Negotiating Realtor Commission: Tips for Reducing Fees

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Clever Real Estate

Updated 

February 7th, 2020

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Updated February 7, 2020

Negotiating a real estate commission that is less than the customary 3% for your listing agent has the potential to save you thousands on commissions. Here's what you need to know about negotiating realtor fees:

  • Commission fees on a home sale are typically paid by the seller
  • The standard rate is approximately 6%, split more or less evenly between the listing and buyer’s agents involved in the transaction
  • These rates are not necessarily set in stone, they’re negotiable — though the amount of wiggle room will vary from case to case
  • The best way to negotiate a lower realtor commission is to come prepared with justifications for why your home will be easy to sell, such as:
    • You are in a seller’s market where homes sell quickly
    • You won't need costly additional services like staging
    • Your home is ready to be shown immediately (i.e., you will vacate your home quickly and allow a lockbox so potential buyers can access it)

Can you negotiate realtor fees?

Realtor fees are negotiable — when selling a home, it is possible to negotiate a fee with your listing agent that’s below the typical 3% commission rate.

Negotiating real estate commission can help you come away from your home sale with significantly more money in your pocket. For example, based on the national median home value of $244,054, according to Zillow, negotiating a commission rate of 1% would save you $4,881 on realtor fees.

RegionMedian home valueAmount saved by negotiating commission down to 1%*
Northeast$272,400$5,448
Midwest$164,600$3,292
South$180,300$3,606
West$362,800$7,256

Data is from the U.S. Census Bureau's 2017 ACS 1-Year Estimates

* Saving estimates based on a typical 3% listing agent commission

One thing to note, however, is that you’ll still have to pay a buyer's agent commission — which you don't have much control over. While buyer’s agent commission rates vary from market to market, you’ll likely have to offer between 2-3% to incentivize realtors that represent buyers in your area to show your home to their clients.

How much is realtor commission?

The average commission rate across the U.S. is around 6%, which is typically split down the middle between the listing and buyer’s agents who handle the transaction. That said, the actual rate can vary from city to city — or situation to situation.

In fact, the standard amount paid in commission can vary by up to 17% — with one 2019 report showing that standard commission rates in Columbus, OH were 6%, while most agents charged 5% in Hartford, CT.

Commission rates may be lower in your area depending on how competitive the real estate market is. In areas where there is a glut of realtors, home prices are high, and homes are selling quickly, you can expect listing commissions to be lower than the customary 3% rate.

Conversely, commission fees may be higher where there are few realtors or the real estate market is cold — meaning there’s a lack of buyer demand or an excess of inventory, and home's don't sell particularly quickly.

How are real estate agents paid?

While real estate agents are paid a commission when your home sells, there are additional costs that may influence whether a realtor decides to lower their rate. If you are attempting to negotiate a lower commission with your listing agent, it helps to understand how realtors are paid and what factors affect their decision.

Most agents don't actually get to keep all of the commission they generate from a home sale. In fact, the commission paid on a home sale will likely be divided into several buckets:

  • Split with buyers agent: Typically, fees are split more or less 50-50 between the buying and listing agent. So if the total commission fee for a home's sale is 6%, about 3% goes to each agent.
  • Commission split with managing broker: When realtors get paid, they don't get to keep all of their money. Generally, they split part of their commission (anywhere between 50-90%) with their managing broker.
  • Marketing costs: Real estate agents usually pay out of pocket for services that improve the marketability of your home. For example, agents often pay for professional photography and may pay to have your home professionally staged.
Home sale price

$200,000

Total real estate commission*

$12,000

Seller's agent commission

$6,000

Split with managing broker**

$3,000

Marketing costs (photography, staging, etc.)

$600

Listing agent take-home pay

$2,400

*assuming a standard 6% listing fee

**commission splits of 50% are common among inexperienced agents

How to negotiate realtor commission

The key to negotiating a reduced real estate commission is to be prepared by knowing what commission rate you’re going to ask for — and have a justification for why you think a lower rate is fair.

Know the real estate market

If you are in a seller's market or great neighborhood and know that your house will sell quickly based on similar homes in your area, you can use that as leverage to ask for a lower commission rate. Information about your local housing market can be found via Zillow's home value estimator tool. You can use this information to argue that your realtor's job will be easier.

For example, in the scenario laid out below, a realtor listing a similarly priced home in a seller’s market like Portland, OR is 65% more valuable than one in a buyer’s market like Stamford, CT.

LocationPortland, OR (sellers market)Stamford, CT (buyers market)
Median home value$454,628$479,795
Average days to sell*68118
Listing agent realtor commission (3%)$13,639$14,394
Commission earned per day on market$201$122

Data sourced from Zillow Research on 1/30/2020

Gather as much information as you can about homes similar to yours in the area. Make sure to note how much they sold for, as well as how quickly they sold.

Know your needs

Do some research and learn what you’re looking for in a listing agent — and what you don't need as well. Maybe you don't need help with staging or aren't sure about sending out mailers. Having a list of services they provide but that you don't need is a great way to get into negotiations.

Get quotes from multiple agents

Shopping quotes from multiple agents is a good way to find the lowest possible commission rate. This is especially important because not all agents will be open to negotiating commission at all. One recent report showed that only about one-in-four would even consider lowering their standard rate.

Another important thing to note here is that simply choosing the agent offering the lowest rate isn’t always the best way to go. You want to make sure you’re listing your home with someone that has experience selling homes in your neighborhood and price range.

Furthermore, speaking to several agents will give you a feel for which ones you think you would work well with — which is an important part of picking an agent.

Additional Realtor Negotiation Tips

Here are some tactics that may help you negotiate a lower commission with your real estate broker:

  • Agree to buy with your listing agent: If you plan on buying a home in the same area you’re selling in, you can use that as leverage with your listing agent to negotiate a reduced commission fee.
  • Offering referrals: If you have friends or family members that are considering selling or buying a home, mention to your realtor that you'd be happy to recommend them in exchange for a reduced commission.
  • Assure your realtor that you’re going to make your home easy to sell: Vacating your house early, leaving it staged, and allowing a lockbox to be installed will make showing your home easy, which may help speed up the sale. In turn, this would make your home more attractive to a listing agent — after all, less time and effort means higher profit margins.
  • Sell your house in the off-season: By choosing to list your home when there are relatively few listings, typically in the fall and winter, you may be able to get a discount from realtors that aren't in a position to be as choosey with their clients.

What is a fair real estate commission for a real estate agent?

“Fair” real estate commission rate will depend on your specific situation. If your realtor is likely going to have to do a lot of work to sell your house, then it may be fair to pay a higher commission, whereas the opposite is true if your house is easy to sell.

Additionally, some agents may be worth more than others. For example, top realtors with extensive experience and local market knowledge can be extremely valuable in making sure you extract maximum value from your home's sale.

On the other hand, there are many new technologies that have made selling a home much easier — which calls into question whether forking over 3% of your home's equity is really justifiable anymore. Because of this, many top agents have agreed to work for discounted commission.

Another factor worth considering is that it may be fair to ask for a lower rate if you have a high-priced home. To a certain extent, it’s the same amount of work to sell a $300,000 home as a $600,000 home. With that in mind it may be fair to ask a realtor to reduce commission fees if your home is highly valued for your area.

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