When selling your home, probably the most significant cost you’ll encounter is the commission paid to your real estate agent. Traditionally, this commission ranges between 5% to 6% of the selling price, split between the buyer’s and seller’s agents, although we should see a change in that tradition in July 2024 as a result of recent litigation. Nevertheless, these rates are not set in stone. By effectively negotiating the commission, you can save a substantial amount. Here’s a guide on how to approach this delicate negotiation.
1. Do Your Homework
Before entering negotiations, understand the standard commission rates in your area. Research online, talk to friends or family who have recently sold homes, and gather data from multiple agents. This knowledge gives you a baseline and strengthens your position during negotiations.
2. Evaluate the Market Conditions
The current real estate market can significantly impact your negotiating power. In a seller’s market, where demand outstrips supply, agents might be more willing to lower their commission rates to secure your listing. Conversely, in a buyer’s market, where homes are harder to sell, agents might be less inclined to negotiate.
3. Assess the Agent’s Experience and Services
Consider the value that the agent brings to the table. Experienced agents with a proven track record might justify a higher commission due to their expertise and network. However, if you feel confident in your ability to handle parts of the selling process, you might negotiate for a lower rate by taking on more responsibilities yourself, such as hosting open houses or managing marketing efforts.
4. Highlight the Positives of Your Property
If your home is in excellent condition, located in a desirable neighborhood, or priced competitively, use these factors as leverage. A home that is likely to sell quickly and with minimal effort can be a strong bargaining chip to negotiate a lower commission.
5. Discuss a Sliding Scale Commission
Propose a performance-based commission structure. For instance, you might offer the agent a higher percentage if they sell the home above the asking price and a lower rate if the home sells below it. This incentivizes the agent to secure the best possible price for your property.
6. Negotiate with Multiple Agents
Interview multiple agents before making a decision. Not only does this give you a range of commission rates, but it also allows you to compare the services offered by different agents. Letting agents know you are considering other professionals can create competitive pressure, encouraging them to offer more favorable terms.
7. Consider Flat Fee or Discount Brokers
Explore alternative options like flat-fee or discount brokers. These agents charge a flat rate or lower commission for their services. However, ensure that the reduced fee doesn’t mean a significant drop in service quality. Review their marketing plans, support, and track record to ensure they can still effectively sell your home.
8. Be Prepared to Walk Away
Negotiation requires confidence and the willingness to walk away if terms are not favorable. If an agent is unwilling to negotiate on commission and you believe their rate is unjustifiably high, be prepared to find another agent. There are many qualified professionals who might be willing to offer better terms.
9. Get Everything in Writing
Once you’ve negotiated a commission rate, ensure all terms are documented in the listing agreement. This prevents any misunderstandings or changes later in the process.
Conclusion
Negotiating the commission with your real estate agent requires preparation, understanding of the market, and a clear assessment of the agent’s value. By following these steps, you can secure a fair commission rate and potentially save thousands of dollars, all while ensuring you receive the professional support needed to sell your home effectively.