In selling a home, there are 3 major groups present: buyer, seller, and real estate agent. The buyer gets a beautiful new home, the seller gets to cash a big fat check, but what does the real estate agent get?
A commission, of course!
When it comes to this all-important fee, it’s essential to know what it is and where your money is going! In this article, we’ll cover what a real estate commission fee is, the pros and cons of negotiating commission rates, and 6 easy ways to negotiate realtor commission fees to help YOU save money, while also adding value to your realtor.
What is a Real Estate Agent Commission Fee?
Real estate agents usually work solely based on commission. Who pays this fee? Home sellers do. They’re usually the ones paying the entire commission fee, which goes to your listing agent, as well as a portion that’s thrown to the buyer’s agent.
Based on this fee, real estate agents will typically pay for their own advertising and marketing, business license, and insurance. However, commissions are only paid at the end of the home sale, when the title transfers. This means that the agent may work with the seller months before even getting paid.
What is the Standard Commission Fee?
When it comes to a real estate agent’s commission, there is a common misunderstanding. Many misbelieve that there is a standard percentage within the real estate industry. But, in truth, there is no set price. Consequently, this gives you wiggle room to negotiate your agent’s rate.
Logistics of Commission Rates: What Realtors Actually Get Paid
The current average commission rate nationwide is approximately 5.45%.
So, if you’re a home seller and your realtor charges you a 6% commission to sell your $200,000 home, that 6% ($12,000) is split with the buyer’s agent. This leaves your agent with 3% ($6,000).
Still sounds like a pretty great commission, right?
Well, it sounds good until your real estate agent has to share their portion (anywhere from 25%-40% of the 3%) with their brokerage office. At the completion of the transaction, your realtor may end up with as little as 60% of the 3% commission. This ends up being around $3,600 that isn’t paid for months until the title for the house is transferred.
So, the question remains: Should you negotiate your realtor commission fee?
Negotiate Realtor Commission Fees: Pros and Cons
Regardless of what an agent or broker might tell you, by law, commissions are always negotiable. But with the low commission rates and extended period of time it takes to even pay your agent, should you?
Well, let’s take a look at the pros and cons of negotiating your real estate agent’s commission.
The Cons
In looking from both perspectives of the realtor and the seller, we foresee 2 cons to negotiating your realtor’s fees.
1. You Get What You Pay For
Everyone wants a resilient real estate agent that will get the best possible price. But if your realtor easily agrees to lower a commission than is typically charged, how great will that agent be at negotiating for you a good deal.
You don’t want a real estate agent who caves too quickly on his own pay when you’re counting on him/her to broker the best sale price and terms for you.
2. Less Advertising for Your Property
For many agents, the marketing dollars for your property come from their commission. So, a lower commission could mean less advertising for your property.
The Pros
Selling a house is expensive, and realtor fees are one of the largest accompanying costs. Even a minor fee reduction could actually save you thousands.
To put this into perspective, the current medium of value for homes in the U.S. is $346,800, which would translate roughly to $18,900 in realtor fees. If you were to negotiate just 1% off of your commission, you’d save over $3,500. Now, if you knocked off 2%, your savings would jump to $6,900. That’s a lot of money!
But, how can you negotiate in a way that benefits both the seller and the realtor? We’ve compiled a list of 6 easy ways to make the negotiating process much less stressful and adds mutual benefit to both the seller and the realtor!
6 Easy Ways to Negotiate Realtor Commission Fees
The goal of negotiating isn’t to “win” necessarily. You always want to aim for a mutually beneficial outcome for both parties involved! Instead of asking only for modifications, think about how you can add value to the partnership as well.
Here are 6 easy ways you can do that!
