Whether your home has gone up or down in value lately, you probably want to keep as much money from the sale as possible. After you pay off your existing mortgage, your real estate commission may be the next largest expense in selling your home. Negotiating the amount you pay to your real estate agent could therefore be the easiest way to save money.
In a typical home sale, each party—the buyer and the seller—works with his or her own real estate agent. But it's the seller who normally pays the commission for both real estate agents from the proceeds of the sale.
When listing your home with an agent, you have an opportunity to set the amount of commission both agents will receive. The commission is set as a percentage of the home's sales price. Most selling agents will ask for a commission of 5% to 6%, to be split with the buyer's agent; sometimes 50-50, but often unevenly, so that the buyer's agent (who puts in much less work) will receive 2.5%.
Reducing your commission by as little as 0.5% could result in big savings—for example, saving 0.5% on a $400,000 home sale would be an additional $2,000 in your pocket.
Studies have found that sellers who negotiate to cut their real estate commission can do so with little risk of getting worse service. Many real estate agents are hungry for business and willing to find some financial middle ground.
Of course, some agents might simply refuse. They're under pressure from the company they work for to keep commissions high, since this money not only pays the agent directly but goes toward office overhead and the various costs of marketing the home. Plus, your agent will have to work out an agreeable split with the buyer's agent. You might need to offer to play a greater-than-usual role in the process, as described next.
Don't want to take "no" for an answer? Go to the top. Seek out the broker, rather than the real estate agent who holds your listing. The broker has the power to pull strings, negotiate his or her cut with the agent, or otherwise help you get a discount.
Consider doing a meaningful portion of the agent's work, much as you would with a discount broker in a hot market. For example, you might host your own open house events; perhaps an informal open house for friends and neighbors (who might tell their friends, and so forth). You'll need to provide brochures, fliers, and information about the property, which your agent might help you prepare. You can refer unanswered questions and bids to the agent.
If you're selling to a family member, friend, or renter and don't need the agent's marketing expertise, a discount is typically a no-brainer. The agent will save a great deal of time and marketing expenses.
Also think about how you can reduce the agent's work on the physical condition of your home. A real estate agent knows he or she will have to work harder if your home isn't move-in ready and might be less likely to reduce the commission. Ideally before the agent even sees the place, add curb appeal to get shoppers excited about the property, and spiff up the inside so that it's clutter free, sparkling like a gem, and laid out for easy navigation. Consider spending some of that commission break on a professional stager.
Selling in the off season is a good time to request a reduced commission. Whether it's the dead of winter in some locales or the pre-school summer doldrums in others, selling in the slowest seasonal periods can be the best times to find a real estate agent who's hungry for work, even at a cut rate. But before you set your selling schedule around this plan, balance the possibility of a reduced commission with the possible negative impact of selling at a time when there are fewer potential buyers.
To learn more about commissions and more, see Selling Your House: Nolo's Essential Guide, by Ilona Bray (Nolo).