Is a Real Estate Commission Negotiable?
The quick response to this question is yes. As with many things, there is more to the story though. While real estate commissions are “always” negotiable, both sides of the equation have contributing factors that may influence whether a seller should pay less money, and whether or not the Realtor will accept it.
Negotiating Commission vs Selling FSBO
If you are thinking about selling your home yourself, in an effort to save some money, statistics show that will simply not happen. The National Association of Realtor’s Profile of Buyers and Sellers, statistics show that homes sold with a Realtor sell for $60,000 more on average then homes sold “by owner”. There are many things to prepare for when selling a home FSBO - in addition to the advertising of the property.
Real Estate Sales commissions perform a variety of functions, not all of them going straight into the Realtor’s pocket. Some brokerages charge the agent fees on commissions, and franchises also usually take a cut. Once the Realtor’s marketing budget is taken into account (a necessity for the home seller), they may be left with less actual “take-home pay” than most people realize.
Standard Commission Rates and Who is Responsible
The selling agent is the person who is responsible for collecting the commission on behalf of the seller. Most agents aim for a six percent commission when selling. The commission is set up ahead of time and splits are established for both the buyer’s agent and the seller’s agent. If (legal in many states) the seller represents BOTH the buyer and the seller at the same time - known in the industry as “double-ending” a deal, the Realtor usually keeps both sides of the commission, minus any brokerage deductions and other fees. Double-ending a deal is rare, but is still a fair deal, as the agent is working for both sides of the transaction. Not having a second agent as the middle-man between the buyer and seller, done appropriately and ethically, can be a good thing for all parties.
Reasons an Agent Might Agree to a Lower Commission
The person is looking to infiltrate a new region or particular market
The area is high end, or the home is a luxury model
The seller is opting for a short sale, reducing marketing costs
The house is in an area where homes sell quickly
The agent is acting as the primary agent for both parties
The agent and seller work with each other frequently on numerous real estate transactions
The buyers are an excellent fit and deserving of a break
Military families may get lower rates with some agents or brokerage firms
Ways to Negotiate a Commission Rate
Experts suggest that sellers check the additional fees to ensure there are no charge hikes to make up for a lower commission. One way to negotiate a lower commission is to look at the big picture and weigh the pros and cons of dialing down the percentage. Will it cost more to sell the house? Should a cheaper rate with someone with less education be of more value than a seasoned agent with a solid reputation who charges a larger commission? Sellers should always consider the options carefully because changing the commission may make it harder to get the home to sell for the full list price. The savings could turn into costs because the buyer asks for more concessions like a lower total cost.
Why Some Agents Cannot Take Less than Standard Rates
Many brokers encourage the agent to aim for a certain percentage for a commission and train them not to take no for an answer. Some businesses take a cut of the commission in return for the education being provided to new agents. Part-time real estate agents may not want, or may not be able to afford to lower commissions. Reducing commissions may not look good for the agent's reputation because it may seem like they are lenient when negotiating. Many things can stop agents from reducing commissions.
Even though it is possible to lower the commission a person pays to sell a house, it may not be in their best interest. Commissions remain a general standard because it’s an expensive industry to operate in, and Realtors are not working 24-7 to make beans. Additionally, a Realtor seasoned in negotiations is more likely to negotiate the highest sales price possible, many times offsetting the commission entirely. In any case, talk to more than one Realtor before making your mind up on anything. Ask questions and pay close attention to responses. Each situation is different and, with the right Realtor, you may be able to have your cake and eat it too! For more information on sales commissions, contact your local trusted listing Realtor today!