Can You Negotiate Real Estate Agent Fees?

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The quick answer? Yes. But it's not that simple.

If you're gearing up to sell your home, you may not want to go it alone. Listing and marketing a home can be time consuming, and there are complexities in negotiating with buyers.

That's why so many home sellers engage the services of a real estate agent. If you hire an agent, your home may sell faster, and you may end up with a much higher sale price.

But there's one downside to hiring a real estate agent -- paying a commission. Real estate agent fees vary, but they commonly land between 4% and 6%. If you expect your home to sell for $500,000, you could pay your agent $20,000 to $30,000.

To be clear, your real estate agent doesn't necessarily get to keep all of that money. If your agent works for a firm, a portion of that commission generally gets paid into the company, and some may be split with a buyer's agent (the agent who leads a buyer to your home and negotiates the sale on the buyer's behalf). And most agents, even those with firms, are considered self-employed, so they owe the IRS a big chunk, too, and therefore can't afford to give up too much income. But in some cases, real estate agents come away from a home sale with a nice chunk of money.

If you're interested in working with a real estate agent, you may wonder whether it's possible to negotiate the fee. Here's what to know.

There's room for negotiation

Real estate fees aren't always set in stone. Some agents are required to charge a certain fee because the real estate firms they work for mandate it, but others can come down on fees to get more business.

That said, while you can attempt to negotiate a real estate agent fee, you're not guaranteed success. If you use an agent who's in high demand, that agent is unlikely to budge when it comes to commission. Why should they, if they don't need the work, or could replace you with another seller who will pay their full fee?

If you are going to negotiate a real estate agent's fees, it helps to do the following:

  • Be reasonable. If your agent asks for a 6% commission, you may be able to work that down to 5% or 5.5%. But is your agent going to slash the fee to 4%? Probably not -- especially if there are enough homes for sale in your area to keep your agent busy.
  • Offer another incentive. Typically, it's sellers who pay a real estate agent fee, not buyers. But, as mentioned earlier, real estate agents commonly share their commissions with buyers' agents. So if you tell your real estate agent you'll work with them to sell your home and to buy a new one, that could motivate your agent to come down on fees.

It may seem like real estate agents have an easy job, especially today, when low mortgage rates are fueling buyer demand, and homes are flying off the market in record time. But real estate agents do a lot of work, and bring a lot of knowledge to the table. It's understandable that they want to be compensated fairly.

There's nothing wrong with trying to negotiate the fees you pay an agent, but don't be surprised if your efforts prove unsuccessful. That said, if you're unhappy with the fee an agent quotes you, shop around. It's good to do so anyway, to help ensure that the fees you're presented with are reasonable for your neck of the woods.

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