How To Negotiate A Real Estate Agent's Commission

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.