How To Negotiate A Real Estate Commission

Selling your home is a large transaction that can involve a lot of negotiation. That doesn’t only include talking the price and other terms with a potential buyer — you can also negotiate with your real estate agent.

If you’re successful, you can close the deal with more money in your pocket. And considering home prices, the amount can be significant. Below, CNBC Select offers tips on how and when you can negotiate with your real estate agent.

What you need to know about real estate commissions

How does the real estate commission work?

A real estate commission is a fee the home seller pays at closing to the buyer’s and seller’s agents. The typical commission rate is 5% to 6% and it’s split evenly between the two agents (and the companies they work for). The seller pays out the money when the deal closes. Since it can be a considerable sum, sellers usually include the percentage they’ll lose to the commission in the asking price. According to Julee Felsman, branch manager and SVP of mortgage lending at online marketplace Guaranteed Rate, even appraisers are required to consider seller’s concessions when determining property values — and that includes agents’ commissions.

“Ultimately, I think we can all agree that the only person bringing money to the table on the closing of a home purchase is in fact the buyer,” she says. “The buyer is, has been and always will be paying for everything.”

How real estate commissions work may soon change

A federal jury in Kansas City, Missouri, ruled in October 2023 that the National Association of Realtors (NAR) and other real estate organizations conspired to artificially . The results of this case might change the rates home sellers pay real estate agents.

In rare situations, such as with a bank-owned property, a listing will indicate that only a portion of the buyer’s agent commission will be covered by the seller. However, even in these scenarios, the buyer’s agent often opts out of additional payment from their client.

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Are real estate commissions negotiable?

The property’s price isn’t the only negotiable thing in a real estate transaction. As a seller, you may be able to negotiate your agent’s commission as well. However, not many people exercise this opportunity. According to the 2023 data from the NAR, only 22% of sellers brought up the topic of commission fees, and the real estate agent was willing to negotiate. Another 5% also initiated the discussion, but the agent wasn’t able or willing to negotiate their rates.

“[Negotiation] doesn’t happen that often,” says Aja McClanahan, a licensed realtor in Florida. “Seems like the consumer isn’t always aware of their ability to negotiate their commissions and some of the fees.”

Indeed, 15% of recent home sellers didn’t know commission rates could be negotiated. That said, if you do want to bring up the topic, it’s best to do so as you’re interviewing prospective agents. Learn about their marketing tactics, level of experience in your local market and what they can bring to the table. This way, you’ll know what you’ll be paying for — and you can begin the negotiation process.

How to negotiate with a real estate agent

You’re aware of what a real estate agent is offering you. But to successfully bring their rates down, you need to have something to offer as well.

Here are some examples of what that might be:

Multiple properties

According to McClanahan, “volume helps” — meaning if you can help the agent close on more than one property, they may be willing to bring down their rate.

For example, if you’re selling a home and buying another one, you can use the same agent for both transactions and negotiate their rates. Note that not all agents work as both a listing and buyer’s agent, so make sure you ask before assuming they do.

The more properties are involved, the better. For instance, this tactic can work for sellers “if they have a deal where they’re like, ‘Hey, can you help me buy a home for myself and my son?'” McClanahan says. “[Or] maybe they can bring a referral.” The same applies if you have multiple listing opportunities as a real estate investor.

High-value properties

Even if you only have one property to offer, you can still make the case to lower the commission. Specifically, the listing agent may be open to negotiation if your home is in a sought-after area or highly valued. For example, it could help if you’re listing a house priced at $2 million or more, “because the commission will be so high, you will have a lot of wiggle room,” McClanahan explains.

Willingness to work with a newer agent

Even if you can’t help your agent close multiple deals, there’s still a chance they will be willing to negotiate with you. This will more likely be the case if you’re working with a less established agent. A popular professional who’s been in the industry for many years might have a long list of home sellers they’re helping. A less experienced agent, on the other hand, might be working to increase their client volume and jump at the opportunity to close more transactions — even at a lower commission rate.

Finally, remember that commission isn’t the only thing you can negotiate. Real estate agents may also charge transaction fees.

“A lot of agents charge those,” McChalanah says, “Sometimes, buyers and sellers are not necessarily aware of that. So it’s a good idea to ask your realtor.”

Transaction fees are administrative costs associated with closing a sale and can total a few hundred dollars. You can always try to ask about lowering or even waiving these fees if negotiating the commission doesn’t prove fruitful.

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Bottom line

A home sale is a large transaction. Even though your agent’s commission is a small part of it, it can amount to tens of thousands of dollars. Luckily, you can always try to negotiate. Remember that even if you aren’t selling a high-value property or can’t help the agent close on multiple properties, it never hurts to ask. The only time it’s guaranteed you’ll fail at negotiation is when you don’t start it.

Meet our experts

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Julee Felsman, branch manager and SVP of mortgage lending at Guaranteed Rate. Felsman has been in the industry for over 25 years, helping homebuyers navigate the mortgage process. We also spoke with Aja McClanahan, a realtor with Real Broker LLC in the state of Florida. She has also been active in real estate as an investor since 2009 and STR operator since 2017.

Why trust CNBC Select?

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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