For decades, home sellers typically covered both their own agent’s commission and the fee for the buyer’s broker, a structure that left little room for negotiation. But a recent legal settlement has shaken up that system, opening the door for buyers and sellers to haggle over who pays what — and how much.
In the Bay Area, many agents ask for a 2.5% or 3% commission — a rate they say is justified given their experience and market knowledge, and the time they take to help clients navigate the process of buying and selling a home. Agents may also face pressure from brokerages, which may receive anywhere between 15% to 30% of that commission, to keep fees close to 2.5%.
Although some agents don’t budge on their rates, some will under the right circumstances. Here’s how a buyer or seller can strengthen their hand in negotiations:
Show that you’re serious. Matt Castillo, an East Bay agent, said that part of the reason agents set their fees around 2.5% is because it’s so uncertain whether their client will actually close — and the agent will get paid. “You might be working with someone for a year, and they may never buy,” he said.
As a buyer, show an agent that you’ll make their time worthwhile. Get preapproved for a loan. Make sure you understand your budget and how much home you can afford. If an agent feels that you’re likely to buy a home with them, they may be more willing to negotiate.
As a seller, make it clear that you’re motivated to sell, so that the agent doesn’t think there’s a risk that you’ll take the property off the market.
Define how much help you really need. Some buyers want their agent to come along to every showing. Others want someone who will come in at the end and help negotiate the price. If you don’t need an agent who will hold your hand, tell them.
The same goes for sellers — if you’re handling certain parts already, like the staging or the photos, you may be able to get a price reduction.
“That’s a good way for clients to negotiate, is defining what services they need from an agent,” said Kyle Henry, an agent in Burlingame.
Price matters. If you’re buying or selling a more expensive property, you may be able to reduce your fee since the agent’s overall payout will be larger.
Use the same agent for multiple transactions. If you’re selling one home and buying a new one with the same agent, they may reduce their fee, since they earn two commissions.
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Shop around. Knowing the market and what others charge will put you in a better position to negotiate.
Point out that you don’t want to be at a disadvantage to others who do negotiate. Stephen Brobeck, senior fellow at the Consumer Policy Center, a consumer advocacy group, had advice for buyers and sellers.
If an agent insists that their fee doesn’t matter because the sellers are the ones who pay, push back. Buyers should ask, “Won’t that put my offer at a disadvantage if another buyer has successfully negotiated a lower rate?” he said.
Sellers should instruct the agent not to offer a specific rate to inquiring buyer agents, and simply say it is negotiable. Then offer a rate a half a percentage point below what the buyers ask, Brobeck said. “Many buyer agents will accept that, and they will amend their agreement with the buyer.”