Negotiating Fees with a Real Estate Agent

A real estate agent’s job is to help you keep your money in your pocket. It is up to you to find a real estate agent who hears you, does not pressure you and, above all, one by whom you feel you can trust and respects your wishes. Essentially you want a REALTOR® that treats the sale of your home as if it was their own. But remember, there are good, okay and bad in every single line of work.  Expect excellent.  When you find it though remember they are most likely excellent for a reason and in exchange for an agent’s services, a fair compensation must follow. Its how they feed their family, like you do every day you go to work.

A critical thing to understand is that a real estate agent is not an expense; a real estate agent adds value and has experience in buying and selling what is your most expensive investment. His or her expertise, time, and technical knowledge and skills are what allow you to carry on with your life, your commitments, and your priorities, while the agent takes care of the complexities of buying a home. A real estate agent maximizes the exposure of your home- through advertising, marketing, showings, and callbacks, etc.- which, ultimately, creates a bigger pool of buyers and results in a higher selling price. Additionally and sometimes even more important is that a great agent knows how to protect your interests, not just financially but legally by ensuring proper documentation, ensuring key items that could lead to legal issues later are addressed up front and you are prepared.  If you think no big deal, well without using Google to find out, do you know the difference between a “ patent” and a “ latent” defect in a home?  If not one could get you very much in legal trouble.

Having said that in most provinces/states compensation, often referred to as real estate commission is usually negotiable, so be sure to find out.  A real estate agent might receive compensation in one of a few ways. He or she is paid either through a fee structure or as a percent commission from the sale of your home or property. Up front, it is important to ask your agent a simple question like, How do your commission fees work? Your real estate agent is obligated to disclose to you how this process and payment looks. As the Seller, you generally will pay fees or commission on the final sale price to your Seller’s agent (their Brokerage), who then will split it with the Buyer’s agent (according to a predetermined formula, but may not always be an equal split so ask about both sides and what the split is). An example: a full commission may be 7% on the first $100,000 of the price, followed by 3% on the balance of the sale price (BOSP).  This is generally split in half with 3.5% and 1.5% going to the selling agent, the other half to the buyer agent.  Generally you pay the full amount to the Brokerage selling your home and they then pay the other Brokerage.  Commission structures vary from geographic areas and from city to city, and ultimately agent to agent.

You do have options. “Is there any way to negotiate your commission fee?” is a great way to open the conversation with your agent. That said, every Agent is bound by guidelines set by the Brokerage that employs them, but the terms of a transaction are negotiable. Generally speaking, a Buyer’s agent fee is an untouchable amount; in a rare circumstance, you may be able to whittle off a 1% discount. Why?  Well if you don’t offer a fair commission to the buyers agent they may not take their clients to look at your house….ethical no, reality at times (remember, good, ok and bad types in all fields) so best to ensure a fair offer to the buyer agent.

However, there is potential to negotiate savings when you list with an agent to sell your home.

Perhaps, you will be able to leverage a “buy & sell” option with a real estate agent, whereby you sell your home and buy a new one through the same agent for a discount in fees. This is more open to the agent as they are making money selling and helping you buy.  Remember though they are spending lots of money marketing your home to sell, if it does not they not only don’t make a selling commission they also lose the buyer commission as you wont be buying, so realize they too take risk and have motivation to sell your home. Or maybe you can offer your agent ‘variable rate’, depending on how or when your house sells.

If it sells by word of mouth or because of a hot market, you can pitch this idea, “If my house sells without the help of a Buyer’s agent, I would like a variable rate of 4% in that case.”  At times an agent listing and selling your home representing both parties is called “ double ending”, and they typically receive the commission from both sides.  Negotiate a win back to you in that happens especially is you are also going on to buy with them. A win-win like this is always worth asking.  Key to remember within all of his however, you generally get what you pay for……sometimes a lower commission percentage is exactly how much effort you are going to get from the agent as well, where as paying full commission you can have very heightened expectations and rightly so.

You will want to seek out a Comparative Market Analysis, or CMA, which will provide a report on the sales of properties that have sold in your area as they (roughly!) compare to your home. This should be requested by both the Seller to know how to price their home, but also by the Buyer to ensure they are not overpaying the market value. A CMA considers current listings, as well as homes that have recently sold in your area. Some simple research on your behalf can provide an advantage for you. For example, when you know the saleability of your home or property, you will have a sense of how hard an agent will have to work to sell your house. In other words, a house that is hard to sell warrants a higher Seller’s agent fee, and vice versa.  Additionally many systems offer history on a property, so list too high and have to drop later and everyone will see the drops…making your house appear to have something wrong with it.  Buyers can note the changes and determine if you are getting more anxious to sell. Another reason to use the right agent.

When negotiating fees with your real estate agent, you will want to consider which services you are looking for. Do you want all of the services that the real estate agent offers? If not, ask if there is any discount in fees for what would be a discount in service. If an agent refuses to negotiate with you in this way, you may want to contact a discount broker who can provide only certain services for a lower price (e.g. less-than-full advertising of your property).  Note concerns above, so do your due diligence carefully and ask for references.

Paying for the services of a real estate agent is an investment in professional services. Being a FSBO (For Sale By Owner) may save you some dollars, but it may also be the worst decision of your life…your selling your most expensive asset. Do you really want to do that yourself? As a direct result of hiring a real estate agent in the sale of your home, you want to ensure market price or higher selling price, in the least amount of time, with the least amount of hassle. A great real estate agent will do just that for you.

Don’t be afraid to ask for what you want, talk to a number of agents, interview them, ask for referrals from friends all before you finalize your decision.  And when you find a GREAT one – hold on to them like you do with all of your other trusted service providers, they are invaluable.



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