Here's how to negotiate a lower commission fee from your real estate agent
Real estate agents' fees — a pesky part of the home buying and selling process — aren't necessarily set in stone. Rather they are often negotiable, a fact that could help parties on both sides of a transaction save money.
And it can be as easy as politely asking for a lower fee: Nearly two-thirds of homebuyers or sellers successfully negotiated down their agent's real estate commission fee simply by asking, according to a new survey from LendingTree. While only 31% of homebuyers or sellers have tried to lower their real estate agent's commission fee when buying or selling, of those who did ask for reductions, 64% were successful.
"This goes to show that while someone has to pay these fees if you work with an agent, there is wiggle room," LendingTree economist Jacob Channel told CBS MoneyWatch.
Real estate agents remain an integral part of the home-buying and selling process, even as online marketplaces make it easier to peruse listings, and place and accept offers without a broker.
Real estate agents make money by pocketing a percentage of a home's sale price, which is typically paid by the asset's buyer, but is sometimes split between the buyer and seller.
Customarily, agents charge between 5% - 6% of a home's sale price as commission. That sum is split between the buyer's and seller's agents, meaning each party walks away with a 2.5%-3% transaction fee.
These fees can eat into a seller's profits, or drive up the real cost of a home purchase to a buyer.
Forty-eight percent of homebuyers and sellers are entirely in the dark, and neglect to even ask what percent commission their agent receives.
"The moral of story is, people aren't paying as much attention to them as they should be," Channel said.
Here's why it's important to establish the cost of the fee upfront, along with tips for negotiating it down.
Be upfront
"Upfront, at the start of the relationship, is the time to nail down what the fees are, and to get questions and concerns you have out of the way," Channel said.
Ask why they are charging that much and if there is room for a discount.
"Neither party should be waiting until the last minute to add something or take something away," Channel added. "You can't suddenly say, 'I don't want to pay you as much as we agreed upon."
Agents can charge as high a percent as they want, as long as they disclose it upfront. There are no laws governing how little or much they can charge.
Just ask, politely
"If you want to talk with your real estate agent about fees and ask for discount, do so respectfully with the understanding that at the end of the day, most real estate agents depend on commissions to survive," Channel said. "Be open and honest, but recognize they might not agree to a discount."
Explain your circumstances
Outline your own budget and explain why it might be hard for you to work with a broker charging a high commission fee.
"Say, 'If you lower your fee slightly, it would make it easier for me to agree to work with you,'" Channel advised.
If a seller's home is expected to be easy to sell, they might be able to shop it around to different agents. Or, if it's a high-value asset, a lower fee will still net an agent a hefty commission.
"If your house is in good condition in a popular neighborhood, it's probably easier for an agent to help you," Channel said.
Similarly, a multimillion-dollar home sale will generate more income for an agent versus a less expensive one.
"Basic math dictates that if you sell a $2 million home and get a 2% commission fee, you're making more money than you would selling a $200,000 house and getting a 3% commission fee," Channel said. "You can shop around and compare agents."
No guarantees
To be sure, just because you ask, doesn't mean an agent will agree to a fee reduction. "You might think a house is an easy thing to sell, but the process of buying or selling is more complicated than people realize at first glance," Channel said.
For example, a good agent can help stage a home for sale, and comes with deep knowledge of different housing markets and trends.