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5 Ways To Negotiate Commissions With Your Real Estate Agent

Every second, all over the world, someone is negotiating something.

It could be for the price of a car, oranges, horseshoes or even why someone should/shouldn't become married.

Find The Perfect Buyer For Your Home in Minutes.



In short, negotiation is a common, everyday activity that most people use to influence others and to achieve personal objectives.

It's healthy.

It promotes competition between businesses and generally keeps pricing within fair value.

According to Redfin, over half of sellers last year attempted to negotiate for a lower commission rate

commissions1

Here's where it gets tricky..

It all starts with your real estate agent.

Your agent is most likely a 'likeable' person. Sometimes they take you out to lunch, for coffee, they know your dog's name and have visited your home on numerous occasions.

They become like a family friend.

So how in the world can you be so bold as to ask for a discount on their commission??

Here are some facts..

  1. Commissions are always negotiable, no matter what your agent tells you.

  2. The Department of Justice even offers rebates and commission reductions to promote healthy competition between real estate agents.

  3. The more successful the agent, the more likely they are to reduce their commission - because they have an abundance of business.

How Commissions Work

In most real estate transactions, there are two sides: The buyer's agent side and the seller's agent side.

Normally, these two sides split the entire commission paid by the seller right down the middle - that is, both "sides" get 50/50.

In California, for example, the normal commission in the metro areas is around 5% of the total sales price. So this would be 2.5% to the buyer's agent and 2.5% to the seller's agent.

Now, where it gets interesting (and where real estate agents start to drool), is when one agent can represent BOTH sides of the transaction; i.e., represent both buyer *and *seller, and take home the whole 5% for themselves!

At Duvora, our platform instantly matches buyers with off-market home sellers, so it's very common for only one agent to represent both sides - which means you have more negotiating leverage.

So, for an average home price in Los Angeles - around $750,000 - each agent would make approximately $18,750.

HOLD ON...

Remember, every real estate agent works for a broker, and the broker doesn't want to go home empty-handed, so they charge the agent a percentage of the commission too.

This percentage depends on what kind of "split" the agent has negotiated with their broker, based on years of service, sales numbers, etc. But for our example, let's say the agent gets to take home 40% of their $18,740.

So now, the agent gets to cash a check into their bank account for the amount of $11,250 - or (if they represented BOTH sides of the transaction) $22,500.

Not too shabby..

So what's the point?

The point is to learn how to make a calculation of what you will be paying your real estate agent, to know how much bargaining power you have.

In order to know where to start you have to get a baseline though.

Get A Baseline In Your Area

Ask around through friends or family from people who have gone through the process.

If you're unable to approach them with a sensative topic like money, then visit an online forum or community and ask the general population.

Once you have a good idea about a baseline commission percentage in your area, then it's time to get to work on your negotiation skills..

Here are 10 tactics you can use to negotiate like a pro.

1. Get Your Emotions In-Check

Your home is not just a "thing" but a scrapbook of living memories tied to your life and your family's life.

The trick is to train your mind to get into "negotiation mode" which means to check your emotions at the door.

In the famous book "Never Split The Difference", by authors Chris Voss and Tahl Raz,

Humans all suffer from Cognitive Bias, that is, unconscious--and irrational--brain processes that literally distort the way we see the world.

There is no bigger culprit which distorts how you see reality, than emotions.

Here's what you can do...

  • Acknowledge and label your feelings.

The author of Emotional Agility, Susan David writes that when you have strong emotions, “the attention you give your thoughts and feelings crowds your mind; there’s no room to examine them,” she says. To distance yourself from the feeling, label it. “Call a thought a thought and an emotion an emotion,” says David.

For example: "She is so wrong about the value of our home and it's making me angry that she won't see my point of view" becomes "I'm experiencing the thought that these home buyers are wrong and I'm feeling angry about it"

Labeling like this allows you to see your thoughts and feelings for what they are: “transient sources of data that may or may not prove helpful.” When you put that space between these emotions and you, it’s easier to let them go — and not bury them or let them explode.

  • Replace your thoughts

Negative patterns come from reoccuring cycles of negative thoughts. If you can catch your negative thoughts early, you will have the ability to force them out of your mind and replace them with something else.

The easiest thing to replace them with is imagining the ideal outcome of the negotionation playing out exactly as you wanted it to. Then make this thought your new focus.

  • Take a break.

It is scientifically proven that taking just a small break (even 1-2 minutes) away from a conversation can "reset" your emotions and regain your center.

Which prepares you perfectly for the next step..

2. Ask For What You Want

Just ask.

Decide how much of a commission reduction you want and just ask for it. State your reasoning afterwards.

The trick is to come into the negotiation prepared to know exactly what you want.

Is the agent representing both sides? Then you know that they have a lot more commission to split.

Two people discussing business over a table with documents

Also, always let them know that you have been contacted by many other agents in the area who are offering very competitive rates. It helps to show them actual flyers or business cards which have been given to you.

3. See It From The Other Side

In any successful negotiation, you have to be able to see it from their point of view.

Be honest with yourself and know if the amount of commission they are getting is "fair" for the amount of work being done.

For example, are you paying for all of the staging, asked to help with showings, etc?

Take all that into account when deciding if the agent is being fair, or being greedy.

4. Take It Slow

Successful negotiations take time.

Don't be in a rush to "get it done", because you'll only end up cheating yourself into agreeing to something which isn't your ideal situation.

Also, from the agent's point of view, the longer it takes you to sign a listing, the more time other realtors have to solicit you.

Let them sweat it out! It's ok not to pick up your phone every single time your agents calls during your negotiations.

Play hard to get and let them know that there might be other options available to you.

5. Be An Optimist

Most every great negotiator is an optimist.

They are confident in their abilities to win the negotiation every single time.

Part of this confidence not only comes through prior experience, but it comes from their glowing sense of optimism.

Understand that when you stay positive, other people feel your confidence and want to work with you.

Now, go negotiate those commissions.

Your now in a great frame of mind to negotiate a great commission rate. It's time to start reaching out to qualified home buyers and sell your house fast.

Derek Devore

Derek Devore

Founder of Duvora® - The real estate matching engine that intelligently connects buyers, sellers and agents together in seconds.

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5 Ways To Negotiate Commissions With Your Real Estate Agent
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