with your Realtor. If you follow the tips above, understand the market you’re selling in and what you’re looking for in an agent, you’ll be better equipped to negotiate and may end up saving thousands of dollars as a result!