{"id":14709,"date":"2021-02-19T09:00:28","date_gmt":"2021-02-19T17:00:28","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=14709"},"modified":"2021-06-07T15:23:36","modified_gmt":"2021-06-07T22:23:36","slug":"negotiate-real-estate-commission","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/negotiate-real-estate-commission\/","title":{"rendered":"How to Negotiate Real Estate Commission With Your Agent"},"content":{"rendered":"

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Real estate commissions \u2014 what you pay an agent to sell your home \u2014 are one of the largest expenses in the home-selling process. The good news is that commissions are completely negotiable, especially if you\u2019re a <\/span>real estate investor<\/span><\/a> who buys and sells properties frequently.\u00a0<\/span><\/p>\n

Here\u2019s why you should negotiate commissions and how to do it \u2014 whether you\u2019re an investor or buying a residential home.<\/span><\/p>\n

What is commission and who pays it?<\/span><\/h2>\n

A real estate commission is the <\/span>payment a real estate agent receives<\/span><\/a> for helping their client buy or sell a home. Although commission may occasionally be a flat rate, an agent is most typically paid a percentage of the home\u2019s final selling price.<\/span><\/p>\n

The seller usually pays the full commission of <\/span>around 6%<\/span><\/a> \u2014 which is then split between the listing agent and the buyer\u2019s agent. It is common for the buyer to not have to pay a dime for their own agent. Instead, the full commission is taken from the seller\u2019s profits of the sale at <\/span>closing<\/span><\/a>.<\/span><\/p>\n

For example, if a home sells for $200,000 and the agreement is for a commission of 6% split 50\/50, the seller pays $12,000, and each agent would receive $6,000. From this amount, each agent will also pay a percentage to their broker and for overhead expenses.<\/span><\/p>\n

Why you should negotiate real estate commission<\/span><\/h2>\n

Real estate <\/span>commissions are absolutely negotiable<\/span><\/a>. Real estate agents are independent contractors, and although they may be tied to paying a certain amount to their broker, they usually have some flexibility in what percentage they can charge. Just as you may have bills you need to cover on your rental investments, like real estate agents, you still get to set your own monthly rent on your properties. Lowering them simply reduces the amount of profit you make on the deal.<\/span><\/p>\n

Aside from owing an agent less cash for their services at closing, you may be able to request additional services \u2014 like professional staging, virtual tours, and other add-ons \u2014 for no additional fee. Alternatively, if your agent typically offers these services, you may be able to get them to reduce their commission by foregoing them. Just be careful you <\/span>don\u2019t pare down services too much<\/span><\/a>, resulting in your selling price suffering a blow.<\/span><\/p>\n

How to successfully negotiate commission<\/span><\/h2>\n

As a real estate<\/a> investor trying to negotiate your agent\u2019s commission, it\u2019s best to start with a solid plan and some rationale behind why you may warrant a reduced commission. Here are some tips on how to prepare for negotiation and what may help you secure a lower rate.<\/span><\/p>\n

Interview several agents<\/span><\/h3>\n

To<\/span> find the best real estate agent<\/span><\/a> for your needs \u2014 and to gain some bargaining power \u2014 interview at least three agents before choosing one. Make sure they\u2019re not only experienced in your local market but also that they\u2019re a good match for your personality and can meet your goals in selling the home.\u00a0<\/span><\/p>\n

If you\u2019re willing to take a chance on a newer agent seeking to build up their client base, they may be willing to offer a lower commission rate in exchange.<\/span><\/p>\n

Consider the market and season<\/span><\/h3>\n

In building your case for a reduced commission, evaluate the current real estate market in your area. In a <\/span>red hot seller\u2019s market<\/span><\/a>, listing agents may be more likely to negotiate a lower commission, as your home is likely to sell quickly without much work on the agent\u2019s part.<\/span><\/p>\n

On the other hand, if inventory is high \u2014 as is usually found in a buyer\u2019s market \u2014 and homes are taking longer to sell in your area, agents may be less willing to accept less as a commission, as they will be spending more time and effort trying to sell the home.<\/span><\/p>\n

In addition, if you agree to sell during an off-peak season when agents have less business, they may also be more willing to negotiate commission rates.\u00a0<\/span><\/p>\n

High-end home<\/span><\/h3>\n

An agent may agree to a lower commission if you\u2019re selling a home for a significant amount of money, as agents will come away with a nice payday on a $500,000 home \u2014 even at a 2% commission. High-end homes in desirable neighborhoods may also be easier for an agent to sell \u2014 requiring less work on their part and less time spent holding open houses.<\/span><\/p>\n

Repeat business and multiple transactions<\/span><\/h3>\n

If you can promise your agent multiple commissions as an investor, they may also be willing to negotiate their rate. You may hire them to both sell a home and purchase the next, or you may be buying or selling multiple properties at one time, as real estate investors often do.<\/span><\/p>\n

Securing investor clients is an agent\u2019s dream. While residential clients may only buy or sell one or two homes per decade, some larger investors may purchase or sell several properties within a short time, whether they’re fix-and-flip homes or <\/span>buy-and-hold<\/span><\/a> rental properties. Because of the frequency of deals, an agent may reward an investor for return business by offering a low rate \u2014 knowing that the investor will use them repeatedly for their transactions.<\/span><\/p>\n

Don\u2019t go too low<\/span><\/h3>\n

Investors are usually skilled negotiators, but avoid simply choosing the cheapest option when opting for a real estate agent.\u00a0<\/span><\/p>\n

An experienced, local agent who knows their worth can actually save you money in other ways \u2014 like finding off-market properties or saving you from a bad deal. Plus, although you may be able to save a percentage of commission by using another agent, a steller agent could recoup you that money and more by generating a higher selling price.<\/span><\/p>\n

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