Pay Less Real Estate Commission

Selling or buying a home can be an expensive and stressful venture. The rate of commission charged by a real estate agent varies, but is typically between 5% and 6%. The rate is not fixed and you can try to negotiate a better deal with the agent. Lowering the rate by even half a percentage point could save you thousands of dollars. As well as attempting to negotiate a lower rate, you can consider employing an agent on a flat fee basis, or marketing and selling the property yourself.

Steps

Negotiating Lower Commission

  1. Recognize that commission rates are not fixed. Before you begin to think about the various way in which you can attempt to pay less real estate commission, it’s important to recognize that there is no fixed standard rate of commission. There is an expectation that commission will be 6%, but in recent years the average rate has been closer to 5%.[1] Real estate agents may tell you that 6% is their standard rate, but that does not mean there is no room for negotiation.
    • Generally, rates of commissions fall during housing booms, and during this time selling a house doesn’t take a lot of work.
    • Commission rates tend to rise in downturns when selling a house is more of a challenge.[2]
  2. Interview at least three agents. Keep an open mind when you are looking for a real estate agent, and be sure to interview a number of prospective agents before signing up with anyone. Before you meet with any agents, prepare some questions to help inform your decision about which agent to choose. If the agent has a proven track record of quick sales, then you may decide to pay a higher rate of commission.[3] However, keep in mind that if the demand for houses is high where you live, then most Realtors in the area will have a proven track record of quick sales.
    • Ask the agent how long on average her listings stay on the market before being sold.
    • Ask her about what specific experience she has with selling houses like yours in your area.
    • Ask her what exactly she will do to sell your house. The agent should have a clear strategy and track record.[4]
  3. Determine good reasons to Negotiate Your Real Estate Agent's Commission When Selling a Home. Your agent may begin with a 6% rate as standard, but you can always try to negotiate this. The agent may refuse to lower it, but you won’t know unless you ask. In your negotiations, it will be helpful to understand some of the reasons why a lower rate of commission may be appropriate. Circumstances in which an agent is most likely to agree to lower commission include:
    • The house is in an area where homes sell very quickly and the agent is unlikely to have to do much work to find potential buyers.
    • The listed home is at the high end of the market.
    • The agent agrees to alter the marketing strategy. This could include only listing the house for a short period, or not conducting an open house.[5]
    • You are selling the house to a friend, family member or somebody known to you.[6]
    • You are buying a house and selling a house with the same agent.[7]
  4. Think about how to reduce the agent’s work. One of the best ways to negotiate a lower rate of commission is to take on some of the work which the agent would otherwise do. For example, if you are selling to somebody you know, you should not have to pay for marketing and listings. You can also do some of the marketing yourself by hosting your own open house events and advertising your house yourself.
    • Another way to lower the work for the agent is to ensure that your house is in good condition and well presented for potential buyers.
    • In your negotiations, say you will commit to cleaning and fixing up the inside and outside of the house yourself.
    • If you negotiate a lower rate you could spend some of the money you save on a professional who specializes in presenting houses to buyers. For example, you may be able to negotiate to pay for a photographer independently for your online listing.[8]
  5. Sell when the market is down. When houses aren’t selling an agent will be in greater need of work so are more likely to be open to negotiating down the rate of commission they charge. Selling your house in the off-season, or while the market is stagnant, may give you a better chance of negotiating a lower rate of commission. The trade-off is that your house may be harder to sell, and the price may have to be lowered.[9]

Considering Alternatives

  1. Sell your home yourself. There are an increasing number of ways to try and sell your house without using real estate agencies, and without paying the potentially high rates of commissions. If you have the time and are prepared to put in the work, it is certainly possible to advertise and sell your house online yourself.
    • You will need to hire a lawyer to take care of all the paperwork, but this could still save you a significant amount of money.[10]
    • Don’t underestimate the difficulties of selling a house. If the property you are selling is not in a highly desirable and popular area, it can be difficult, expensive, and time-consuming to drum up interest.
    • These deals are known as “For Sale by Owner” (FSBO) transactions.[11]
    • Keep in mind that even if you list your home with a real estate agent, you may be able to save money if you find a buyer yourself. For example, if the seller brings the buyer, the agent’s commission will be 2%. However, if the listing agent brings the buyer, then the agent’s commission will be 4%. If another agent brings the buyer, then that agent’s commission will be 6%.
  2. Contact flat fee agents. There are a number of real estate agents that will work to a flat fee, rather than a rate of commission. Depending on how much your house is being sold for, this could save you thousands of dollars. Flat fee agents generally offer a much more limited service than agents who work for a percentage.[12]
    • The advantage to the seller is that you can negotiate a fee up front and you will know exactly how much you are going to pay the agent from the start.
    • Be sure you are completely clear about what the fee gets you.
    • You may be able to pay a relatively small amount for the agency to list your house for a limited period.
    • When the agreed upon listing period expires, your house will not be re-listed unless you pay again.[13]
  3. Investigate rebates. In some instances, a broker will offer to include a rebate to be paid to the seller after the deal is closed. This will involve the broker paying back a percentage of the commission received for the sale. For example, a broker may offer you a rebate of one third of the commission, which could equate to thousands of dollars saved.
    • Some brokers use rebates as part of their strategy to get your business.
    • As well as cash rebates, other incentives used may include gift certificates, or a free or discounted moving service.
    • Rebates are not legal in every state, so be sure to check the rules where you live.

Tips

  • Keep in mind that negotiating for a lower commission may also mean that the services that the Realtor provides will be reduced as well. It is unfair to expect the Realtor to provide their full services at a reduced price. Consider whether the value of these services may outweigh the money you may save by negotiating for a lower commission.

Related Articles

References

  1. ↑ http://www.latimes.com/business/realestate/la-fi-harney-20150301-story.html
  2. ↑ http://www.wsj.com/articles/SB10001424052748703989004575652630596788508
  3. ↑ http://www.creditsesame.com/blog/5-tricks-to-save-cash-on-realtor-commissions/
  4. ↑ http://www.angieslist.com/articles/real-estate-agents-commission-negotiable.htm
  5. ↑ http://www.angieslist.com/articles/real-estate-agents-commission-negotiable.htm
  6. ↑ http://www.nolo.com/legal-encyclopedia/negotiate-real-estate-commission-when-29965.html
  7. ↑ http://www.nytimes.com/2011/01/30/realestate/30cov.html?pagewanted=all&_r=0
  8. ↑ http://www.nolo.com/legal-encyclopedia/negotiate-real-estate-commission-when-29965.html
  9. ↑ http://www.nolo.com/legal-encyclopedia/negotiate-real-estate-commission-when-29965.html
  10. ↑ http://www.creditsesame.com/blog/5-tricks-to-save-cash-on-realtor-commissions/
  11. ↑ http://www.wsj.com/articles/SB126280047965118177
  12. ↑ http://www.investopedia.com/financial-edge/0611/understanding-real-estate-commissions-who-pays.aspx
  13. ↑ http://www.latimes.com/business/realestate/la-fi-harney-20150301-story.html
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