Jeff Ostrowski | (TNS) Bankrate.com
In a real estate deal, there’s always some level of bargaining. If you’re the seller, you face negotiation not only with potential buyers, but also with the person you’re working with to finalize the deal: your real estate agent.
Thanks to a recent settlement of a federal lawsuit, the way real estate fees will change in July 2024 (subject to court approval). If you’re looking to save some money, here’s what you need to understand about how fees work, and how to come to an agreement on a rate that both you and your agent can feel satisfied with.
How real estate fees work, and who covers them
In the past, real estate fee rates were typically around 6% of a home’s sale price. However, the average real estate fee rate has decreased in recent years to just under 5% of a home’s sale price, as reported by Real Trends, a real estate research and consulting firm, and by Anywhere Real Estate, the parent company of Century 21, Coldwell Banker and other brokerage brands.
Under the current system, the cost is usually paid by the seller at the closing, and it’s normally split equally between the seller’s agent and the buyer’s agent. (So, for a 5% fee, each agent would receive 2.5%.) On a $400,000 transaction, which is approximately the median sale price nationwide, the 5% fee amounts to $20,000.
Agents and brokerages can offer various fee structures, though, with some advertising flat fees or other benefits. So there might be an opportunity to discuss the rate if you’re seeking to save on the cost of selling your home.
“There are agents and brokerages that reduce, discount or offer coupons for their services,” says Kevin Van Eck, an executive with @properties, a brokerage in Chicago. “Each agent, along with their brokerage, can determine where they set fees based on the value and success created.”
Is it possible to negotiate Realtor fees?
Frequently, yes, there is room for negotiation. And as of July, there might be even more flexibility. As a result of a lawsuit involving the National Association of Realtors (NAR) and several major brokerages, new fee regulations will come into effect that month that will mean sellers no longer have to cover the buyer’s agent’s fee, which may lead to more intense price competition among buyer’s-side agents. Additionally, listing agents will no longer be allowed to disclose the buyer’s agent fee in the MLS (multiple listing service), as has been common practice.
Your success in negotiating often depends on an individual agent’s circumstances, says Dave Liniger, chairman and co-founder of RE/MAX Real Estate. “Some agents are unwavering,” he says. “Other agents need the business so much they’ll readily negotiate.”
As you get ready to list your home for sale, you may want to meet with a few listing agents to find the right one for the job. Ask each agent about their fee rate and what exactly you’ll be getting for that price. Consider not only how the agent plans to market your home, but also their skill in pricing it, experience, resources and track record.
“The seller can inquire about the commission, but it's best to do so after speaking with the agent and understanding their experience, how they will promote the home, and the value they bring,” says Van Eck.
Liniger recommends that sellers have three to five listing agents visit their homes to make their pitches. By comparing the proposals, you can see how much agents charge and have leverage to negotiate a better deal. “You won’t receive if you don’t ask,” he says.
You might also want to compare what you learn from full-service agents with the services of a discount broker. Just remember that the discounter’s offerings may be limited compared to those of a traditional agent.
How to negotiate real estate commissions
Once you understand exactly what you’re paying for, you will be in a better position to request a discount. Here are some tips:
- If you can provide the agent with more than one listing opportunity, that could be a convincing reason for a reduced commission. “If [you’re] a real estate investor who is looking to offload several properties, I would definitely talk about the commission,” says Dana Bull, an agent with Compass in the Boston area. Most agents welcome repeat business, she says.
- If you don’t have another listing opportunity of your own to offer, try using your ability to recommend the agent to others in your neighborhood or network as leverage. This might be especially impactful if you know they are looking to build their business. “I can’t just slash my commission, but I might be willing to give a slight discount if the client offered some sort of other strategy to get more business after the sale,” Bull says.
- If you have a home in a sought-after area, or a buyer already interested, or an unusually high sale price, your agent may not need to do as much to earn their fee. If neither party can foresee the need for additional services — “if an agent is coming in to basically just do some hand-holding, keeping the transaction on schedule and assisting with paperwork,” Bull says — that might be another good reason to propose a slightly lower rate.
- If you plan to buy a new home while selling your current one, use that to your advantage. Liniger says an agent who can represent you on both the sale and the subsequent purchase will likely be willing to cut their fee.
You may be considering skipping the commission conversation entirely and selling your home yourself. If so, be aware: While an experienced house flipper might be skilled enough to list a home without an agent, for most homeowners, the for-sale-by-owner route can be more challenging, more costly and more time-consuming in the long run.
Bottom line
In any negotiation, both parties must be willing to give and take. Negotiating your agent’s commission can work in your favor, but an agent can walk away if they don’t necessarily need your business. Keep in mind, too, that it can make sense for sellers to pay more for additional services instead of negotiating the commission down, Bull says. These might include higher-end marketing, home staging or additional mailers, for instance. And if you’re not in a rush, consider waiting until after the July rule change to see how things shake out. Ultimately, it’s important to find an agent you can speak with openly about cost, and who you trust to do the best job to sell your home.
(Go to Bankrate's website at bankrate.com.)
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