When you compare real estate agents, you will find a possibly bewildering range of commissions and fees. Are they fixed or are they negotiable? Fortunately, commissions and fees are negotiable. You need to do your homework first, though. Then you will be in a position to negotiate lower fees and commissions.
Commissions and real estate agent feesSince commissions were deregulated, real estate agents can charge whatever they choose to charge. Competition has kept commissions fairly low, but they can still vary from around 2.0 percent to 3.5 percent of the value of the home. If your home is valued at $800,000, you will be paying approximately $16,000 commission at 2.0 percent. If you pay 3.5 percent, you will be paying your real estate agent $28,000.
It's not likely the spread in your area will be that drastic. In most areas, commissions vary by around one-half to one percent. It can still make a difference. Half a percent on an $800,000 home equals an extra $4000.
Fees are a different matter. Fees are fixed, but some real estate agents may charge more for marketing fees than others. In some cases, they may charge a higher commission, but offer some advertising for free. It won't be the full package, but you won't have to pay your basic marketing expenses such as signage and a listing on your agent's website.
How to negotiate real estate agent fees and commissionsReal estate agents are competitive. They want your business, but you may need to convince them to lower their fees or commission. The best way to do this is to be informed when you meet them.
OpenAgent makes it easy for you to become informed. From the comfort of your home, you can compare commissions and fees before you approach real estate agents. Some things to look for include:
- The commission they ask for
- Whether some advertising is included in the commission
- If advertising is included, what type of advertising is included?
- What are their marketing fees for different types of advertising?
- Do they expect upfront payment or do they deduct advertising after they sell your home?
- Do they have a "no sale, no fee" policy?
Your negotiations should extend beyond the costs of selling your home. For example, you have choices when you choose a real estate agent:
- You can choose an open listing and list with more than one agent.
- You can give a real estate agent exclusive authority. If you do this, the agent gets a commission even if you find a buyer for your home.
- Sole agency differs from exclusive authority. If you find a buyer, your agent may not be entitled to a commission.
Can you over-negotiate?It is understandable that you want to pay a lower commission and lower fees, but that shouldn't be your sole consideration when comparing real estate agents. Some real estate agents will charge a lower commission and lower marketing rates because they want to attract more clients. It isn't always true, but sometimes it may be because they have a bad reputation in the community.
If a real estate agent is too quick to accept your lower offer, is it because they need a client? If so, they may not be the best choice. A reputable real estate agent may charge a higher commission, but work harder on your behalf.
Real estate marketing fees depend on the amount of marketing a real estate agent does. They will always be willing to let you choose the extent of marketing you want to do. In general, marketing costs between one half to one percent of the cost of the home. It might include:
- Professional photography
- A flyer or brochure
- Online advertising
- Newspaper advertising
- Advertising in real estate magazines
- Distributing to a network of potential buyers on the agent's database
- A video or drone footage
- They may suggest hiring a professional photographer to take photos of your exterior and interior.
- They will want to advertise your property on their website.
- They may recommend advertising on real estate websites that have a greater reach.
Almost all real estate agents have websites today. However, their reach may not be as great as the reach of sites like Domain and realestate.com.au. While the cost of advertising on these sites can be relatively high, the ads will attract more potential buyers.
The most important thing is to find a reputable real estate agent who will work on your behalf to sell your home at the highest possible price. If you choose the lowest commission and fee you're offered, you might save a few thousand dollars, but you also may lose when your property sells for $20,000 less than it is worth.