Just like when you’re selling anything, selling a house requires a buyer and seller. The thing about selling real estate is that you can have a real estate agent represent you and your interests to help get you the most money (if you’re a seller) or aid in getting you the lowest price (if you are a buyer). Having a Realtor represent you does cost money. It’s usually a percentage of the house sale price. There is a lot of confusion over who pays the fee. People also don’t know you can negotiate real estate commissions. Here’s some background info on the agent fee and 5 tips on negotiating real estate commissions.
How Does Real Estate Agent Commissions Work?
A real estate commission antitrust lawsuit going on right now may change this, so we will talk about what has happened traditionally. Until now, a listing agent would receive a percentage of the sale and then pay the selling brokerage for selling the property. The best way to understand this is to look at an example.
The average home sale in America as of Q2, 2023 is $495,100. As of 2022, the average real estate commission was just under 5%. So, let’s say your listing agent charges you 5% to sell your home. That would mean that as a gross, he would make $24,755. If he splits that 5% 50/50 with the selling agent, both agents make $12,377.5 before brokerage fees. However, they don’t always split 50/50.
I’m sure you’re wondering why it works like this. Homes are commonly priced to allow for the commission rate for your agent. Also, remember that you probably benefited from the same selling practice when you purchased.
A common misconception is that agents have a fixed rate or that every agent makes 5% or even 6%. That would be price-fixing and is illegal. The range of 4% to 7% is typical, though, with more experienced or better agents charging higher percentages or changes to those rates based on the listing. For example, land may have a higher percentage because it takes longer to sell and requires more advertising, and luxury homes may have a lower commission because of the sales price. This is why it’s valuable to be able to negotiate commissions with Realtors.
If you don’t even want to try negotiating or think giving a percentage to someone to represent you is a bad idea, you can fill out the short form below. We’ll gladly give you a fair offer that saves you fees and commissions and allows you to close in as little as seven days.
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How To Go About Negotiating Realtor Fees
We have 5 tips and tricks for you to use to negotiate a lower commission with your Realtor. Some are specific to the real estate space. Others use tactics that can be used anywhere. The goal is to help put a few extra dollars in your pocket from a real estate commission negotiation. Read on to find out our 5 top tips and tricks.
Offer your agent the opportunity to do two transactions.
This is easy to leverage if you’re looking to buy and sell in the same area. Most agents will likely accept a discount when listing a property if they can make a second commission when helping you buy. Be sure to bring this up early when talking to a realtor before negotiating commissions with Realtors.
Make it easy for your agent to sell your home.
If a real estate agent walks in and you have a pre-home sale inspection done, addressed the most significant issues, cleaned and decluttered the home, and even maybe updated what needs to be updated, the listing agent will only have a little to do to sell your house. It’s virtually ready to sell right then and there.
Some agents may even bring up staging, and after doing your part to prep the house, you might feel like it’s a waste of money. But it might be a way to get them to lower the price or at least get a discount on staging, which could make you up to 8 percent to 10 percent more—ultimately putting more in your pocket.
Make the Realtor commission negotiable by creating competition.
This is the tried and true method of negotiating. It’s used in sports with athletes all the time. Use the same tactics as real estate agents to entice people to increase prices by creating competition. Knowing someone else is possibly in the picture is likely to get the real estate agent negotiating commission against himself before you even interview the other agent.
Know the market as well as they do.
You can use this one in tandem with creating competition and help encourage a commission reduction. If you can find the average commission rate in your area and factor that with a good idea of what your house will sell for, you can talk straight numbers with them. After the initial shock has gone away, you can talk about the actual commission amount they would be giving up by not taking the listing at a reduced commission and factoring in a competing real estate agent. They might crack very easily.
Ask them if there is any marketing that they can give up for a lower commission.
This is my forewarning about this. This may only work in a seller’s market. Sometimes, the agent may not need to do 3D floor plans, drone photos, or additional marketing costs. Just asking them to save money in a hot seller’s market may give you some extra leverage to save some of their commission. Make sure you know market conditions before you ask for this because sometimes those increased marketing tactics will help you sell much quicker.
Can a Seller Ask a Realtor To Reduce Commissions?
This may be so simple you don’t think of it. Ultimately, this might be the most straightforward way of getting a reduction on the commission. By being upfront and just asking, they are likely to respond quickly. Here’s the thing you have to consider, though, when asking this: what if they say yes easily? Does that mean they’ll be such a pushover when they’re negotiating on their behalf? You’d like to walk away with the most money in your pocket, which could create a lose-lose situation for yourself.
The one time it works to ask for a reduction on commission.
There is something called dual agency. It’s when the agent is allowed to be the representative agent for both parties. It’s a tricky situation and isn’t allowed or heavily regulated in some states. However, addressing it early and allowing your agent to do dual agency may allow you to negotiate a lower total commission because the agent is getting both ends of the commission. Let’s use the same example as above and show what you might be able to do.
The average commission on the average home sale above is $24,755. Let’s say you already told the listing agent they could do dual agency, but they expected a 1 percent commission drop. That’s a change to $19,804. That’s a difference of $4,951 in your pocket. But for the agent, that’s $7426.50 more in their pocket. It may take a little more work, but if they can find the buyer by hosting open houses or doing more marketing for buyers for that type of house, it means he could walk away with about 60% more money. The most significant advice is to talk about it early and encourage it.
Final Thoughts For Negotiating With A Realtor
Not all real estate agents will negotiate their rates. Nor should you expect them too. At the end of the day, you pay for what you get from your real estate agent. If you want the best, you’ll have to pay them. These tips may get you a slight reduction, but I wouldn’t expect a huge discount. Every little bit helps, though. If you can’t sell your house without taking a reduction in realtor commissions or you just don’t want to pay the fees, a cash buyer investor, like SILT Real Estate and Investments, LLC, may be the best option to sell your house. You can fill out the short form below or call us at (708) 415-3801 to get any questions answered you have or even to get your offer started.