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How To Negotiate Real Estate Commission With Your Agent

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Fundamentally, you need to understand how real estate commissions are computed and paid if you want to negotiate real estate commissions successfully. A real estate commission is the amount paid to a real estate broker or agent after a sale. It’s typically based on a certain percentage of the property’s final sale price or a fixed amount agreed upon by the agent and the client.

The standard practice in many states is that the seller pays for all the real estate agent’s commissions on both sides of the transaction. The standard rate is typically fixed at 6% of the final sale price. The common practice is for the buyer’s agent and the listing agent (seller’s agent) to split this amount. You can click here for more information about the common practices regarding real estate commissions.

In most transactions, the buyer doesn’t have to pay their agent anything. What happens is that the total amount of the commissions is taken from the final sale price paid out by the buyer when the deal is closed. Here are some of the typical strategies on how to successfully negotiate the commissions you pay out:

Select Your Agent Carefully

One of the first things you should do to successfully negotiate the commissions you pay out is to carefully select the listing agent you’re going to hire. You should interview as many as you can, but you should come up with a minimum of three prospective listing agents before selecting who will sell your residential real estate property. The critical qualification is that your listing agent should be highly familiar with your local real estate market.

Here are some of the things you should look for in a listing agent:

Practice knowledge

If possible, practical knowledge and familiarity with your local real estate market, specifically your very own neighborhood where your property is located.

Hands-on experience

They should have actual experience of selling properties with your local real estate market.

Success

Track record of successfully selling properties similar to your property.

Objective but fair

It would be best if you also look for someone who can match your personality and ways of doing things but with objectivity and fairness.

Good negotiator

Remember that getting an experienced agent can help you get a higher price for your home. But the downside here is that they might be more inflexible about negotiating their commission.

On the other hand, a newbie agent might take more time to market and sell your property to qualified buyers. But they might be more flexible about negotiating their rate of commissions and fees. Both choices have their pros and cons, so it’s really up to you to decide which is more beneficial to you.

Consider Property Season And Market Conditions

The other factors you need to consider in negotiating your agent’s commission are the property season and the prevailing market conditions. These factors also impact whether or not your agent would be willing to negotiate their commissions.

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Typically, market season and conditions can affect your listing agent’s willingness to negotiate.

When there are only a few good-listed properties, and yours is one of them, it may be easier for them to sell. Since there are more interested buyers for properties similar to yours, they might be willing to take a cut if they can sell your property quickly without waiting too long and putting in too much effort.

On the contrary, when there are a lot of excellent properties to sell, listing agents might be less willing to negotiate to take a cut in their real estate commissions if properties are not selling fast. This is based on the fact that they’d have to spend more time and exert more effort to be able to sell your property.

You can not blame estate agents for following the law of supply and demand to gauge if they’ll accept negotiations regarding their sales commissions.

The key consideration is to point out during your negotiations with your prospective listing agent that your property isn’t difficult to sell. If your property has been resold in the past, you can highlight the fact that many buyers and sellers had owned your home before you did. To prove it, you can even show them its tax transactions history.

Real Estate Investments And Repeat Sales

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Suppose you’re a real estate investor with multiple properties and real estate transactions every few months or so. In that case, you could also use this as leverage to negotiate the real estate commissions you’ll pay out to your listing agents.

The real estate listing agents may be more willing to negotiate their commissions if they know that you own multiple properties and that you may have more business for them if they do the job right.

Additionally, you may tell them you’re also going to hire them to look for a property to buy after they’ve successfully sold your property at the price you want and with some cuts on their real estate commissions. This could entice them since they’d be hitting two transactions with one client, probably more to come if you’re satisfied with their performance.

In other words, you can use your other prospective property sales and transactions as leverage during negotiations.
This is even easier to do if you’re a real estate investor with multiple properties under your name. Do note that all real estate agents dream of landing a real estate investor as a client, compared to a client with a one-time sales transaction.

Conclusion

Negotiating the real estate commissions you pay out to your listing agents would take a lot of tact and careful consideration. Although real estate commissions follow a standard rate in most states, there are a few things that you can still do to cut your listing agent’s commission.

To successfully negotiate these cuts in your listing agent’s commission, you should select your listing agent carefully, consider the property season and market conditions, or you can also use your multiple properties as leverage during negotiations.

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