Can I negotiate with my Realtor for a lower commission?
Things to consider before negotiating Realtor commissions
- Real estate commissions are shared between the buyer's and seller's agents.
- Negotiations require give and take; what can you offer the Realtor?
- Hot markets, valuable homes and repeat clients provide clout in negotiations.
- It's often best to find the right fit and not just the lowest commission.
The contract you sign with a real estate agent to sell your house specifies the commission you will pay upon closing. This amount is typically around 6 percent of the sale price, and that money gets split between your agent and the buyer's agent.
What many people don't realize is that contract is with the selling agent's broker, who is typically the owner or principal of the agency (the company) where the agent works. If you're the buyer, you pay the broker, and the broker pays both agents.
Those agents use this commission to pay a franchise fee to their brokers and cover overhead costs, so an agent may pocket as little as 1.5 percent from the original 6 percent commission. This isn't to say that you shouldn't try to negotiate. But be prepared to offer some incentives to your agent. Here are some reasons why agents might be willing to reduce their commission.
Your house will sell quickly
If you live in a desirable neighborhood with good schools in a sellers' market, you reasonably can expect to get multiple offers within a week or two of listing your house. Thus your Realtor won't have to spend as much time or money marketing your house and might be willing to take a lower commission. If your Realtor still hesitates, suggest adding a clause to the contract that lowers the commission only if you sign off on an offer within a week of listing the house.
Your house is valuable
The commission on a $100,000 home is $6,000, while the commission on a $1-million house is $60,000. Both houses may take the same amount of work to sell but the commissions are vastly different. If your home is worth more than the median home in your neighborhood thanks to its curb appeal, move-in condition, and interior and amenity upgrades, it will be more appealing to Realtors as well. Quality listings sell faster for higher prices, which means easier and larger commissions.
You are a valuable client
Repeat clients have more power in negotiations. If you have referred friends to your Realtor, that agent also has a vested interest in keeping you happy. If you plan to buy a new house in the same area after you sell, you can offer to work with the same agent on the purchase as well, which nets the Realtor a second commission without incurring any additional marketing costs.
You live in a hot market
Hot real estate markets tend to attract more agents to that market, which increases competition for listings. This can help you negotiate. It is always a good idea to interview several agents before choosing one. Make sure these agents know you are shopping around and see who offers the best commission.
You offer to help
If you provide services or pay for items the agent needs to market your home, such as professional photography, advertisements, brochures or even hosting open houses, this can provide an incentive for your Realtor to lower the commission.
There are a few other things to consider when negotiating with Realtors. Some brokers don't allow their agents to reduce commissions, for example. On the other hand, some brokers only charge agents a flat fee for working in that agency. These agents may have more leeway on commissions. Top agents in an area may be in such high demand that they don't need to lower their commissions. Finally, unless your contract only lowers your agent's commission, the buyer's agent also will get a smaller cut, which can impact how many showings you get.
In the end, commission is only one part of the seller-Realtor relationship. When you interview agents, try to find the best fit and the agent who will work hardest to sell your house, not necessarily the agent who will work for the smallest commission.