You Can Negotiate Your Real Estate Agent’s Commission

How to negotiate your real estate agent's commission 

It might come as a surprise, but you have the opportunity to negotiate the commission of your real estate agent. The quoted commission rates are not set in stone, and it’s perfectly acceptable—and advisable—to discuss lowering them.

By negotiating your real estate agent’s commission, you could significantly reduce your expenses and keep more money in your pocket.

In this article (Skip to...)

• How real estate commissions work
• Can you negotiate commissions?
• Ways to negotiate agent commissions
• The bottom line
• FAQ

How real estate commissions work. And who pays them?

A commission is different from a fee. A fee, which might be charged by a lawyer, accountant, doctor or government, is payable for a particular service, regardless of the outcome. A commission only falls due when a particular outcome is achieved, usually when a sales transaction (such as one for a home) is completed or closed.

Traditionally, American homeowners have paid real estate commissions in the 5%-6% range. But a March 2024 legal challenge to the National Association of Realtors® means that’s changed. The NAR’s settlement, which applies from July 2024, could see the average commission rate tumble by 25% to 50%, according to CNN Business. The Urban Institute takes up the story:

For decades, Americans have paid some of the highest real estate agent commissions in the world, amounting to roughly $100 billion annually. But a recent settlement agreement will soon change that. After multiple class-action lawsuits nationwide alleging anticompetitive practices, the National Association of Realtors (NAR) has agreed to pay more than $400 million in damages and rewrite its current agent commission fee rules.

This was written before the NAR settlement came into force. So, we’ll have to wait to see how commission rates settle down. But we can expect them to fall. And that might provide an extra opportunity to negotiate your real estate agent’s commission.

Who pays?

Typically, the home seller pays the real estate agent’s commission. Often the purchaser will have a buyer’s agent. And the seller’s agent will normally split his or her commission 50-50 with the buyer’s one.

But none of this is set in stone, just as commission rates aren’t. We’ve described normal practice, but there are certainly exceptions.

And the NAR’s settlement could disrupt the housing market in ways nobody’s yet thought of. For example, will listing agents still be able to split their commissions with buyers’ ones once the pot has shrunk?

Can you negotiate a real estate agent's commission?

You can see why some real estate agents are wedded to the old system. For most, agents appraised the home, described how they’d market it, and quoted an eye-watering commission rate. Your role was to fight back the tears, nod your head and shake hands.

But it never had to be that way. As a savvy home seller, you were always free to negotiate your real estate agent’s commission. Few did but anyone could. And some managed to save a bundle by doing so.

Ways to negotiate real estate commission

Agents will argue that lower commissions and non-exclusive listing agreements disincentivize them from committing 100% to the marketing of your home. They’re businesses. And the less they stand to make and the lower their chance of making anything, the less time and money they can afford to devote to your home sale.

There’s some validity in that argument. But it doesn’t mean you can’t negotiate your real estate agent’s commission and make appreciable savings.

Start by connecting with several local agents from the cream of your neighborhood real estate brokerages. Ask each for a quote of their listing commission and any other agent fees.

Who’s the cream? Read How to Choose a Real Estate Agent.

Then, play each off against the others. Call Agent X and say you’d love to list with them, but Agent Y has quoted a lower commission rate. Can Agent X match it? If so, get back to Agent Y and request a lower rate.

You can keep that up until you’re convinced you’ve wrung out the last concession. But don’t base your decision solely on the lowest commission rate. You want someone professional and trustworthy with whom you get on well.

Also, don’t be too impressed by the people who say they can get you the highest home sale price. Some inexperienced agents may unrealistically inflate their appraisals of the final sale price to win your business.

Non-exclusive listings

Don’t sign an open-ended exclusive listing. Give your agent two or three months’ exclusivity to show you what he or she can do.

That should focus their mind and provide them with a powerful incentive to find a buyer before the exclusivity window expires. If you watch shows like Million Dollar Listing, you’ll probably have seen this in action.

Of course, you’re not obliged to offer anyone an exclusive period. It’s up to you to judge your best way forward based on the agents in front of you and the state of your local market.

Other negotiating tactics

These might provide you with further leverage:

1. If you’re buying and selling locally, suggest the listing agent becomes your buyer’s agent. The higher combined reward could allow them to shave more from their commission
2. Stress the wide extent of your local social (and maybe business) network. If your agent does a great job for a moderate commission, your recommendations could help build their business
3. Prepare your home for sale before inviting in candidate agents. The easier they think it will be to sell, the less they need to charge
4. Get creative. Might you have other payment models that could work for you and the agent? How about a flat fee or a flat fee combined with a success bonus on closing? But think these through first and explore them with your agent. A flat fee might lower their risk and so allow them to charge less. But it also removes some of their incentive to sell your home quickly
5. Think through the implications of doing everything yourself. You might be able to save money by adopting a For Sale by Owner (FSBO) model. Just don’t underestimate the work you’d be taking on and other potential pitfalls
6. Remember, some agents offer stripped-down services for lower commissions or fees. Some will just list your home on the Multiple Listings Service (MLS) for a low fee. But, again, you’ll be on your own for everything else. Do you have the time and the knowledge to do a good job?

Pick the ones that suit you best from that menu. With luck and decent negotiating skills, you could save a substantial amount.

Negotiate your real estate agent's commission: The bottom line

The median sales price for homes sold in the U.S. during the first quarter of 2023 was $420,800, according to the Federal Reserve Bank of St. Louis.

A 6% commission rate on that would see your agent walk away with $25,248. That tumbles to $21,040 for 5% and $16,832 for 4% commission. The latter would be a saving of $8,416.

So, don’t underestimate how much you could save when you negotiate your real estate agent’s commission. And remember the stresses and strains most people place on their finances when they’re moving home. Paying the least Realtor commission possible is a no-brainer.

However, don’t go too far. You need a good, professional real estate agent whom you trust and like. So, it could be worth paying a bit more to work with one of those.

Finally, be clear about the services a reduced commission rate buys you. And get them in writing. Four percent or 5% may well get you a full service, the same as 6%. But you’ll likely get less if you pay much below those amounts. That may suit you. But be sure you understand what you’re taking on.

FAQ