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5 Tricks to Save Cash on Realtor Commissions

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The average 6 percent sales commission that most real estate agents get is a high price to pay, especially if you believe economists who say that realtors don’t sell homes for significantly more than the asking price.

If you’re not getting much more money when using a real estate broker to sell your house, why use them? Expediency may be the best answer, since agents often sell homes faster than homeowners could on their own, according to a paper by Stanford University economists.

The Stanford researchers also found that without the Multiple Listing Service, or MLS, that is available to real estate brokers, using a broker reduces the selling price of a typical home by 5.9 to 7.7 percent. A real estate company’s costs aren’t worth paying for, they found, when the MLS assistance is taken out of the realtor’s hands.

But if you’re going to sell a home and want to pay for an agent’s expertise, there are ways to lower the fee. Here are some places to start:

Go for half. The typical commission is 6 percent, which is split by the agent for the buyer and the agent for a seller—3 percent each. But it’s only paid by the home seller. If you’re selling your home and buying another with the same agent, they’ll collect that 3 percent twice.

Tell your potential agent that you’ll give a 3 percent total commission for selling your house that the agents from each side can split, and your agent can work whatever deal he or she wants when they help you buy another home. For a $300,000 sale, it’s still a $9,000 commission for selling your house, but the realtors from each side will have to split it in half.

Without cutting the commission in half, each realtor would get $9,000 twice—for selling and buying a $300,000 home. Yes, much of that would go to the agency, but it’s a hefty fee for a few weeks of work.

Shop around. Interviewing three or more agents is a good way to find out if you get along with an agent and learn how they’ll sell your home. But Robert Papes, a North Carolina-based business consultant, took it a step further and had several companies bid for the chance to sell his home.

He first asked them how many homes they sold in his price range in his area; how they would market his home; how much residential real estate their top seller sold; and the price they recommended putting his house on the market for to sell it in three months.

Papes explained that each agent was competing with others. The lowest commission came from an agency that wasn’t his first choice. He went back to his first choice and asked if they would meet the competitor’s bid, which they did, and he sold his home in three months at a 5 percent commission rate.

Ask what you’re getting for your money. Like Papes, who searched for a realtor who had experience selling homes in his area and could sell his home within three months, asking an agent what services they offer is a way to find out if a commission is worth it.

Ask how the agent justifies a higher commission and what they do that other, less expensive agents don’t do. Why should you pay more for their services? For luxury home sales, it can cost more to advertise in publications and websites for the wealthy, or the agent may have more contacts than a cheaper agent does.

Hold out for a higher selling price. This tactic may not help you negotiate a lower sales commission with your agent, but it will help you at least pay for their services without subtracting their fee from your asking price.

If a buyer offers close to the asking price on your home within the first week, the impulse is to take the offer. But as the experts at Freakonomics have so famously pointed out, the real estate agent has more to gain by selling your home quickly than by waiting an extra week for an offer $10,000 higher that meets your asking price.

In this clip from the 2010 Freakonomics film, the extra $10,000 only gets the agent $300 more in commission—with half of the $300 going to the real estate agency. Earning an extra $150 isn’t much of an incentive, they point out. But if you, as the home seller, hold out for another week or so and get the higher price, the extra $10,000 is well worth your time.

One real estate broker has an alternative that he says would help: Offering a 20 percent incentive for selling the house for more than the asking price, or 20 percent less in commission for getting less than the asking price.

Find alternatives. Companies such as HelpUSell and ZipRealty offer alternatives to traditional real estate agents by selling services individually or for a flat fee to get your home on the MLS.

Some agents, however, have been known to go out of their way to avoid showing those houses.

Or sell the home yourself and hire a lawyer to do the paperwork. If you find a buyer who will still meet your asking price, you’ll both save thousands of dollars by not paying commissions.

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