Yes! You can negotiate with real estate agents.
Whether negotiations are in your comfort zone or asking for a better commission rate scares the living daylights out of you, let’s talk about some negotiation strategies that’ll put you in the driver’s seat.
Understanding the Real Estate Commission
First, let’s talk about what the real estate commission is and who pays it so that you can understand how to negotiate it down.
What Is the Real Estate Commission?
The real estate commission is the amount of money a real estate agent earns in a real estate transaction. Usually, the standard commission rate is between 5% and 6%, but because it’s not regulated by state or federal law, commission rates vary by state and are negotiable.
Who Earns the Real Estate Commission?
Buyers often believe that they’re funding the deal because they’re taking out the loan and paying for the house. However, the commission is paid by the seller because the commission is paid to the listing agent. The listing agent then splits the commission with the buyer’s agent.
Negotiating a smaller commission is possible, so as you interview seller’s agents, keep an eye out for any of these situations where you can improve the terms of your contract.
The strength of your negotiating position comes from understanding how you can make the sale easier for the real estate agent, and how taking a discounted commission could positively influence their long-term career goals.
The Power of Referrals
Sending additional business to your real estate agent is going to make you markedly more attractive than a one-off transaction. Whether you agree to use your agent again when you buy your next house, or you let them refer you to another agent so they receive a referral fee, your position as a repeat customer makes it possible for you to include your next purchase in your current negotiations.
Make Your Home Easy to Sell
If your curb appeal is up-to-date, your interior is polished and renovated, and all of your finances are in order, your chances for a quick sale are significantly improved. Throw in a seller’s market, and your real estate agent’s job has just become considerably easier. An easy-to-sell home might entice a real estate agent to discount their services because it’ll be a fast sale for them.
Pick a Newer Real Estate Agent
A rising agent that is eager to get some experience under their belt may be more likely to negotiate so that they can quickly shed their green status. AgentStory can help you find ambitious new agents who are rapidly building their real estate business.
Pro-tip: While newer agents may be hungry for the chance to sell your property at a reduced rate, if they’re part of a national brokerage, they may not have any room to negotiate.
When an Agent Will Be Less Likely to Negotiate
Not all agents will be hungry to negotiate. As you’re interviewing real estate agents, it’s helpful to keep in mind some of their priorities.
Consider these questions as you try to determine whether an agent will be willing to reduce their percentage:
- Will your home be difficult to sell? Is it a unique property?
- Does the agent need the money? Or are they trying to build up their client base?
- Are they already so busy that they can pass on a discounted commission?
- Will their brokerage allow them to negotiate?
Seller’s agents may also be constrained by their own expenses. Not only are they paying part of their commission to the buyer’s agent, but they’re also paying for brokerage fees, marketing, and general business expenses.
Example: A seller’s agent closes on a $300,000 house and collects their 6% commission, or $18,000.
The agent divides the commission in half with the buyer’s agent, so now they have $9,000.
Then the agent pays the brokerage fee, which they’ve negotiated up to a 60/40 split because of their experience. The $18,000 has dwindled down to $5,400.
If you’ve negotiated a 4% commission instead, the seller’s agent could end up only earning $3,600, and they still have to pay for their business expenses.
Can You Negotiate with Discount Brokers?
Discount brokers, like Clever Real Estate, Home Bay, and UpNest, will list your home for a reduced commission rate. Different discount brokers offer a variety of fee structures, and they will have varying degrees of support for you to sell your home. Some will charge a flat fee for only listing on the MLS, while others will include limited marketing or house showings as part of the commission fee.
Since the discount brokers’ prices are already so low and because they deal with such a large volume of housing transactions, it’s highly unlikely that they’ll be willing to adjust their fee structure for you.
The Bottom Line
As you negotiate with the seller’s agent, take into consideration that the most successful negotiations are the ones in which both parties feel like they walked away with a win. If your goal is to keep more of your home’s profits, then plan to create a scenario in which your real estate agent receives intangible benefits down the road. Referrals, experience, and a quick sale are your best negotiating tools for lowering the real estate commission.