One of the coolest things about investing in real estate or buying your first home is that everything is negotiable. This is particularly true when it comes to a real estate agent's commissions. Although the traditional real estate agent's commission is 6% of the selling price of the house, this number is not fixed in stone. Although some agents will not negotiate with you, many will. In this difficult real-estate environment, negotiating a real estate agent's commission is becoming more and more popular.

TUTORIAL: Buying A Home

Pricing Your Home to Sell
The first thing to remember is that the real estate agent does not get paid unless the house sells. This may seem like common sense, but it's critical to know when negotiating the commission. Real estate agents like to represent homes that are priced to sell in their particular marketplace. Therefore, taking the real estate agent's advice on how to price your home should allow it to sell quickly.

Priced to Sell
If your real estate agent knows you are a serious seller with a properly priced home, he or she will be more likely to lower the commission in order to get your listing. This is for two reasons: first off, the real estate agent knows a properly priced home will sell faster with less effort than one that is overpriced. This allows the real estate agent to accept lower commissions since it will likely be easier and take less work to sell the home. Next, getting paid something is better than not getting paid anything. If the real estate agent understands you want to sell your home quickly, they are likely to lower their commission instead of risking you taking the listing to another agent who will.

The same thing applies to the buyer's side with a buyer's agent. Be ready to move on a house by being prequalified for a mortgage or have cash to quickly deploy on a good deal. Your buyer's agent will be more likely to lower their commission if they realize you are a serious buyer.

How to Approach the Negotiation
Now that you understand why a real estate agent will lower his or her commission, what is the best way to go about having this happen? Well the only way is to ask. Remember to ask in a tactful and respectful manner. Don't act like a know-it-all, particularly with a popular and successful agent. The general tact is to ask for a 1-2% discount on the commission. Explain to the real estate agent that you want to sell fast and need to save the extra money for your needs. If the real estate agent balks at your offer, simply find another successful agent who is open to what you wish to pay.

Always remember that there are various flat-fee real estate agents in every marketplace. If you are truly interested in paying the least amount of commission and are willing to give up some hand holding or other services, these flat fee brokers may make the most sense for you.

The Bottom Line
A real estate agent's commission is entirely negotiable and it is becoming more and more popular to do so. However, not all real estate agents are willing to negotiate. If you follow these steps you'll have a good chance of getting the most for your money.

Related Articles
  1. Home & Auto

    When Are Rent-to-Own Homes a Good Idea?

    Lease now and pay later can work – for a select few.
  2. Home & Auto

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  3. Entrepreneurship

    Top 5 Real Estate Crowdfunding Companies

    It’s estimated that crowdfunding investors will be putting $2.5 billion into the U.S. real estate market in 2015. As an investor, crowdfunding opens up investment opportunities that might have ...
  4. Home & Auto

    Après Ski to Profit: Investing in a Swiss Chalet

    Evolving Swiss property laws mean that Swiss ski chalets have become precious commodities – and excellent investments, even if you're not British royalty.
  5. Home & Auto

    Is Running a Short-Term Rental Worth the Hassle?

    The pros and cons of hosting short-term rentals in your home.
  6. Savings

    All About Income

    Income is the money you or a business earns by providing goods or services, or through investments.
  7. Insurance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  8. Investing News

    3 Hotel REITs that Outperformed the Market

    There are quite a few REITs that own and operate a collection of hotels and other lodging properties. They are known as hospitality REITs, and in recent years they have realized a reasonable ...
  9. Taxes

    Top Tips for Minimizing Taxes on Severance Pay

    A look at the top ways to lessen the tax burden on severance pay.
  10. Professionals

    8 Justifications For Sky-high CEO Salaries

    Why are CEO salaries so astronomically high? There may be more to the story than you think.
RELATED TERMS
  1. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
  2. Ceding Commission

    A fee paid by a reinsurance company to the ceding company to ...
  3. Turnkey Property

    A fully renovated home or apartment building that an investor ...
  4. Fair Housing Act

    This law (Title VIII of the Civil Rights Act of 1968) forbids ...
  5. Back Pay

    The amount of salary and other benefits that an employee claims ...
  6. Contingent Commission

    A commission with a value dependent on an event occurring, and ...
RELATED FAQS
  1. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  2. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  3. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  4. How does the always be closing (ABC) strategy benefit a salesperson's sales funnel?

    It is good practice in sales to always be closing, because it's common for a salesperson's sales funnel to be leaky. When ... Read Full Answer >>
  5. Where does the term "always be closing" come from?

    The exact origin of the sales phrase "always be closing" is unknown, but it was newly popularized by its usage in the 1992 ... Read Full Answer >>
  6. What is a fiduciary deed and when is it useful?

    A fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!