To successfully negotiate a real estate commission, you need to gather data on your situation and the local real estate market, then use that data to make your case with multiple real estate agents.
If you’re selling your home, having a good strategy for negotiating can save you a lot of money. For example, if you can reduce the selling agent’s commission from just 3% to 2% on a $300,000 home, you’ll have $3,000 more in your pocket.
While it’s possible to negotiate real estate commissions with an agent yourself, you’ll often find better rates with low commission companies that offer built-in discounts. For example, our friends at Clever Real Estate offer a free service matching you with top quality agents in your area from trusted brokers like RE/MAX and Berkshire Hathaway.
This match comes with a pre-negotiated 1% or $3,000 seller’s agent commission, depending on the property value. It’s an easy way to save on commission!
🚨 Key takeaways
- It’s perfectly legal to negotiate with your real estate agent on their commission when selling your property.
- Success in negotiation comes down to accentuating the reasons why you should pay a lower commission.
- You can find those reasons by evaluating your own situation as well as the state of the real estate market in your area.
- If you don’t feel comfortable negotiating, there are alternative services that can reduce the fees and commissions you pay.
Are real estate commissions negotiable?
Negotiating a real estate commission is both legal and acceptable! The Code of Ethics of the National Association of Realtors states that “you can negotiate your commission with the listing broker at any time during the transaction.”
🚨 Know the lingo!
- Agent: the person who will be handling the sale, either on the seller or buyer’s behalf. Thus, most real estate sales involve two agents.
- Broker or brokerage: in the United States, the business entity for whom your agent works.
- Commission: the pool of money that involved agents and brokers receive after the property sells. This money comes out of the home’s sale price.
- MLS: stands for Multiple Listing Service. It’s a service shared among brokers and agents where all properties currently for sale among those agents and brokers are listed. It’s how agents know what homes are available at a quick glance.
However, agents you talk to may be unwilling or even unable to negotiate. That’s in part because they aren’t earning as much as you think.
How agents split real estate commissions
Commissions are divided up among the agents and brokers involved in selling your home. The money doesn’t just go to the listing agent!
Real estate commissions make up approximately 5.5% of the sale price. This amount varies based on the number of homes for sale and the number of active agents in the area.
Commissions come out of the selling price of the home. If you are a buyer, you are not directly responsible for any commissions. The seller pays the commissions out of the proceeds of the sale.
What happens to that commission? First, the brokerage representing the buyer and the one representing the seller split the commission. Then, each brokerage gives some of its share to the agent involved in the sale. These are typically split 50/50.
For example, let’s look at a home that sells for $200,000 with a 6% commission. This means the total commission is $12,000, or 6% of $200,000. The brokerages split the commission evenly, then split their shares between themselves and the agents, leaving the selling agent with just $3,000. The split looks like this.
|Total Commission||6% ($12,000)|
|Seller agent and brokerage||3% ($6,000, half of total commission)|
|Selling agent||1.5% ($3,000, half of seller commission)|
|Selling brokerage||1.5% ($3,000, half of seller commission)|
|Buyer agent and brokerage||3% ($6,000, half of total commission)|
|Buying agent||1.5% ($3,000, half of buyer commission)|
|Buying brokerage||1.5% ($3,000, half of buyer commission)|
That selling agent you’re negotiating with is only getting a small portion of the money. It’s that small portion that they’re able to negotiate with, and that doesn’t give them a lot of room.
If you’d like to see these numbers applied to your own situation, use this calculator to see what the selling agent’s portion of the commission might look like.
Remember, agents and brokers have numerous expenses. The selling team needs to cover transportation costs, the costs of staging the home, the cost of advertising your property, and so on. Those costs quickly cut into the commission.
As a result, many agents may be unable or unwilling to negotiate, even to make a sale. As a single customer, you may not have much negotiating leverage.
You can potentially get bigger savings with a company like Clever Real Estate, which negotiates discounted rates for you. Since Clever guarantees their partner agents a steady stream of business at zero upfront cost, Clever has more leverage and can get you a lower rate than you may be able to get on your own.
If you still want to try your hand at negotiating, here’s how to do it right. Start by planning out your negotiating strategy, and that begins with doing your research.
Read more: How Much Do Realtor Fees REALLY Cost?
Know your local area
Knowing the conditions in your area can help you identify factors that you can use to make a case for a lower commission.
Knowing the average commission in your state is useful for determining whether a commission you are offered is reasonable or not. The average realtor commission is not a perfect indicator, as different areas of a state can differ significantly, but it provides a starting point.
Our friends at Clever Real Estate surveyed real estate data nationwide and found that commissions varied from 4.5% to 6.5% depending on the state, so you can’t just rely on national averages.
The local real estate market
Are homes selling quickly or slowly in your area? The answer to that question can shape whether a real estate agent is willing to negotiate with you.
One good way to identify whether the housing market is hot or not is to compare it to a year ago. If more houses are selling right now than a year ago at this time, that means the market is relatively hot, and homes are selling fast.
In a hot market, realtors often put in less work per house and are thus willing to negotiate more.
On the other hand, if sales are lower than a year before, the market is relatively cold. While some agents may be hungry for a deal, many may be unable to afford to negotiate.
You can find this information by looking for summaries of housing statistics in your state. While there is no standard place to find these data sets, they often appear on the website of your state’s association of realtors.
Real estate markets fluctuate by season, too.
Compared to the rest of the year, spring and summer are relatively “hot” seasons for real estate. Houses go on the market and sell relatively quickly as people take advantage of the nicer weather.
Due to the fast turnaround on properties, agents typically spend less time per property in the spring and summer. This may make agents more willing to negotiate in the “hot” spring and summer.
Similarly, real estate markets get “cool” in the fall and winter. Buyers are more likely to stay at home than attend open houses.
Agents in a “cool” market may sometimes be hungry for a sale, but they may not have the leverage to negotiate. “Cool” markets usually mean realtors spend more time per property, and that means less space to negotiate.
Read more: When Is the BEST Time to Sell a House?
Knowing who’s who in your local real estate market can also be valuable. Agents vary widely on reputation and experience level.
Experienced realtors are more likely to get your home sold quickly and sometimes with a higher final price than other agents may be able to pull off. However, experienced agents usually know their worth and may be less likely to negotiate.
Newer agents may be more willing to negotiate, but they might be unable to sell your property as efficiently as experienced ones. They may lack the connections or resources to sell your home quickly, particularly if they’re not associated with an established brokerage in your area.
Read more: How to Find a Real Estate Agent
Know your situation
Understanding your situation inside and out can also help set the stage for negotiating a lower commission rate. Here are things you can do to sweeten the pot for an agent to lower their rate.
A vacated home is much easier to show and much easier to sell. Agents have free reign to make the house as beautiful as possible without your possessions and everyday life cluttering things up.
If you are able to vacate early, offering to do so is an essential point in your negotiations for a better real estate commission. The time and expense that you save the selling agent will make them much happier to discuss a realtor commission discount.
Help prepare the property
Preparing a house for showing and selling involves a lot of work. Major tasks include taking high-quality photos for advertising, cleaning the property thoroughly, and making repairs both large and small.
If you’re able to handle these tasks yourself, you may be able to negotiate a lower real estate commission. However, many larger brokerages have agreements in place to handle these tasks efficiently. Doing this work yourself may be a more effective negotiating point with an independent agent or smaller broker who might not have such services easily available..
Have a high-value property
A high-value property is far more likely to warrant a lower commission than a low-value property.
Consider a house that is going to list for $1 million. If the seller can get a 6% commission on that house, that’s $60,000 to split among the interested parties and likely means a five-figure payday for just one sale.
Another house is going to list for $200,000. Even with a 6% commission, that’s only $12,000 to split among the interested parties. It’s a small payday for everyone.
The selling agent may be more willing to negotiate the commission on an expensive property simply because their share will still be lucrative after the sale. For a less expensive home, the selling agent may simply be unable to negotiate.
Use the same agent to buy and sell
Consider using the same agent for both transactions if you’re buying a new property and selling your old one at the same time.
Since this means two commissions from one customer, the agent may be willing to cut you a package deal.
If you have friends and family interested in buying or selling a home soon, your referral may have real value to your agent.
You should consider offering to directly refer friends and family to the realtor in exchange for a reduced commission.
This tactic will likely only work if your referrals are actively looking for a home or selling their own home. Otherwise, the referral has limited value to the agent, as it doesn’t represent a customer.
Be ready to walk away
If you don’t need to sell and are just considering the possibility, you have the power to walk away from the deal. That gives you a lot of negotiating power.
The power to walk away means you can simply choose not to sell until the market is more in your favor. If you want a lower rate and can’t find an agent that will work with you, then step back and wait.
Talk to multiple agents
A single agent declining your request for a lower commission isn’t the end of the road. There are many agents out there, and you’ll know them already if you’ve been doing your research.
Unless the first agent you meet is a perfect fit and willing to cut their commission to suit you, talk to others before deciding on the best one for you.
How to negotiate a lower real estate commission
Successful negotiation centers around making the best possible case for what you want. That means talking up the factors in your favor that would encourage an agent to give you a discount.
Make a mental list of all of the factors in your favor and stick to those for your negotiation.
1. Choose an agent to negotiate with
If you’ve done the homework, you should know several agents actively working in your neighborhood. Choose an agent that seems like they might be willing to negotiate with you.
A good first choice is a newer agent in the area or one who hasn’t had many listings recently. Those agents may be hungry to get some sales under their belt.
2. Lay out your case
When you meet with the agent and the subject of the commission comes up, that’s the moment to negotiate. Listen to their offer and simply ask for a slightly lower commission. Your target should be lower than your area’s average commission, but not so low that they can’t afford to agree.
When doing so, list all of the factors in your favor that you’ve found while doing the homework. What about the current real estate market would indicate that a low commission is in order? What about your situation makes a lower commission seem sensible?
Remember, all you can do is ask. If you ask with confidence and reasoning, many agents will jump on board.
3. What if they say no?
If the agent says no, it’s not the end of the world. Simply say that you want to continue shopping for agents, then move on to another agent and repeat the negotiation.
If they all say no, go back to the agent you believe will most effectively sell your house or consider an alternative to negotiation.
4. What if they say yes?
If the agent says yes, you can sign on the dotted line immediately, of course. However, you might also want to consider taking that offer to another agent.
If you clicked well with another agent who didn’t negotiate with you, you can call that agent up and explain the new situation. State that you have an offer in hand from another agent with a lower rate and that you’ll sign with them if they match it.
Don’t completely overlook the agent that was willing to negotiate, though. Unless there is a good reason to switch agents, give the courtesy of your business to the agent who was willing to negotiate with you.
5. What if the agent is also representing the buyer?
You should avoid any situation where the agent is representing both the seller and the buyer, even if an agent suggests it. This is known as dual agency. Dual agency is an unethical practice and illegal in many states.
What’s so bad about it? In a real estate transaction, the buying agent is there to represent the buyer’s best interests and the selling agent is there to represent the seller’s best interests. When there is a dual agent, at least one party is not having their best interests fully represented.
Read more: The Role of the Real Estate Agent
Alternatives to negotiation
Negotiation may not be a good option for you. Perhaps you’re in an area with only a few agents or a single brokerage, or maybe you’re just not interested in negotiation.
There are many options for people who just want a lower rate without negotiating, each with advantages and disadvantages.
Discount real estate services
Discount real estate services center around pre-negotiating a lower rate with real estate agents in your area.
Some services like Redfin work like any other brokerage, except they offer a lower commission rate while providing fewer services to the client. They tend to deal in volume, making less per house but servicing more homes.
Discount brokerages work great in a hot real estate market, but in areas with fewer houses on the market and lots of buyers, you may want a more full-service brokerage to promote your home.
Other services, such as Clever Real Estate, connect you directly with established agents in your area from established brokerages like Century21 and RE/Max. Clever pre-screens agents for you and matches you only with top agents in your area that meet your needs. Most agent matching services are 100% free of charge.
Because the agent matching service does the work of delivering a customer to an agent, the agent usually provides a significantly reduced commission. In Clever’s case, they work with agents who have already agreed to sell your home for a $3,000 or 1% buyer’s commission.
FSBO (For Sale By Owner)
FSBO (for sale by owner) means that you’re handling the sale yourself. You don’t have a selling agent, so you don’t have to pay the selling agent’s commission.
What’s the catch? You have to do all of the work necessary to sell your property.
Tasks like identifying needed repairs, getting them done, cleaning up your home, making it presentable, advertising your home, and showing your home are all on your plate.
You also don’t have the other benefits that an agent provides, such as MLS listings and networking.
Note that you will still have to pay the commission of the buying agent. Rather than saving you a full 6% commission, FSBO will only eliminate the selling broker’s half of the commission.
FSBO is an excellent option if you’re a go-getter with plenty of time on your hands. However, if you don’t have the time or energy to commit, there may be better solutions for selling your home.
Read more: How to Sell Your House Without a Realtor
Flat-fee MLS services
Flat-fee MLS services add properties to MLS for a flat fee. The other work of selling a home still lies in the hands of the owner. Many people who go the FSBO route also hire an MLS lister to get their property out there on the local market.
If you’re considering using an FSBO approach for selling your home but need a hand in promoting your listing, using an MLS lister is a good option.
Real estate lawyer
If you already have someone who wants to buy your property and you’ve already agreed upon the price, a real estate lawyer is a great option.
A real estate lawyer will only charge you for the costs of preparing the legal documents needed to execute selling a property legally.
Lawyers have high hourly rates, but document preparation services are typically straightforward and fast. Thus, the total cost will remain very low, far less than a 5%-6% commission.
“We Buy Homes for Cash” companies
Companies in this business are seeking to flip your house fast. They provide a speedy cash payment for your home with the intent of selling it again quickly, perhaps after making a few key improvements.
They’re a great option if you need cash immediately, but the catch is that such companies significantly underpay the property’s market value. Consider using such services only if you’re in a very tight situation.
iBuyers are companies that use digital tools to buy and sell lots of properties. They make money by cutting their effort to buy and sell down to a minimum.
iBuyers such as Opendoor will typically pay you slightly below market value for your home with minimal hassle. They’re a good choice if you want to sell relatively quickly with little effort and don’t mind a slightly smaller sale price.
On the other hand, agents who know the local market can often get you a better return for your house. They can often beat the market value for your home and get you more money, even after commission.
Read More: The Best iBuyer Companies
The Bottom Line
Effectively negotiating a lower real estate commission can save you hundreds or even thousands of dollars on your home sale. Pulling off a successful negotiation requires gathering information on your area and specific situation, then presenting the best possible case to multiple agents.
If you want an agent to represent you but want to save on commissions without negotiating, consider an agent matching service like Clever Real Estate, which will match you with an agent in your area at a pre-negotiated commission.
The Best Discount Real Estate Brokers Discount brokers offer many of the services of a full-featured brokerage with fewer fees. Which discount real estate broker is right for you?
What Companies Offer the Lowest Real Estate Commission Fees? These companies offer great rates without any negotiating.
1% Listing Fees: A Way to Save Thousands or a Huge Scam? Services that offer 1% listing fees seem like a great opportunity to save money, but are they legit?
Will realtors negotiate their commission?
Yes, but not always. According to a 2018 housing survey from Zillow, about 57% of sellers who attempt to negotiate the commission with the selling agent succeed in reducing the commission. However, only 31% of sellers try to negotiate at all. Even if you are successful, you might find better savings with a lower commission company that offers built-in discounts. See our full rankings of the best discount real estate brokerages!
What if I feel uncomfortable negotiating?
You don’t have to! You can skip the negotiating and choose the best agent for you based on other factors such as experience and local success. Alternatively, you can try a different approach for selling your home, such as a discount real estate service or FSBO (for sale by owner).