Can You Negotiate Real Estate Agent Fees? 8 Things You Need to Know First
Think about the last time you had to pay for a big expense. If there was a reasonable way you could’ve paid less, you would’ve done it, right?
Some people think about real estate agent commissions the same way. A Redfin survey showed that 60% of people who sold a home saved money on agent fees.
You can negotiate realtor fees, and a successful negotiation can be a great way to save money when you sell your home. It doesn’t always work out, but it might be worth a try. Here’s what you need to know:
1. Find out what you’re working with before negotiating
Most home sales involve two different real estate agents: the buyer’s agent and the seller’s agent. Their combined commission is usually between 4-6% of the home’s sale price. If someone sells their home for $350,000 with a 6% commission rate, they’ll pay $21,000 in combined realtor fees. An even split would mean $10,500 for their realtor and $10,500 for the buyer’s realtor.
The seller usually pays both commissions, but that doesn’t mean they can’t find ways to pass the cost onto the buyer. Increasing the home’s listing price is a common way to do this.
Most negotiations will happen between the seller and the listing agent representing them. The buyer and their agent usually aren’t involved.
Think of negotiating realtor fees as more of an art than a science. Each situation is a little different, and some of it will come down to your best judgment. But you can still set yourself up for success.
If you haven’t already, do some research into the real estate commission fees where you live. Ask family, friends, or other acquaintances in the area how much they paid when they sold their home.
The thought of rejection might be intimidating at first. But a good realtor won’t be annoyed by your offer, even if they don’t accept it. They get these questions all the time, so you’re in good company.
2. Understand what will help you negotiate agent fees
Like a lawyer in a courtroom, you’ll want to prepare yourself with the facts. Know which factors help your case and you’ll have a better shot at negotiating a lower commission.
Here’s what can work in your favor:
You’re selling and buying with the same agent
Real estate agents are more willing to negotiate when they expect two commissions instead of one. This can also give them a higher chance of earning referrals and repeat business.
The same idea applies to people selling more than one home with the same agent. The more you work with a realtor, the more negotiable their fees could be.
You’ve worked with this agent before
The repeat-business discount is real. Some agents will be more open to lowering their rate if you’ve bought or sold a home with them in the past. This is their way of thanking you for your past business and nudging you for your future business.
The real estate market is right
Is it a buyer’s market or a seller’s market? During a buyer’s market, there are more homes for sale than buyers. It’s the other way around during a seller’s market, when buyers outnumber the homes currently listed on a multiple listing service (MLS).
You might have a better shot at negotiating a lower listing agent commission during a seller’s market. Here’s why:
- Your home will sell faster.
- Selling your home won’t take as much work. It’s more likely to “sell itself.”
- Less inventory means fewer homes for sale and fewer sellers to work with.
The selling agent could use any or all of these reasons to see their rates as more negotiable. Researching national trends is a good starting point, but it helps to prepare yourself with real estate data from your specific housing market too.
Your home can list for a high price
Know how much your home is worth before you decide how to ask for a lower commission. Higher-priced homes equal higher commissions that could be seen as more negotiable.
Average single-family houses for sale in Sacramento, CA might sell for several hundred thousand dollars more than similar homes for sale in Grand Rapids, MI. In this example, the realtor in Sacramento could be more likely to accept a lower commission rate since they’d be making more money from the home sale.
Of course, this doesn’t mean you can’t try to negotiate real estate fees if your home has a lower valuation. Keep in mind an agent may be less likely to accept a discount since their fee will be a lower dollar amount.
Your home is in ready-to-sell condition
You’ll have more negotiating power if your home is already in tip-top shape before approaching a realtor.
This can happen one of two ways:
- Your home could use updates, but you make arrangements to complete them ahead of time. The listing agent steps into a home that needs little to no work done before it’s listed.
- Your home is already in excellent selling condition.
Proceed with caution if you go with the second option. Like selling a used car, it’s easy to overestimate the current condition of your home. A second opinion never hurts if you think you need one.
You’re working with a newer agent
Less experienced agents might be more likely to accept a lower commission rate to get more sales under their belt and build a reputation.
Keep in mind that more experienced agents may be able to sell your home quicker and for more money. This depends on the agent and market conditions, so it helps to ask plenty of questions beforehand and learn more about each agent’s approach to selling your home.
You’re using a dual agent
When the same real estate agent represents both the buyer and seller, it’s known as “dual agency.” There are many things to consider, and dual agency is actually illegal in some states. But lower commission rates can be one possible perk.
The agent involved could be more likely to accept a lower commission if they get two commissions from the same deal. It’s up to you whether that makes up for the potential drawbacks of dual agency.
3. Keep your offer competitive
Negotiating anything is all about balancing your expectations. Offering $25,000 for a new car might be realistic if it’s listed for $26,000, but not if it’s $35,000. Negotiating a real estate agent commission isn’t much different.
Asking a realtor to shave 0.5% or 1% off their commission can be ideal if you back up your offer with perks that make your home easier to sell. Half a percent might not sound like a lot, but with a $400,000 home, that’s another $2,000 in your pocket.
If your realtor already offers a reduced rate, you might decide it’s best to skip the negotiation altogether. It all depends on your unique selling situation and how you want to approach it.
Most agents don’t receive a salary, so commissions are the only way they’re paid for their time and expertise during the homebuying or selling process. Agents may also give up a big chunk of their commissions to the brokerages they work for, which usually cover marketing costs, license fees, and other expenses.
Take the information you gathered earlier and use it to present the best offer you can. The more realistic your expectations are, the more likely an agent will take you up on your offer.
4. Be transparent and start early
Don’t wait until you have an agent locked up to tell them you want to reduce their commission. If you’re interviewing multiple agents, tell each one how you feel upfront.
Make sure you bring this up before you sign a listing agreement, especially if it requires you to work with the agent for a certain period of time. Some listing agreements let you back out at any time, but others don’t.
Ask as many questions as you need to understand what will happen if you want to back out of the agreement.
5. Have a backup plan
You can always try to negotiate real estate commissions, but the agent doesn’t have to accept your offer. It helps to come up with a backup plan in case this happens.
Ask yourself a few questions before you approach an agent:
- Considering my home, the real estate market, and other factors, can I realistically expect the agent to lower their commission?
- Do I value this agent enough to pay a full commission if they say no to my offer?
- If not, which agent or agents will I ask next?
- If I decide to pay full commission, are there other ways I can save money?
Try to answer these (and any other questions you can think of) ahead of time. That way, you’ll know just what to do if the agent says their commission rate isn’t negotiable.
6. Know when not to negotiate
Knowing when not to negotiate realtor commission fees can be as important as knowing how to negotiate. Home sellers choose to pay the full listing agent commission in many cases.
You might decide to skip the negotiations if:
- The real estate agent is known for their reputation for selling homes in your area.
- The agent has a lot of experience and it shows.
- Your home is harder to sell based on the local market, physical condition, or other factors.
- You haven’t worked with the agent before and don’t plan to work with them in the future.
- The agent already offers a lower commission rate than other local agents.
Negotiations are always on the table, but agreeing to a full commission can show an agent you really value their expertise and ability to sell your home for as much as possible.
Even if you decide not to negotiate, double-check the commission fee before you sign a listing agreement. An unpleasant surprise is the last thing you want popping up down the road.
7. You might not need to negotiate at all
Does the idea of negotiating someone’s commission give you the heebie-jeebies? You can still pay a lower rate:
Consider a company that already offers reduced rates
Some real estate firms automatically offer a lower commission rate when they sell your home. For example, the real estate company Redfin has a standard 1.5% commission rate, or 1% if you use a Redfin agent to buy and sell a home within the same year.
This might not be an option if you already have your heart set on another realtor or live in an area that low-commission brokerages don’t service. But if you’re still trying to find the right agent and have access to one of these companies, it could be worth considering.
Talk to multiple real estate agents
Make commission rates a topic during your interviews with potential real estate agents. Some of them could offer lower fees upfront.
If they already reduce their commission, you’ll need to decide how you value the savings. If you don’t sense much difference between this agent and other agents with higher fees, signing with the lower-priced agent could work in your favor.
But suppose you have to sacrifice things like experience, home exposure, or services offered. That might call for a little more reflection.
Consider selling to an iBuyer
Some companies offer a service called iBuying, where they buy your home upfront and sell it themselves. An iBuyer can be a good option for someone looking to sell their home fast without the steps involved in a standard sale.
You won’t pay a traditional real estate agent commission if you’re selling your home this way, but you could pay more overall. It’ll help to consider the pros and cons of iBuying before you put pen to paper.
Sell your home without an agent
Around 7% of sellers choose to sell their homes without a listing agent (for sale by owner), according to the National Association of Realtors. People who list alone only need to pay the buyer’s agent commission if the buyer is using one. But they’ll pay out of pocket for things like marketing, photography, and flat fee MLS services.
Selling a home on your own can be difficult, but it’s not impossible. You’ll want to consider everything involved with selling your own home without an agent and decide if it’s worth the money you’d save on a commission fee.
8. Buyers can save money too
Since the seller usually pays both commission rates, the buyer doesn’t have to worry about negotiating these fees. But they can sometimes still save money in the form of cash back after closing.
Like a seller negotiating the listing agent’s fees, buyers are free to negotiate with their agents. But an agent isn’t obligated to offer rebates or other financial perks.
If you want a sure thing, you can sign with a realtor or company that offers buyer rebates from the start.
As a buyer, negotiating the price of the house you want to buy usually rewards you with the most savings. All the more reason to work with an agent that will do everything in their power to make a deal happen.
Should you try to negotiate an agent’s commission?
The answer depends on you, your home, and a few other things. Remember, realtor fees are always negotiable, even if you don’t think there’s a great chance the agent will say yes. Keeping it realistic is the name of the game.
It’s safe to say your mileage may vary when you negotiate commissions. But with some research, flexibility, and a little bit of luck, you could walk away with extra cash to spend on your next home.