Selling your home? A good strategy for negotiating realtor fees could save you tons of money.
Knocking your real estate commission down just one percentage point could mean the difference of several thousands of dollars in your pocket after a sale. It’s definitely worth your time to arm yourself with some information on the market and push yourself to have the conversation with your realtor.
If you don’t want to spend the time negotiating fees yourself, you could save time — and even land better rates — by using a free agent matching service like Clever Real Estate.
Clever negotiates low 1.5% listing fees with top-rated agents from trusted brands like Keller Williams and RE/MAX. You’ll get full service from your agent and save thousands on realtor fees — no awkward conversations necessary! Find a great local realtor and get a 1.5% listing fee now!
🚨 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.
Can you negotiate realtor fees?
Negotiating realtor fees is a good idea — it’s totally legal and standard in the industry. 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.”
Real estate agent commissions are one of the biggest costs of selling a house, so negotiating them to significantly reduce your costs and increase the amount you take away from your home sale.
Real estate agents don’t charge a set fee across the board, so you have room for negotiating to bring your costs down by thousands of dollars.
The average real estate agent commission in the U.S. is about 5.45%, according to research from Clever. For a sale at the median home value of $346,800, that means about $18,900 in realtor fees. Negotiating just one percentage point off of that commission would mean a savings of more than $3,500!
To enjoy these savings, however, you have to know how to negotiate with your real estate agent.
5 Tips for negotiating realtor fees
Keep these tips in mind to have a successful and mutually beneficial conversation with your real estate agent about commission fees.
Note that the purpose of negotiating isn’t to get to the lowest possible price for you. Approach your relationship with a real estate agent as a partnership, and talk through ways you can both win through negotiating commissions.
🚨 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.
1. Know the factors that affect commission rates
Several factors affect real estate agent commission rates. Keep these in mind when you negotiate so you understand what determines the agent’s going rate.
The market temperature
The hotter the market, the more flexible an agent is likely to be on commission rates.
That’s because homes tend to sell quickly and with less effort in a hot market, when there’s high demand. Agents invest less time and effort into your sale, and they have plenty of time to devote to earning commission on multiple sales, so a few thousand dollars savings for you doesn’t hurt their bottom line.
In most areas, winter is a slow time for home listings, and summer is the busiest. New business is hard for agents to scrounge up in the off season, when there are fewer listings, so they might be more willing to negotiate rates to get your business.
You’ll have an easier time negotiating your commission rate the higher your home’s value is. A small percentage of a $1 million sale, for example, might be a lot more than a larger percentage of a $200,000 sale. But both homes could take the same amount of time and effort for the agent.
Be aware of the dollar amount that 1% or 2% represents for your realtor when you negotiate their rate.
2. Shop around for your best option
You don’t have to go with the first agent you see on a bus bench in your town. You have tons of options for brokerages, agents, discounts services, and more, so there’s no need to settle for a cost you’re not comfortable with.
Do a little research of real estate agents and other selling options in your area, or use a matching service like Clever Real Estate to do the negotiating for you and get the terms you want.
If you do the legwork yourself, shop around and interview at least three agents or brokerages before choosing who to list with.
3. Know your local average commission rate
To negotiate with your real estate agent, you have to know a little about the field you’re playing on. With home prices and other factors varying by state and region, real estate commissions vary as well.
The nationwide average commission is 5.45%, while a typical listing fee rate is closer to 2.7% — and these numbers vary wildly from market to market and season to season.
For example, the average real estate commission in Wisconsin is 5.93%, for a typical fee of $13,700. In California, the commission rate is quite a bit lower — 4.92% — but the total fee is much higher — $33,600 — because of higher home values.
Know what agents generally charge in your area to understand the range they’re willing to work in as you negotiate.
4. Offer the full buyer’s agent fee
As the seller, you typically pay the commission on not only your listing agent’s fee but also the buyer’s agent fee. Offering a competitive buyer’s agent fee encourages buyers’ agents to show your home, which makes your real estate agent’s job easier.
Unless you or your agent already have a buyer lined up, prepare to pay a full buyer’s agent fee to help the house’s chance of selling and make it easier to negotiate your agent’s fee down.
5. Buy and sell with the same agent
Let your agent earn double the commission on your move without double the work by using them to help you sell your existing home and purchase your next home.
This saves them the trouble of finding a new customer, so they might be willing to negotiate a lower commission to get your repeat business.
Alternatives to negotiation
Don’t ever be afraid to negotiate with a real estate agent — but if your fee negotiations don’t yield the terms you want, here are some ways to save money on your home sale without them.
Use a discount real estate broker
Discount real estate brokers offer in-house agent teams that offer many of the same services as traditional agents at a significantly lower price.
Because most discount brokers make up for their lower rates by handling a higher volume of business per agent, you might make tradeoffs in quality of service. Check reviews and talk to some agents or customers who’ve worked with them before signing a contract with this type of service to make sure it’s going to work for you.
Take advantage of agent matching services
Find your real estate agent through an agent matching service that negotiates discounted rates on your behalf, like Clever Real Estate.
The best agent matching services are 100% free to use and only work with highly rated, full-service agents.
Clever matches you with top-rated local agents from major brands and regional brokerages. They’ve agreed to offer Clever customers full service for a fraction of their typical rates in exchange for the simplicity of connecting with clients. So you get the discount without sacrificing quality service.
Sell as for sale by owner (FSBO)
Listing your home for sale by owner means you handle the entire sale without the help of a real estate agent.
The potential upside is big savings. You get to hang onto the portion of the home’s sale price that would otherwise go to your real estate agent’s commission. If you work with an unrepresented buyer, you can avoid the buyer’s agent fee and boost your savings even more!
Just beware of the downsides to FSBO, too. The home selling process is complex and time consuming. Agents are experts in your market, so they could have an easier time getting you the best possible price and terms — and they usually have an easier time connecting with buyers, because they know where to find them.
Use a flat fee MLS company
One of the biggest challenges for FSBO sellers is attracting qualified local buyers. The multiple listing service (MLS) can increase your listing’s exposure, and their flat fees tend to be much lower than real estate commission fees.
A flat fee MLS listing company posts your listing on your local MLS — the primary platform buyer’s agents use to find properties — for a low, upfront fee.
Unlike an agent, a flat fee MLS doesn’t offer much beyond exposure. You’ll still manage the entire sale, and you’re on the hook for the fee whether your home sells or not.
Consider dual agency
Dual agency is when a single agent represents both the buyer and seller in a real estate transaction. It’s common for them to charge a lower commission for each party, because they’re collecting both sides of the fee, known as “double-ending” a deal.
This typically occurs when you find your own buyer, or an unrepresented buyer approaches the agent or their brokerage about your listing directly.
Dual agency lowers the overall cost and time that goes into the sale, so it can benefit you, the buyer, and the agent all at once. But it also poses a potential for conflict of interest, because the agent might not be able to make the best fiscal decisions for either party. Because of that, dual agency is illegal in eight U.S. states, so check your local regulations before asking about this option.
Sell to an iBuyer
iBuyers are companies that leverage technology to make fast, all-cash offers on homes, often sight unseen.
These companies have strict criteria for the types of homes they buy. If your home qualifies, you’ll get an initial cash offer within approximately one business day. You can then typically choose a flexible closing timeline — anywhere from seven to 90 days.
This isn’t usually a money-saving option, though — you pay dearly for the convenience of a quick sale. iBuyers charge hefty service fees, ranging from 5% to 15%, and the most you’ll likely get for your home is fair market value.
Sell to a “We Buy Houses for Cash” company
We Buy Houses for Cash companies and property flippers will typically buy any property — regardless of its condition or location — for cash.
A cash for houses company or property flipper may be a good option if you:
- Want to sell a distressed property and are unwilling or unable to fix it up before listing — also known as an “as-is” sale.
- Need to sell quickly because of circumstances like foreclosure, relocating for a job, or parting ways with a co-homeowner.
- Don’t want to deal with the hassle and time commitment of listing on the open market for any reason.
The big tradeoff with cash for houses companies is price. These companies and investors have to make low offers to ensure a decent profit on the flip. They typically pay 40% to 50% below a home’s market value in exchange for the quick and convenient sale.
How agents split real estate commissions
Keep this in mind when you’re negotiating a total commission fee: Your realtor fees don’t all go to your listing agent. Commissions are divided among the agents and brokers involved in selling your home.
That means your agent only has a small portion of the total commission to negotiate with you.
Real estate commissions on average are 5.45% of the sale price. Generally, the buying and selling agents split the commission 50/50. If the agents are working with a real estate brokerage, their managing broker can take half of their commission, as well.
That leaves your listing agent only about 25% of the commission fee open to negotiation.
Realtor fees example
Let’s look at a home that sells for $200,000 with a 6% total commission.
Say the brokerages split the commission evenly, each taking a 3% fee. Then each brokerage’s share is split, usually 50/50, between the brokerage and the realtor, so each agent would receive a total 1.5% fee, or $3,000.
The split looks like this.
|Commission fee||6% ($12,000)|
|Listing agent||1.5% ($3,000)|
|Listing brokerage||1.5% ($3,000)|
|Buyer’s agent||1.5% ($3,000)|
|Buyer’s brokerage||1.5% ($3,000)|
Realtor fees calculator
Use this calculator to see what your selling agent’s commission might look like based on your terms.
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 discount real estate brokerage.
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 forgo the agent and sell your home through an alternative method, like using a discount real estate brokerage or selling as for sale by owner.
What is a fair commission for a real estate agent?
In 2022, the average real estate agent commission in the U.S. is 5.45%. That number varies across markets and seasons; most agents charge a commission around 2.7%. What an agent considers fair will depend on the value of your property, how hot the market is, how easily they can line up buyers and other factors that determine how much time and energy they’ll devote to the sale.
What is the lowest commission a realtor will take?
The lowest commission real estate companies charge fees around 1% to 2%, or minimum fees of $3,000 to $5,000. You’ll generally find those rates through agent-matching services, which negotiate low costs on your behalf. Typical realtor fees, if you work directly with an agent or brokerage, or around 2.7%, with a nationwide average of 5.45%.
What are 80-20 and 70-30 broker commission splits?
80-20 and 70-30 splits typically refer to the commission split between agents and their brokerage. In these splits, agents take 80% or 70%, and the brokerage receives 20% or 30%. It is usually closer to a 50-50 split between the agent and brokerage, but high-production or more experienced agents can command a higher split.
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