When and How to Negotiate Real Estate Commission

Marissa Hermanson
Updated February 16, 2022
Couple meeting a real estate agent
Photo: Noel Hendrickson / Getty Images

Learn how to negotiate your way to a less expensive closing day

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If you’re looking to buy or sell a house and already feel frazzled by the thought, you’re not alone. That’s why most people hire a real estate agent to represent them throughout the process. 

Hiring a real estate agent ensures that the transaction goes smoothly—from listing the home to negotiating the sale and helping with the closing process. The agent’s services help eliminate stress for both the buyer and seller. Rather than getting paid per hour or a flat fee, most real estate agents are paid a commission for their work. Let’s take a look at how real estate agent’s commissions work and how you may be able to negotiate them to save money.

How Much Do Realtor Fees Cost?

First things first: What kind of commission do buyer’s and seller’s agents take home? The real estate agent commission is usually between 5% and 6% of the property’s final sale price. The buyer’s and seller’s agents then split that total, with each party taking 3%. Then, the realtors share a portion of their commission with their respective brokerage agencies. For example, if a house sells for $200,000, a 6% commission is $12,000. Each realtor would receive $6,000 while giving a portion back to their agencies. 

Typically, the seller pays the commission for both the buying and selling agent, while the buyer pays closing costs, which cover items like loan processing, taxes, and paperwork. If the commission is already factored into the listing price, the seller pays it indirectly. 

How Do Real Estate Agents Earn Commission?

Let’s face it: Buying or selling a home is a tough and sometimes complicated process. Real estate agents are well-versed in the local housing market and can tell you the proper value of your home, advise you on house repairs, help with home staging and marketing, and then negotiate the sale, arrange the inspection, and help with the closing process.

Essentially, real estate agents work hard to help you buy or sell your home for the best price, which also impacts their commission. All of their services, along with their commission rate, should be listed in their realtor contract.

Can I Ask for a Lower Commission Rate?

You can! There aren’t any laws that set real estate commission rates, so you are free to negotiate. If you offer a lower commission rate to your realtor, be aware that they may refuse and even back out as your listing agent. There are a few reasons real estate agents may be willing to accept lower fees, though. 

Reasons Real Estate Agents May Accept a Lower Commission

  • If it’s an easy property to sell. If the house will be hard to sell, they most likely won’t discount their fees.

  • If the home has a high listing price.

  • If your agent is providing fewer services for your sale than they typically do. 

  • If the realtor represents both the buyer and the seller (known as “dual agency”).

  • If you’re selling a move-in ready house that is beautifully staged, meaning the listing agent doesn’t have to do much work.

  • If you are using the same agent to buy and sell simultaneously or are using the agent to sell multiple properties.

How to Negotiate a Lower Real Estate Fee

If you think your sale qualifies for a lower real estate fee or agent commission, it’s time to prepare for the negotiation table. Use these tips for negotiating a real estate commission to prepare, as well as the following guidelines:  

  • Know the market: If you’re the seller and you live in a hot neighborhood, use that as your reasoning. Be sure to back up your claim with recent sales data and research to show how quickly homes in your area have sold and their selling prices.

  • Offer to take on some of the work: If you eliminate some of the services that the realtor traditionally provides, then you may get a discount on their fees. 

  • Sell in the off-season: If you sell during the off-season, you may be able to negotiate with an agent in need of business during slower months.

  • Buy multiple properties: If you are a real estate investor and you’re planning to buy or sell several properties in the future, let your realtor know you’d like them to help you with those transactions. They may be willing to adjust their rates for the prospect of multiple sales.

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