What You Need to Know about Realtor Commissions (Hint: You CAN negotiate!)
If you’re buying a home, especially for the first time, you may have several concerns about what costs you’re going to incur in addition to the new mortgage payment. One of the more seemingly complicated aspects of the home buying process is dealing with the commission fees your agent will claim at the end of the sale.
Let’s go over the basics of realtor commissions, including how they work and how homebuyers can negotiate the terms of agent commissions.
What Are Commissions?
If you have never before heard about realtor commissions, you may be unaware of how they work. Because real estate agents generally do not make a salary, their pay comes in the form of commissions. Agents can claim commissions when they have made a sale on a property.
When the home sale goes through, a real estate agent will ask for approximately 6% of the sale price. When a realtor sells a home for $250,000, they’ll claim $15,000.
The harder a real estate agent works and the more sales they make, the more commission checks they receive.
If an agent on the side of the buyer works alongside the seller’s listing agent, the commission is typically split between the two.
Can I Negotiate the Commission?
The short answer is yes. You can, in theory, negotiate the commission terms that your real estate agent is going to take at the end of a sale.
Whether the agent will be open to the negotiation is another story entirely, being that 5-6% has become an industry standard. Some agents claim higher commissions, and if a property has both a buying and selling agent, they may each ask for different commission rates.
Some real estate agents will be open to negotiating their commission and others will be less willing to discuss it.
When it comes to approaching the topic of commission negotiation, it’s a good idea to inform yourself as much as you can about the sale itself and the market you’re buying in.
For example, you’ll want to understand how realtors make profits, whether there are two agents involved, and how long the agent has been in the industry.
Additionally, if your agreement with the agent involves several properties or there are a variety of other unique factors involved in your sale, your agent might be more willing to accept commission negotiations.
Negotiating is worth a try. At worst, the agent will decline the request to negotiate and at best, you as the home buyer will save yourself some money at the end of the sale.