With the real estate market superheated right now, some homes are selling within days, with cash offers well over the asking price. What that means, though—if you’re looking to sell and you think your house will sell quickly—is that you have a better chance negotiating a lower commission with your real estate agent. Some agents might refuse to lower their commission, but it can’t hurt to ask—especially when it’s a seller’s market working in your favor. Here’s what you need to know.
How do commissions work?
In a typical home sale, it’s the seller who pays commission to both the buyer and the seller’s agent, using the proceeds from the sale. The average overall cut used to be 6% of the sale price, although in recent years it has dropped to just under 5%, according to Real Trends, a real estate research and consulting firm.
For a $500,000 home, that 5% would be $25,000, half of which goes to your agent’s brokerage (the other half goes to the buyer’s agent). That half is split further between the brokerage and your agent, typically in the range of 40-60%. The agent then has to cover the costs for staging and marketing your home, which can include expenses like brochures and social media videos. That means that after taxes, your agent is making roughly $4,500 for selling the property.
There are cut-rate brokerages that will only charge you a flat 1% fee, too, but they’re pretty much just listing your home and planting a sign on your lawn. That might be all you need in this market, so you might want to consider that, as well. (The Balance has a good overview on how these discount brokerages work.)
How to negotiate a lower commission
You’ll want to put your best foot forward and negotiate the commission when you first hire the agent. Ask the prospective agent about their experience and what you can expect in terms of service for that rate.
Once you have an idea of what you’re getting from a prospective agent, you can try to chip away at their commission by asking for a point or half a point off their commission. Valid arguments to justify a lower fee can include:
- The agent is inexperienced. If a prospective agent only has a couple of years experience selling houses, they’ll probably need your business more than an experienced agent with a lot of referrals. You have to be mindful of the old adage, “you get what you pay for,” of course, but not all inexperienced agents are automatically bad, either.
- It’s a seller’s market. Normally, homes take weeks or even months to sell, but these days we’re seeing homes sold within days, sight-unseen. Citing listings and houses sold in your area, you can make the case that your house will sell more quickly, which means that your agent will have to do less work in a shorter period of time.
- The house will be empty. One of the biggest hassles for agents is making arrangements with the owner to stage and showcase the home. If you don’t actually live in the home, that can make the sales process a lot easier for the agent.
- You can offer another listing opportunity. If you can offer another property that can be sold, then a bundle discount is a reasonable suggestion. Successfully referring family or friends is another way you can do this, too.
- You are a returning customer. If you have a good relationship with an agent and have sold with them before, it’s reasonable to suggest a discount, especially if you are promising to use them again later.
If you can use any of the arguments listed above as part of your negotiation, you’ll have more luck lowering your commission. Personally, I’ve had success with the “it will sell fast” argument and was able to knock our commission down by 0.5%. But I had sold a place with the same agent before, and was able to refer other business his way, so I’m sure that helped, too.