Ask Phyllis: a blog series of frequently asked real estate questions. Email us here
Negotiating the Realtors Commission
Dear Phyllis,
I will be selling my home in the fall. What is the best way for me to find the agent with the lowest commission?
JL
Dear JL,
In our neighborhood the most common commission structure is between 5% – 6%. The commission is divided four ways:
1) Listing Agent (agent who represents the seller)
2) Listing Agent’s Broker
3) Selling Agent (agent who brings the buyer)
4) Selling Agent’s Broker
It is typically divided equally between the listing agent and their brokerage and the selling agent and their brokerage. These commissions are in fact negotiable. But will paying the lowest commission guarantee the most money in your pocket? Assume a home sells for $1,000,000 and you have negotiated a 5% commission. After agent payments you would net $950,000. However, if that same home was to sell for $1,025,000 and you paid a 6% commission you would net $963,500. That’s an additional $13,500.
When negotiating the Realtors commission, perhaps you could suggest that if you find the buyer the commission would be reduced. Hiring the Realtor® with the lowest commission structure will not necessarily help you obtain the highest selling price. A key skill you want in your real estate agent is a strong negotiator. When you find the Realtor® with the lowest commission you will have found the one with the weakest negotiating skills. This is not who you want representing you on such a valuable asset. So a better question to ask would be, “How can I end up with the highest net proceeds?”
You should hire your agent based on their marketing plan, experience and the services they offer. Do they hire a professional photographer (someone who photographs homes for a living)? Where will your Realtor advertise? As 90% of home buyers search online – your real estate agent’s online presence is very important. Are you interested in knowing which inexpensive fix-it’s will return 3-4 times the dollar amount invested? Many Realtors® include a professional home staging consultation as part of their service. In today’s heated real estate market your home will sell.
