Selling a home can be an expensive endeavor.
The average cost of selling a home in the US — which includes preparing for sale, closing costs, and real estate agent fees — is over $15,000. In more expensive markets, this number can be easily as high as $50,000.
The largest part of these costs, by far, is the commission you pay to your real estate agent.
If you have only owned your home for a few years, and haven’t built up much equity, realtor costs can easily be more than the proceeds you receive from selling it, forcing you to bring cash to the closing table.
Fortunately, it doesn’t have to be this way. It’s possible to save thousands on commission when you sell your home, without sacrificing on the quality of your agent or the services they provide. This article will teach you how to hire a top ranked agent, and save thousands on commissions.
What is the average commission rate for a real estate agent?
The average commission charged by real estate agents varies market by market, but that average is almost always between 5 and 6 percent.
The average rate of appreciation of real estate is only 3.7 percent, and when you take into account all of the costs of selling a home, it can take a couple years of home ownership to be able to sell your home and break even.
Saving on commission is often the difference between selling your home for a profit, or losing equity. It can also be the difference between buying another home of similar size, or having enough for a down payment on a bigger home in a better area.
So how do you save on commissions? Well, we have good news for you.
Real Estate Agent Commissions Are Negotiable
Legally, setting commissions in a market is against the law. Agents aren’t allowed to tell you that “in our market, commission is X%.”
However, brokerages are allowed to set the commission that their agents offer when they sign an agreement to list your home.
This means you need to shop around to find an agent that works for a brokerage that lets them negotiate. It’s not uncommon to find an agent who is willing to reduce their commission, but their brokerage won’t let them.
In order to properly negotiate your commission rate, it’s important to understand how your agent is compensated, and how they incur costs.
How much commission does a realtor make on a sale?
Typically your agent will charge you a total commission, and keep a portion of it for themself, and offer the rest to another agent that brings the buyer. In some states, your agent is allowed to keep both pieces if they represent the buyer as well. It is common for your agent to split the total commission evenly between them and the buyer’s agent.
Of the portion that your agent receives, they have to share it with their broker. How this is shared varies wildly from brokerage to brokerages. Some brokerages share commissions with their agent in the form of a percentage (80/20 and 70/30 in favor of the agent), while some new brokerages offer a flat fee to their agents, allowing them to keep more of their commission.
Some agents will also pay for photography, marketing, staging, and other services related to the selling of your house.
Now that you know how real estate agents are compensated, you can use the price of your home to calculate a rough estimate of how much your real estate agent will make on the sale of your home.
For more expensive homes, that number can be staggering. You can research the average time to sell a home in your area, and you now have a good idea of how much time it will take your agent, and how much they will make.
This give you all the tools you need to successfully negotiate a lower commission rate.
Tips For Negotiating Commision With Your Agent
1. Shop around. By interviewing multiple agents, you can compare commissions, and are more likely to find an agent that is willing to negotiate and lower their rate.
2. Sell and buy with the same agent. If you’re buying, mention to your prospective agent that you want to work with them on both transactions. This creates twice as much potential revenue for the agent, so even if they take a discount they can make it up with commission on the buy-side (where the person you buy from, not you, will pay the commission).
3. Be a great client to work with. If you’re willing to leave the house for showings, and make your agent’s job easier, they’re more likely to negotiate.
4. Make cost-effective improvements. If you’re willing to make upgrades before sale, mention that as well. Spending money to make the home more appealing to buyers will make it easier to sell, giving you a better negotiating position.
Why Is A Full Service Agent Important?
Saving on commission is great, but you have to be sure you aren’t sacrificing service in the process. Most sellers hire an agent because they aren’t confident they can sell their home for the highest possible price on their own.
It’s important to work with a professional agent that takes professional photos, has experience to help market your home, and who knows how negotiate with potential buyers when a home comes in.
Great agents have systems in place that allow them to sell lots of homes and still provide full service to their clients. These agents are able to discount their commissions, and handle the subsequent increase in clients while still keeping their sellers satisfied.
Working with an agent like this also increases the odds that they will already be working with a potential buyer for your home.
The Clever Alternative: Save Thousands With A Full-Service Agent
Saving on commissions with a full service agent doesn’t have to be hard. Clever has a nationwide network of partner agents that will list your home with a full service agent for a flat fee of $3,000, or 1% if your home is more than $350,000.
You’ll still receive full service from a top rated, local agent in your area. That includes pricing, a comparative market analysis, professional photos, marketing, help with negotiations, inspections, paperwork, and everything else you need to get to closing.
Click here to schedule a free, no obligation consultation with a top rated, local agent.