Whether the home you own has gone up or down in value lately, when the time comes to sell, you want to keep your profits as high as possible. After paying off your existing mortgage, the real estate commission you pay to your agent might be the next largest selling expense. Therefore, negotiating down the amount you pay to your real estate agent could be the easiest way to save. But you'd need to do so at the outset of the relationship, as described below.
In a typical home sale, each party—the buyer and the seller—works with their own real estate agents. But it's the seller who normally pays the commission for both agents, from the proceeds of the sale, per a written contract signed with that agent.
When entering into the listing contract, you, as the seller, 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. By tradition, most selling agents ask for a commission of around 5%, to be split with the buyer's agent. That split is sometimes 50-50, but often cut unevenly, so that the buyer's agent (who puts in far less work) will receive around 2.5%.
Those figures might change even without negotiating on your part. Consumer dissatisfaction, particularly with the amount sellers must pay to buyers' agents, led to a major 2023 court ruling. A Missouri court found that the National Association of Realtors (NAR) had, along with some residential brokerage firms, conspired to artificially inflate home-sale commissions. The court ordered damage payments totaling $1.78 billion. That case will wind its way through appeals courts for some years, but similar lawsuits are already being filed in other areas. What's more, real estate agents could find themselves facing new and tough questions from clients.
No matter how this all plays out, reducing the commission you'll pay to your real estate agent 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 financial middle ground.
Given the new public attention to this issue, some agents are likely to be especially amenable to negotiation. Some circumstances that you can use as leverage include:
Of course, some agents might push back hard. 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 numerous costs of marketing the home, such as paying for advertising listings and flyers, photographers, possibly snacks at open houses, and so on. Plus, your agent will still have to work out an agreeable split with the buyer's agent.
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 their cut with the agent, or otherwise help you get a discount.
If you're hitting a wall, but really want to work with a certain agent, you could offer to play a greater-than-usual role in the process, as described next.
Then again, you might simply look for a different agent, perhaps one that routinely offers a discounted commission arrangement. Before going that route, make sure you'll be getting all the same types of service a regular agent would offer, or at least are willing to do them.
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 have 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.
Also think about how you can reduce the agent's work on the physical condition of your home. Real estate agents know they will have to work harder if your home isn't move-in ready, and might thus be less likely to reduce the commission. Ideally before the agent even sees the place, you can add curb appeal to get shoppers excited about the property and spiff up or stage the inside so that it's clutter free, sparkling like a gem, and laid out for easy navigation.
Selling during 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 bid the price up.
It is not only legal, but the industry standard for an agent's commission percentage to remain unchanged despite unforeseen costs such as repairs demanded by the home buyer. Your contract probably states that the listing agent will be paid a percentage of the sales price of the property at the closing, with no concessions for surprises or extra costs incurred by the seller. The only time an agent's total commission amount will change is if there is a change in the actual sales price.
To learn more about real estate agent commissions and more, see Selling Your House: Nolo's Essential Guide, by Ilona Bray (Nolo).