When buying or selling a home, some of your costs are unavoidable and carry a fixed fee. Many, however, can be negotiated. If you are a buyer, you may get a lower mortgage rate and you can work with the seller to cover some of the closing costs.
- Tips For Negotiating Your Real Estate Agent's Commission
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One of the most asked questions about working with a real estate agent is about commission. The question of what you have to pay your agent has become more complicated over the years. Generally, the commission is a percentage of the price of the house. That has become more concerning in recent years because prices have gone up. This means that in some markets, such as Los Angeles, where the median price is $985,000, commissions can become a very big part of the cost of buying or selling a home.
The most important thing to know is that commissions are always negotiable. No governing agency, including the National Association of Realtors, sets commission rates. The historical industry standard has been 6%, split between the buyer’s and seller’s agents. One recent change to the industry rules is that real estate agents working with buyers must have a written agreement with the buyer that spells out the fact that commission is negotiable and specifies a range or amount of compensation.
According to Redfin, the commission rate has been declining in recent years. As of August, the typical buyer’s agent received 2.55% in commission, which works out to an average of $15,377 per deal. Although the commission percentage has dropped, the amount has risen because of higher home prices.
Zillow’s Consumer Housing Trend Report 2024 showed that 51% of sellers negotiated with their listing agent to lower their commission. However, 64% did not negotiate because they felt the rate was fair. Of those who negotiated, 55% contacted more than one agent. Those who negotiated also tended to have a higher median sold price.
Now that you know you can negotiate with your real estate agent, should you? In most cases, the answer is that it never hurts to ask. Lending Tree found that while only 31% of buyers and sellers attempted to negotiate their commission, of those that did, 64% were successful in obtaining a lower commission rate. The agent has the right to say no and explain why they won’t lower the commission or they may work with you to set a different rate.
Tips For Negotiating Your Real Estate Agent’s Commission
Don’t be afraid to shop around. If you are selling your home, having multiple agents come to your house, examine the home and give you a comparative market analysis makes sense. This will show you how your home stacks up against the competition. The agent may suggest a list price for your home. Many sellers are tempted to go with the highest price, but what an agent says the home can list for doesn’t mean it will sell for that amount. Higher commission doesn’t always mean better customer service. Ask your prospective agent who will be handling your transaction. Many agents work in teams. This may mean more resources, but it also means that the agent you sign with may not be the person who picks up the phone.
Ask nicely and ask early. Talking about money is complicated and can be stressful. By starting the conversation early in the process, you can set expectations before any contracts are signed. You can still ask if you have already signed a contract that agrees to a certain amount of commission, but the contract terms will legally bind you. If you buy a home and sell another house simultaneously, you may have more room for negotiation. Real estate investors who are consistent buyers in the same location may have even more advantages.
Make sure you understand what’s included. What an agent does for you can vary depending on whether you buy or sell. You may prefer to handle some aspects of the transaction on your own. This can be risky if you are not experienced with real estate transactions, but if you have bought and sold multiple times, you may not need all of the services an agent provides. If this is the case, you may want to consider a discount or flat-fee broker.
Whether you are buying or selling a property, you will want to know all the costs you may face and how they vary depending on your situation. Ask questions and be willing to try negotiating; it may save you money in the long run.