Negotiating Fees with a Real Estate Agent

real estate agent talking to clients

A real estate agent’s primary job is to help you keep your money in your pocket. It’s essential to find an agent who listens to you, doesn’t pressure you, and, most importantly, one who earns your trust and respects your wishes. Essentially, you want a REALTOR® who treats the sale of your home as if it were their own. But remember, there are good, okay, and bad professionals in every field. Aim for excellence when choosing your agent. When you find an excellent one, keep in mind that they are excellent for a reason. In exchange for their services, fair compensation is expected. After all, it’s how they feed their family, just like you do every day when you go to work.

A critical thing to understand is that a real estate agent is not an expense; they add value to the process. With experience in buying and selling your most expensive investment, their expertise, time, and technical skills allow you to continue managing your life, commitments, and priorities, while they handle the complexities of the sale. A real estate agent maximizes the exposure of your home through advertising, marketing, showings, and follow-ups. This ultimately creates a larger pool of buyers and leads to a higher selling price.

The Importance of Legal Protection in Real Estate Transactions

Additionally, and sometimes even more importantly, a great agent knows how to protect your interests—not just financially but legally. They ensure all necessary documentation is in place, address any potential issues that could lead to legal problems later, and prepare you for what’s to come. For example, do you know the difference between a “patent” and a “latent” defect in a home? If not, one of them could cause you serious legal trouble.

In most provinces or states, compensation, often referred to as the real estate commission, is usually negotiable. Be sure to ask your agent about it upfront. A real estate agent might receive compensation in one of a few ways: either through a fee structure or as a percentage commission from the sale of your home. It’s important to ask a simple question like, “How do your commission fees work?” Your agent is obligated to disclose how this process and payment will look. As the seller, you generally pay fees or commission based on the final sale price to your seller’s agent (or their brokerage), who will then split it with the buyer’s agent (according to a predetermined formula, though it may not always be an equal split, so ask about the details).

For example, a full commission may be 7% on the first $100,000 of the sale price, followed by 3% on the balance. This is typically split in half, with 3.5% and 1.5% going to the selling agent, and the remaining portion to the buyer’s agent. Generally, you pay the full commission to the brokerage selling your home, and they will then pay the other brokerage. Commission structures can vary by geographic area, city, and agent.

You do have options when it comes to negotiating your agent’s commission. Asking, “Is there any way to negotiate your commission fee?” is a good way to start the conversation. Keep in mind that every agent is bound by guidelines set by the brokerage they work for, but the terms of a transaction are negotiable. Generally, a buyer’s agent fee is non-negotiable. In rare cases, you may be able to negotiate a 1% discount. Why? If you don’t offer a fair commission to the buyer’s agent, they may not be motivated to show your house to potential buyers. While this may not be ethical, it is sometimes a reality (there are good, okay, and bad agents in every field). Therefore, it’s best to ensure that your offer is fair to the buyer’s agent.

There is, however, potential for negotiating savings when you list with an agent to sell your home.

For example, you may be able to leverage a “buy & sell” option with a real estate agent. This would allow you to sell your home and buy a new one through the same agent for a discounted fee. Agents may be more open to this because they are making money on both the sale and the purchase. However, keep in mind that agents spend a lot of money marketing your home. If the sale doesn’t go through, they not only lose the selling commission but also the buyer’s commission, as you won’t be purchasing with them. Agents take risks, too, and they have a strong motivation to sell your home. Alternatively, you could offer your agent a “variable rate,” depending on how or when your house sells.

If your house sells quickly through word of mouth or in a hot market, you might consider proposing, “If my house sells without the help of a buyer’s agent, I’d like a variable rate of 4%.” In cases where an agent lists and sells your home while representing both parties (known as “double ending”), they typically receive the commission from both sides. In that case, negotiate a win for you, especially if you’re also buying with them. A win-win like this is always worth asking for.

Keep in mind, though, that you generally get what you pay for. Sometimes, a lower commission percentage could mean less effort from your agent, while paying the full commission could come with heightened expectations—rightfully so.

Before making any decisions, you will want to seek out a Comparative Market Analysis (CMA), which provides a report on properties that have recently sold in your area that are comparable to your home. This report is useful for both the seller (to know how to price their home) and the buyer (to ensure they aren’t overpaying). A CMA considers both current listings and recently sold homes. Some simple research on your part can give you an advantage. For example, knowing the marketability of your home can help you understand how much work an agent will need to put in to sell it. A harder-to-sell home might justify a higher seller’s agent fee.

Additionally, many systems track property history, so if you list too high and have to drop the price later, everyone can see the drop. This can make your house appear problematic. Buyers may notice price changes and infer that you’re becoming anxious to sell. This is another reason to work with the right agent.

When negotiating fees with your real estate agent, think about what services you’re expecting. Do you want the full range of services that the agent offers? If not, ask if there’s any potential for a fee discount based on reduced services. If the agent refuses to negotiate in this manner, you might want to explore contacting a discount broker who offers fewer services at a lower price (e.g., limited advertising). However, proceed with caution, do your due diligence, and ask for references.

Paying for the services of a real estate agent is an investment in professional services. Selling your home yourself (FSBO – For Sale By Owner) might save you some money upfront, but it could also turn out to be the worst decision of your life. After all, you’re selling your most valuable asset. Do you really want to handle it on your own? By hiring a real estate agent, you increase the likelihood of achieving market value or even a higher selling price, with minimal hassle and in the least amount of time. A great real estate agent will do just that for you.

Don’t hesitate to ask for what you want, speak to multiple agents, interview them, and ask for referrals from friends before making your decision. When you find a great agent, hold on to them as you would any trusted service provider—they are invaluable.

Share:

Facebook
Twitter
Pinterest

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.