How To Negotiate Terms with Your Real Estate Agent

Many sellers see real estate agents as a necessary evil. Some would even say they are crude salespeople who are only looking for a quick buck. On the contrary, most realtors are there to help you make a sale and are willing to work with you to get it done. Many realtors are willing to negotiate their terms to make it work for both parties. They may have a base contract which they give to every client, but almost every realtor will adjust those terms to fit your preferences better.

If you find a realtor that won't negotiate their terms, that's okay. Some agents get enough clients with their base terms that they don't need to compromise. One way to avoid this is to look for less-experienced agents. Newer agents will be more eager to help and more likely to take a lower commission to secure your business. If an agent seems to be a tough negotiator, that might be a good thing. If you have a hard time negotiating terms with a realtor, that likely means they will be tough during negotiations with a buyer (which means a better deal for you when they're representing you). I would definitely want someone like that on my team on closing day. 

Hopefully this makes you feel better about working with an agent. Less than half of all sellers actually discuss the contract or negotiate the terms before signing. They may not know that nearly every aspect is negotiable, especially the commission. The initial commission rate is typically the standard in your region. You can choose to go with the standard or negotiate based on what you think is appropriate. Not every home sale is created equal, so the commission rate doesn't need to be either. 

Here's What You Should Know About Commission

The seller and realtor agree on a commission rate when they sign the contract.

As the seller, you will sign a contract with the realtor when you agree to work together. For the most part, this contract is to ensure that you sell your home through that agency. What the seller may not know is that the contract lays out an agreement that lasts until the home is sold. Even if you haven't discussed a listing price, you've agreed to a commission rate once you sign the contract. Make sure you plan out how much you're willing to spend on commission before you agree to the terms. 

The commission rate will vary by region or even by the real estate agency.

What may be expected in one area might seem too high or low in another. Some agents can do very well at a 4-6% commission, while others will suggest 7-9%. It's important to know what is typical in your area and whether that realtor has a history of negotiating the commission rate. Plus, if they know you've done your research, they're less likely to try to take advantage of you. 

There is no official "standard rate," although the realtor may have a typical rate that they use. 

Your realtor might say that somewhere between 7-9% is "standard" to get you to agree to the terms. It may be a standard because people agree to those rates, but there is no legal or professional standard for commission rates. Some agents will agree to rates as low as 4% if the seller plays their cards right. If you keep in mind that the realtor wants your business and that you have other options, you're on the road to breaking the "standard" that they're trying to convince you to subscribe to. 

The commission is split between the selling and buying agents (terms agreed upon in the contract).

Another vital part of the contract is the buyer's side commission. The terms of a home sale contract will include the total percentage the seller agrees to and breaks down the commission split between the buying and selling agent. Whenever you ask for a lower commission, that means you're asking the selling agent to lower their cut of the profit. This is an important detail to remember when negotiating, as some agents may see it as an insult. If you're confident enough and make a good case for why you want a lower commission, they will understand. 

Your agent might find a buyer and represent them too (dual agency).

Sometimes the selling agent will try to bring in one of their own clients to buy the home. In this case, they will get both the buying and selling sides of the commission. Another term for this scenario is dual agency. Representing the buyer and seller is a conflict of interest and can get tricky. It may be unethical or even illegal in some states. Try to avoid this situation if possible.

Helpful Hints for a Successful Negotiation

Prepare Your Home Before Contacting the Agent

There are many things you can do to your home before going into contract with an agent. Pre-Listing activities are becoming more popular because they can save the seller thousands of dollars in commission. Anything from having an inspection to staging your home will mean less work for the realtor and gives you a better case for a lower commission.

Refer a Friend to that Agent

If you have a friend or family member that may be buying or selling their home soon, share their contact information with the realtor. Giving them more business opportunities may make them more likely to negotiate and give you a better deal. Think about it: 4% commission from two clients is more money than 6% from one. This is a great way to save yourself and your friend some money while helping out your agent. It's a win-win!

Make it Easier on Your Realtor

Similar to going through the pre-listing process, you'll want to show the realtor that you're giving them all the tools for a successful sale if you want to negotiate a lower commission. Ideally, you can stage your home or at least clean and organize everything before the tours. Another benefit will be if you're already moved out of the house and offer them full access through a lockbox or giving them a key to the home. Either way, allowing them to tour the home at any time is an advantage because they can get as many people in the house as possible. Anything you can do to make their life easier will give you a better shot at a lower commission. 

Avoid Requesting Lower Buyer's Side Commission

Typically, you'll want to avoid decreasing the buying side commission. Buyers' agents won't want to show their clients the home if they know it has a lower commission than other similar homes. This means you're essentially asking the selling agent to take a smaller cut. Be very sensitive to this because you don't want to offend anyone or make them feel like they're not worth a higher commission. 


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