How to Negotiate Real Estate Commission? (2023 Updates!)

Real estate commissions have been falling sharply and touched a record low at 4.94% in Q1 2023.

According to a study, Home sellers spent an estimate of $86 billion in real estate commissions last year. Strangely, very few home sellers know that negotiating real estate commission is possible.

» Jump To:

• What is a Typical Real Estate Agent Commission?
• How Does Real Estate Commission Work?
• How Do Agents Split Real Estate Commissions?
• Who Pays a Real Estate Agent Commission?
• Can You Negotiate Realtor Fees?
• 7 Ways to Easily Negotiate Real Estate Commission
• Alternatives to Negotiation
• FAQs

What Is a Typical Real Estate Agent Commission?

A real estate commission or a realtor commission is the fee charged by a real estate agent in exchange for the services provided. It’s calculated on the basis of your home’s final selling price and typically ranges from 5% to 6%.

So, let’s take an instance:

If your home costs around $500,000 then according to the standard real estate commission it would price around $30,000. This is HUGE!

» Remember: Even if you do convince your real estate agent to negotiate the commission, it may not be as exciting as it seems. There won’t be any huge reductions which you’re hoping for.

Don’t worry, you can still save your hard-earned money over these hefty commissions by going for Flat Fee MLS listing services.

💫 Let’s Start: Begin now! Get an insight into the price difference between a Flat Fee MLS Listing Service and a Traditional Agent.

How Does Real Estate Commission Work?

You must be acquainted with the fact that the average realtor commission costs around 5% to 6% and is split equally between the seller’s agent and the buyer’s agent.

It’s not as simple as an estimate of 6% of the total sales price going directly into the realtor’s pocket.

Let us understand the complete framework through a graphical representation.

How Agents Split Real Estate Commissions?

• An estimate of 6% is charged from the seller’s end and split equally between the listing agent and the buyer agent.
• Agents may have a unique commission structure with their respective brokerage firms. Typically, a 60% agent / 40% brokerage or 50% agent / 50% brokerage.
• Agents may invest their own expenses in marketing exposure.

🤔 Did You Know? Real Estate Commissions are declining consistently. Find out the possible reasons HERE!

Who Pays A Real Estate Agent Commission?

Real estate agent commissions are paid by the home sellers and split equally between the listing agent and the buyer agent. Homebuyers are lucky as they do not have to pay even a dime for their own respective agents.

Later, the commission gets distributed between their brokerage firm and themselves. Mostly an uneven proportionate of 60% to 40% or equally.

✋ SKIP TRADITIONAL AGENT COMMISSION: List FSBO with Houzeo.com for a flat fee of $349!

Can You Negotiate Realtor Fees?

Yes!

Real estate commissions are negotiable and legal. With increasing competition and better alternatives, real estate agents are willing to lower their commission and provide concessions to the home seller.

The Department of Justice promotes active competition between the real estate agents by giving consumer rebates and compromised commissions.

Moreover, The NAR Code of Ethics elevates the practice of negotiating real estate commissions by permitting it at any point during the transaction.

7 Ways to Easily Negotiate Real Estate Commission

1. Know the Market and Trends!

Be a leader, not a follower. You might be going with a realtor as you’re unaware of the home selling process, but don’t you just rely on them completely.

Before going to a realtor, study the Real Estate Housing Market trend comprehensively. Find out what your state’s average real estate commission is. This will assist you in determining whether the commission offered is reasonable or not.

According to Real Trends, the nation’s average real estate commission touched a record low in the year 2023.

📌 SAVE: Don’t know how to perform a comprehensive analysis? Here’s a step-by-step guide for Selling a House!

2. Interview Multiple Real Estate Agents

Exploring choices is the simplest method to find the best value. Interviewing multiple real estate agents is the best solution to ‘How to negotiate real estate commission?’

The more you learn, the more you explore, the better you get!

Real estate professionals are well aware that today’s sellers are not so naive; they do their homework and have a basic understanding of the process.

They should be glad and accept the questions warmly, as it clearly points out that the seller is more advanced in the home selling process which reduces the workload on agents.

Avoid doing business with those agents who refuse to give an interview. As they must be honest with their profession, no matter how alluring the services are.

» How to Interview a Realtor?

If you’re going to interview real estate agents for the very first time, then make sure to clear your doubts that will make your transaction easier in the future.

Here are some exemplary questions to help you with:

• How long have you been practicing real estate transactions?
• How do you plan on marketing our home?
• Are you familiar with this area and its surroundings? Have you sold any house in our locality?
• Are you easy to reach? How will you keep me informed?
• Are you in a running transaction with other buyers and sellers?
• Do you have your own website?
• How long does it take to list on MLS? Will you syndicate my listing for FREE?
• I interviewed an agent that promised to sell my house above the CMA at a negotiated commission. How much can you compromise?

3. Luxury House

Luxury or High-End homes are more likely to sell faster than other properties. Also, agents do negotiate their commission when selling such homes.

Let’s take an instance: According to the comparative market analysis, your home costs around $1,000,000.

Then, even at a negotiated percentage of 2.5 listing commission. The agent will make around $25,000.

Imagine the look on your face if you were given a large sum of money all at once.

4. Multiple Transactions and Repeat Purchases

If you’re an investor, then this is the best deal for you! Securing an investor is a dream for many realtors. An ordinary home seller may buy or sell one or two properties in a decade while investors frequently buy and sell properties.

Doesn’t matter if they’re either flipping or renting. As you’re bringing constant business for these real estate agents, they might agree to negotiate real estate commissions on a huge margin.

You can also buy or sell a property with the same agent to negotiate the real estate commission. If you list and buy with the same agent, then the real estate agent is going to earn both commissions simultaneously.

In such cases, you can try negotiating real estate commissions. Sometimes, real estate agents strictly reject such policies because they don’t settle for working twice as many transactions and earning less than twice.

5. Consider a Rookie Real Estate Agent

To get an easily negotiated deal, consider going for a rookie real estate agent. They’re new to the industry and craving to build up a strong portfolio. Once you negotiate with them, they might reduce the commissions right off the bat.

As of now, their primary concern is to build a clientele rather than earning much from the transaction.

Make sure you don’t settle for too less. Those looking for a good deal, whether they are investors or new home sellers, often wind up settling for far less.

An experienced home selling real estate agent can help you save thousands of dollars in many other ways. Such as offer management, counteroffer, negotiating deals, and so on.

Moreover, you may save a huge amount of commission by going for a rookie real estate agent but an experienced person can redeem you for that money by offering a higher selling price.

6. Allow Your Agent to Act as a Dual Agent

Now, what’s a dual agent? And why are they often called a transactional agent?

To answer that, whenever a real estate agent works with both the buyer and the seller on the same transaction, then the real estate agent is known as a dual agent or transactional agent.

They might be open to negotiating as you’re bringing them dual offers simultaneously. If the real estate agent is present on both sides of the transaction then it becomes feasible for the agent to execute the transaction conveniently.

7. Agents in Competitive Neighborhoods

If you reside in a hot-selling neighborhood then there’s a high chance to negotiate real estate commission. As houses in the hot-selling market require fewer efforts in marketing and have a high conversion ratio.

Even agents compete among themselves to grab the opportunity and convert you as their potential client. You can be the one to gain benefit from this intense competition. With your bargaining skills, do negotiate with them and try to get the best deal possible.

Furthermore, some agents prefer to operate their businesses in specific areas. This provides you some flexibility when it comes to negotiating.

Alternatives to Negotiation

1. Flat Fee MLS

A flat rate listing is a service provided by fixed-fee listing companies, where they list your house on the MLS for a fixed fee or a flat rate. Depending upon the flat fee listing package you choose, the listing companies also offer a range of other services that will help you when you need assistance.

» Best Flat Fee MLS Listing Service: Houzeo

#1 Flat Fee MLS Service

Listing Fee: $399

4.9/5

10,020+ reviews

💲 Pricing

Houzeo is a high-tech platform with easy listing, fast changes, and online showings and offers.

You can choose from 4 Flat Fee MLS packages:

• Bronze Package – $399+$350 at Close: This package offers a Houzeo listing only for 6 months with 24 photos.
• Silver Package – $399+0.5% at Close: This offers maximum photo upload and provides you with seller disclosures.
• Gold Package—$429+0.5 % at Close: This is Houzeo’s signature MLS package and includes all the technology Houzeo is known for, such as Houzeo Showings, Houzeo Offers, and DigiTransact.
• Platinum Package – $449+1% at Close: It includes the assistance of a licensed broker to help you with negotiations, seller disclosures, and closing.

👉 Our Take: We recommend the GOLD plan. You’ll have access to Houzeo tech, making managing showings and offer negotiations easy! Before you list, confirm all prices on your particular state’s pricing page.

» Houzeo Reviews: Find out why 10,000+ Americans love Houzeo.

⚡ Highlights

Houzeo is America’s #1 Flat Fee MLS service because of 5 reasons:

1. Max Exposure: Houzeo’s listing packages get your home on Zillow, Trulia, Realtor.com, Redfin, and 100s of other real estate websites.
2. 5-star Customer Service: Houzeo has a fully staffed customer service desk available 6 days a week. Chats and emails are open 7 days a week.
3. 100% Online: Houzeo is a high-tech platform with easy listing, fast changes, online showings, and online offers. Its powerful house search app makes your home visible to potential buyers on the go.
4. No Hidden Fees: All fees are disclosed upfront, so there are no Houzeo hidden fees. You get to bypass the traditional listing agent commission.
5. Free Home Value Estimator: Now, you can get a free home value estimate within 30 seconds. It helps you set a listing price.

🚩 Deal Breakers

There are no dealbreakers with Houzeo.

» Is Houzeo Legit?  Houzeo addresses all Houzeo complaints from home sellers.

⭐ Reviews

Houzeo is rated 4.9 out of 5 stars by thousands of home sellers on Google & Trustpilot.

» Houzeo Reviews: Houzeo is rated “Excellent“ by 10,020+ home sellers.

Introducing the Houzeo Mobile App!

• View your listing
• Manage your showings online
• Review and compare offers
• Counter an offer
• NEW! Buyers can now search your property and save it in “Favorites”

Start Your FREE Listing NOW!

2. FSBO (For Sale By Owner)

For Sale by Owner, Sell your home yourself or Do it yourself MLS listing refers to the process of selling your home without the help of an agent or broker. When you advertise your home for sale by owner, you do not have to pay the entire listing agent commission.

A typical FSBO house was sold for $260,000 in 2022 compared to $318,000 for agent-assisted home sales. The National Association of Realtors reported that FSBOs accounted for 7% of home sales among which MLS websites made up 18%

» Best For Sale By Owner: Zillow

🤔 LARGEST REAL ESTATE PLAYER

Listing Fee: Free, but 3% for MLS

1.6/5 (out of 229 Reviews)

🔎 Sneak Peek

With over 200 million visitors a month, Zillow is by far the biggest real estate platform in the U.S. Pair it with Trulia (which also has homes for sale), and it provides critical exposure. FSBO listings on Zillow though have a very poor success rate for 3 reasons.

• Zillow has an “Other Listings” section where all the FSBO listings are collated. This makes it difficult for the buyers to check out the listings in the first go.
• The buyer leads are forwarded to member agents instead of sellers.
• Because agents are heavily involved as part of the Zillow platform, sellers will have to deal with unnecessary calls.

As part of Zillow For Sale By Owner, your property will not be listed on the MLS but only on the platform. That means you lose out on critical exposure to buyer agents who are involved in almost 90% of US real estate transactions and fetch listing data from the MLS. This may translate to you not getting top dollar for your property.

⚡ Highlights

• Biggest real estate websites in the US
• Hides FSBO seller listings by default
• Solicitation calls from agents
• Poor customer service

⭐ Reviews

Zillow is rated 1.6 out of 5 stars on Trustpilot.

📍 Coverage

Zillow has a nationwide reach.

3. Discount Real Estate Company

Discount real estate companies are real estate companies that provide specific services for a discounted fee.

Instead of charging the seller standard agent commission of 3% (listing agent commission), a discount realtor will work for less (such as 1%-2% commission or a predefined flat fee) and provide restricted services.

The reduced fee can easily save sellers a good amount of money. Discount real estate brokers typically offer the same services as full-service brokers. The key difference is in pricing.

» Best Discount Real Estate Company: Redfin

BEST TECH-ENABLED BROKERAGE

Listing Fee: 1% of Sale Price

4.2/5

60+ reviews

💲 Pricing

Redfin does not disclose its pricing on its website. Sellers will have to pay common closing costs.

• It offers 0.5% buyer’s rebate. To avail this, you’ll have to buy and sell with them.

👉 Our Take: Redfin offers 1 rebate option but with a strict clause. While, other real estate companies are willing to offer a higher rebate.

» Redfin Reviews: The reality of the buyer’s rebate.

⚡ Highlights

Here are some advantages of choosing Redfin:

• Advanced Technology: With 3D walkthroughs and 40+ filters to narrow down your search, the Redfin app makes it easy to find the right home from anywhere.
• Paired With Local Agents: Local agents know their market better. This can help you secure a good deal.
• Home Tour: You can see updated listings every 5 minutes on their website. You can also schedule a home tour for the same day.
• Nationwide Coverage: Redfin covers 80+ markets in the US.

🚩 Deal Breakers

Here are some limitations we found with Redfin.

• Strict Rebate Criteria: Clients who sell and buy with Redfin within one year get a rebate of 0.5%.
• No Freedom in Agent Selection: You get an agent assigned automatically without having a choice in the matter.
• Agents Are Less Incentivized: Unlike traditional agents who work for commission, Redfin agents get a fixed salary. This can demotivate them from offering you additional services.
• Poor Customer Reviews: Customers have complained that agents are often unreachable and unprofessional.

⭐ Reviews

Redfin has an average rating of  4.3 out of 5 stars from 60+ reviews on Google.

» Redfin Reviews: The Reality of the 1% Fees, Pros, Cons, and Alternatives!

4. “We Buy Homes for Cash” Companies

If your house is in a poor condition and you don’t want to spend thousands of dollars on repairs or closing costs, then you can choose “we buy houses for cash” companies. These companies make quick offers and help sell your house fast for cash. You’ll get 50%-70% of your home’s fair market value, which is a low-ball offer.

A home worth $150,000 on the open market can be scored at $70,000 by an investor with quick cash. An offer that is nearly 50% lesser than what the property is worth.

» Best “We Buy Houses For Cash” Companies: Opendoor

BIGGEST IBUYER

Service Fee: 5%

4.4/5

3,066 reviews

🔎 Sneak Peek

Opendoor is the country’s biggest iBuyer. They offer fast cash for homes and flexible closing timelines. Opendoor makes competitive offers, but these are far less than your property can get on the open market.

• Service Fee: 5% of Home Sale Price
• Typical Offer: 70% to 100% of Fair Market Value (FMV)
• Types of Properties Purchased: Opendoor offers cash for houses only in desirable neighborhoods. If your property needs minimal repairs, Opendoor is an option for you. Otherwise, you may not even receive a preliminary cash offer from Opendoor.
• Closing Date & Offer Terms: Opendoor provides a flexible closings, with dates up to 45 days out. Opendoor’s offers are not flexible, and final terms may change after home inspection.
• Limited Coverage: Opendoor only covers 51 markets.

🚩 You Should Know: For the ease of a fast cash offer and flexible closing, you may pay up to 13% of your home’s sale price in service fees. Opendoor’s final cash offer is calculated after deducting home repair costs and closing costs.

👉 Our Take: Opendoor could be the best company to sell your house fast if they purchase properties in your zip code. Remember—an MLS listing on Houzeo.com will automatically put you in front of Opendoor and other iBuyers for an instant cash offer.

» Opendoor Reviews: Everything you need to know about America’s biggest iBuyer

⚡ Highlights

• Excellent for experienced home sellers with desirable properties
• The repair cost breakdown isn’t disclosed in the offer
• Not suitable for first-timers or FSBO sellers
• The sales process may feel rushed, and the home seller has negligible control over the sale
• The difference between Opendoor’s preliminary offer vs. final offer can be humongous
• Home sellers receive cash offers within 24-48 hours, only on the properties that are in Opendoor’s coverage.

⭐ Reviews

Opendoor has an average rating of 4.4 out of 5 stars on Reviews.io.

» Opendoor Review: Is Opendoor the best cash home buyer in 2023?

📍 Coverage

👎 Limited Coverage: Opendoor offers cash for houses only in 51 markets, and some of the top markets are Boston, Albuquerque, Cincinnati, Indianapolis, Birmingham, Modesto & Stockton, Galveston, Miami, San Francisco, San Jose, etc.

👍 Rankings of Local Cash Buyers: In case Opendoor doesn’t cover your zip code, you can consider local companies that buy houses for cash:

• We Buy Houses for Cash in Alabama
• We Buy Houses for Cash in Arizona
• We Buy Houses for Cash in California
• We Buy Houses for Cash in Florida
• We Buy Houses for Cash in Georgia
• We Buy Houses for Cash in North Carolina
• We Buy Houses for Cash in Ohio
• We Buy Houses for Cash in Tennessee
• We Buy Houses for Cash in Texas

5. iBuyers

iBuyer companies or iBuyers, where the “i” stands for “instant”— are using algorithms to set home prices and promising an end to packed house tours. iBuyers buy homes for cash directly by making an all-cash offer in 24–48 hours.

They typically close in two weeks or less. Selling to an iBuyer lets you skip the hassle and uncertainty of listing with a real estate agent and negotiating deals. You can skip the traditional route of facing home-selling intricacies such as advertising, marketing, staging, and other legwork in the real estate process.

» Best iBuyer Company: Offerpad

🚀 FAST CLOSING

5% service fee

 4.6 / 5 (out of 164 Reviews)

Sneak Peek

With their simplified tactics, Offerpad, an iBuyer company, makes it easier for homeowners to sell their houses for cash quickly. Some iBuying company reviews state that they were able to close their house sale in as early as 10 days, which is very impressive in the real estate industry.

Offerpad is a real estate firm backed by cutting-edge technology, extensive data analytics, and a team of knowledgeable in-house market specialists. Their specialized team of real estate professionals inspects your home and Offerpad’s patented evaluation that uses predictive market analysis and comes up with an initial “offer price” for your property.

📍 Offerpad operates in 22 markets across the nation in 16 states.

⚡ Offers are made within 24 to 48 hours and closing times are faster than other iBuyers. Typically, homes close within 7 to 14 days after accepting the offer.

✅ Best for: Home sellers looking for fast cash offers and quick closing.

» MORE: Offerpad Reviews 2022: Is it Worth the 1% Cancellation Fee?

Highlights

• Close in just 10 days.
• No need to repair or prep home
• Extended stay option for home sellers
• Customers report high repair costs that reduced their final offer dramatically
• Closing costs and service fees add up to over 10%, in some cases
• Offerpad gives preference to their best interest as compared to the user, which is stated explicitly in their terms.
• Many iBuying company reviews mention Offerpad’s 1% cancellation fee as exploitation of users seeking cash offers.

Reviews

Offerpad has a 4.6 out of 5 rating on TrustPilot with 164 reviews. While we don’t have any state-specific reviews, the general review about working with Offerpad is positive with fair cash offers and flexible closing dates.

Coverage

Offerpad operates in 22 markets across the nation in 16 states.

Final Thoughts

Selling your home yourself can be tough and stressful if you’re not familiar with the home selling process already. Hiring a real estate agent to assist you throughout the journey is surely a great idea. But, why do you want to invest such a huge amount of money when you can get the same services with stellar customer service at a cost-effective package?

Real estate agents do charge a hefty amount of commission ranging from 5% to 6% which may cause a big hole in your pocket. To avoid that and help you save thousands of dollars from your hard-earned money, Houzeo brings the most efficient Flat Fee MLS listing packages with long-term easy MLS listing, Syndication, Unlimited Listing Changes, and Offer plus Showing Management.

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