Four tips to save on real estate commissions

Washington, DC
CNN
 — 

Real estate agents’ fees are always negotiable. But it doesn’t always feel that way to the homeseller, who typically pays the commission.

That fee, which is usually between 5% and 6% of the final sales price in the United States, is typically split evenly between the homeseller’s agent and the buyer’s agent.

But real estate agents are professional negotiators who make their living in sales. Most are members of the National Association of Realtors, which is the largest trade group in the country representing 1.5 million agents, and are trained to come armed with a list of reasons why they shouldn’t lower their rate for you.

Few dispute the value of a good agent who knows the market, is experienced in how to prepare a home for sale, and successful in marketing a home and closing the deal. But many sellers — who can find home-value estimates, download contracts and arrange for financing for themselves online — wonder if the fee has to be so high.

It can feel daunting for owners selling their home — one of the largest transactions in their lives — to go toe-to-toe with a pro who has negotiated three deals before lunch.

The good news is that with so few properties on the market now, sellers have more leverage to negotiate with agents who are circling, looking for listings.

“Homeowners being aware of how much power they have is really key,” said Nic Johnson, a real estate industry entrepreneur. After 17-years at PIMCO, an investment management firm, he launched Listwise, a company focused on helping homesellers get the best price for their home and only pay for the results they get from an agent.

“In my experience working with agents, most agents will negotiate their rate,” said Johnson. “They’ll lead with, ‘This is my standard.’ But they have another rate, which is their, ‘This is what I’ll take to get your business,’ rate.”

Here are some tips to help you lower the commission.

Know the commission landscape in your area

If real estate is all about location, negotiation is all about preparation.

Use a real estate listing site — like Redfin, Zillow, or Realtor.com — to look at current properties on the market in your area and what the typical buyer’s agent fee is. The research will help you know if your expectations on the commission are realistic.

The big listing portals now disclose the fee the buyer’s agent will get (if they have access to that information and if a seller is offering the buyer’s agent payment). Since sellers typically offer a commission that is split evenly between their agent and the buyer’s agent, a 3% fee for a buyer’s agent, for example, generally means sellers near you are paying a 6% commission.

But if most of the comparable properties on the market in your area show a buyer’s agent commission of 1.5%, for example, you can reasonably assume the full commission paid by a seller is closer to 3%. And you may not have to work very hard to get an agent in your area to agree to that.

Sure, negotiating with one agent can be daunting enough, but you should really try to meet with three to five. As the seller, you have the goods they want to sell, and you have the power to hire or not hire the agent.

Be sure to ask what services will be included. When asked to curtail their fee, many agents may also curtail their services.

Good full-service agents deliver a lot of services. Agents you meet with should make their case and express their value. Ask them to explain what they will do to help you get your home sold for the most money in the least amount of time.

You’ll want to be sure the agent will market and list your property on the local multiple listing service, a database of local listings, where it is likely to reach the most buyers, and you’ll want to be sure they will help you with the paperwork involved with closing.

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