How to Save Money on Realtor Commission Fees

Home Selling

How to Save Money on Realtor Commission Fees

2016-05-13_fullsize_Temecula

Most people have heard that real estate commission on a home sale is typically 6 percent of the sale price, but many people don’t realize the fees are fully negotiable.

Typically, a REALTOR® gets paid when a home sells, and the seller pays the commission. Since the 1990s, the average realtor commission fees in the U.S. have been between 5 percent and 6 percent. When the home sells, half, or around 3 percent, is given to the realtor who represented the seller, and the other half is given to the realtor who represented the buyer. On a $400,000 house with a 6 percent commission, the seller will pay $24,000, with half going to her agent and the other half going to the buyer’s agent.

While many people think realtor commissions are standard, a 2016 Redfin survey of more than 2,000 home buyers and sellers found that 60 percent of people who sold a home in the past year said they received a discount on the commission they paid to their real estate agent.


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One reason sellers are paying less may be that agents are lowering their fees due to pressure from real estate brokerages like Redfin, which charges a commission of only 1.5 percent to sell a home.* For the 1.5 percent fee, Redfin provides full service from a local agent, including free professional photography, a 3D scan that creates a virtual tour of your home, premium marketing on Redfin.com, and the expertise of an agent who will walk you through the entire process and negotiate the best deal for you.

If you’re thinking about selling your home soon and want to save money on commission, here are a few tips for discussing realtor fees with the agents you are considering.

  1. Discuss the commission and timeframe of the listing agreement up front. When you’re interviewing potential real estate agents, ask how much they charge and make sure you understand how long you are locked into working with the agent. Make sure this conversation happens before you sign a listing agreement, which obligates you to work with the agent for a certain period of time. Get a clear understanding of what will happen if you want to get out of the agreement and the timeframe for cancelling. Redfin listing agreements allow the seller to cancel the agreement at any time.
  2. Ask if their commission is negotiable. Some agents are not open to negotiation, which is their prerogative, but many are open to discussion. Either way, the response to your question can reveal a lot about the agent. Be wary of anyone who acts annoyed if you bring up commission. You don’t want an agent who is working with you begrudgingly.
  3. Don’t sacrifice service. Ask what you’re getting for their commission fee. Some discount brokerages will charge a lower commission or a flat-rate fee, but they’ll only provide basic service, like putting your home on the multiple listing service and sticking a “for sale” sign in your yard. Other agents may offer a lower commission, but charge additional fees for services, like professional photography. Meanwhile, other agents, including Redfin agents, provide all of those services standard. Make sure you’re getting a clear picture of what is included in the fees so that you can make an apples-to-apples comparison. From there, you’ll need to decide what’s important to you and what you’re willing to pay for it. While some sellers opt for a discount model, the home could sell for less money without the professional photos, extra marketing and attention from an experienced agent, which means the commission savings may not make a difference to your bottom line.
  4. Offer a competitive rate for the buyer’s agent. As noted above, sellers typically pay commission to the buyer’s agent. But some sellers see a chance to save money by offering a lower commission to the buyer’s agent. The commission offered by the seller is displayed in the multiple listing service, the database of all homes for sale. The truth is that some agents may be less motivated to show your home to their buyers if they see you are offering a low commission. The buyer’s realtor may require the buyer to cover the fee themselves, effectively making your home more expensive. We generally advise sellers to offer a competitive rate in line with what other sellers in the area are offering to buyers’ agents. This will ensure all buyers’ agents are motivated to bring buyers to your property.
  5. Let agents know you’re shopping around. Just like any major expense, it’s in your best interest to interview multiple agents and seek out the best service for the best value. Be sure to interview a Redfin agent to learn what services they provide for 1.5 percent commission. Ask other agents you are considering if they’ll provide the same level of service for the same price. If they know your business is on the line, they may reduce their usual commission.

*If you work with a Redfin agent, no negotiation will be necessary. Redfin charges 1.5 percent commission for all listing clients, except in the Washington D.C./Maryland/Virginia area, where we charge just 1 percent. To find a Redfin agent in your area, visit www.redfin.com/real-estate-agents.

If you’re thinking of skipping the agent all together and selling your home yourself, check out Should You Hire an Agent or Sell Your House by Owner? for more information on the process.

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