How Much Should You Be Paying Your Realtor?

If you choose to have a realtor list your home, you will be paying them a commission upon the sale of your property. Depending on the agent you use, the commission you’ll pay may differ; however, many real estate agents charge a standard 6%.

Six Percent is a lot…Where is This all Going?

It’s important to note that most of the time your agent is only receiving a 3% commission––the other 3% is paid to the buyer’s agent. When your agent, the listing agent, negotiates their commission, they are exclusive negotiating their 3%. This is because listing agents know some buyer’s agents are deterred from showing their clients properties that don’t offer a standard 3% buyer’s commission.

The biggest factor that allows agents to negotiate their commission is the brokerage they are with. Some brokerages take as much as half of the agent’s commission, leaving the agent with only a 1.5% commission before marketing costs. As you can see, there is not much room for discounts if the brokerage is taking this large of a cut.

So Can I Negotiate My Commission?

Commissions are always negotiable, and you may be surprised as to how much money you can save just by asking. Although some realtors never discount their commission, many will if it makes sense for both parties.

Being a licensed realtor myself, I find that experienced agents who work for lesser known firms often provide the best value at the lowest price. This is because lesser known brokerages often have very competitive contracts with their agents, so the agent will have more “wiggle room” to discount their commission. Almost all the value your realtor provides comes from themselves, not their brokerage, so finding an experienced realtor at a small firm is your best bet at getting a percent or two off of your sale commission.

What Leverage Do I Have?

As a seller, there are two major ways you have leverage to negotiate. Firstly, you are in a good position to negotiate if the property being listed has a high listing price, as the agent’s commission increases linearly with the price of the property.

Secondly, let your agent know if you plan to use them as a buyer’s agent for your next home purchase. Agents will be more inclined to give you a discount if they know they will receive a full 3% commission on the buyer’s side when you purchase your next home.

You may have heard a realtor say ‘you get what you pay for’ when not budging on their commission. As delineated above, however, most factors that allow realtors to negotiate their commission does not have to do with the quality of service.