How To Negotiate Real Estate Agent’s Commission

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There are three key people involved in home sales – the buyer, seller and the middle man or who we refer to professionally as a real estate agent. Each of the trio expects to get something from the transaction. The seller hands over the house to the buyer while pocketing the agreed cash. The real estate agent, on the other hand, is the link bridge between the buyer and the seller, and as such deserves a cut or commission from the sale.

How To Negotiate Real Estate Agent


But most people tend to get confused about this ‘fees’ paid to real estate agents, asking questions like whose pocket is the money coming from? How much are real estate agents entitled to? In this text, we’ll be breaking down everything you need to know, including how to negotiate a real estate agent fees. Enjoy the read.

Let’s start with the most frequently asked questions. 

Who’s expected to pay a real estate agent’s commission?

In real estate business, the home seller bears the real estate agent’s commission cost. The commission is received by the listing agent and split with the buyer’s agent. The buyer is free from commission payment. 

How much do real estate agents should charge?

Many people believe that real estate agent commissions are a fixed percentage. However, this is far from the truth, as there’s no specific pricing. In fact, price-fixing is illegal in many industries. But several states peg the commission rate at 6% of the final sale price of the home. For vacant lots, however, commissions can be as high as 10% to 20% of the sale price. This is because land sales typically take longer and consume more marketing revenue.

Are real estate agents paid monthly salaries asides their commissions?

No. Real estate agents typically are commission-based agents with no monthly salary.

Here’s a breakdown of the numbers. Assuming you have a $200,000 home to flip, and your real estate agent charges you a 6% commission on its sale. He or She is expected to split the 6% (or $12,000 commission) from the sale with the agent of the buyer. That means there’s just 3% (or $6,000 commission) left. 

That’s not all. Your estate agent is then expected to hand his brokerage office a share of this 3%. This cut can be anywhere from 20% to 45%. Once all the cuts have been deducted at the end of the transaction, you’d find that your agent may be left with just $3,600 or 60% of his $6,000 (3% commission). 

As you may probably know, real estate agent fees are not instant. They are only released following the successful transfer of a home’s title. What this means, in essence, is an agent may plow through offers and work for months with a seller before receiving his commission.  

Is it possible to negotiate commissions?

Yes. According to the law, commissions are negotiable. Negotiating for the perfect rate, however, is another thing entirely. 

If you’re a homeowner looking to sell, of course, you’d prefer to have an agent who can get you the best price for your property. Considering this, you won’t want a real estate agent who isn’t a good negotiator, as you can’t expect to get the best possible rate with someone who easily accepts offers. 

That said; many agents use a part of their commission to shoulder the cost of marketing a property. What this entails is your real estate agent fees will influence your property’s advertisement. 

Can a real estate agent represent both seller and buyer? 

Sure. Dual agency is a situation where a real estate agent represents both buyer and seller. It’s also another instance when there’s a possibility of a lower commission. There’s a “but” though. ‘Dual agency’ isn’t allowed in several states. Even those it’s allowed in, many agents prefer not to engage in it, as it complicates things for them working for both buyer and seller.

All in all, negotiating a real estate agent commission is a welcome idea. You can enquire on why an agent chooses to charge his/her quoted fee. This will provide you more insight on what’s covered as well as the possible sale period and the marketing schedule. It won’t be a bad idea to compare prices by interviewing other agents. If you decide to settle for an agent, you can inquire if the agent is open to commission reduction. Who knows, you just might land yourself a decent deal.

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