5 Tricks to Save Cash on Realtor Commissions

Aaron Crowe

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:

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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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Published October 10, 2012 Updated: December 16, 2019
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Caroline S•  December 19, 2015 Edit
"Some agents, however, have been known to go out of their way to avoid showing those houses." This is illegal (called boycotting) but unfortunately it still happens and is basically impossible to enforce. You mentioned a few flat fee shops who face this problem and it is a serious one. I'd also suggest looking into Hauseit which is a NYC based company that pairs you with a top local full service broker who provides the occasional flat fee listing. This avoids the reputational risk you mentioned.
Duane Christensen•  August 6, 2016 Edit
For more than asking? Then it either wasn't priced right or there's a shortage of homes on the market. Then if the home doesn't appraise, you're back to the negotiations table. It's easy to say you don't need a Realtor until you try selling on your own. Even with the little help of a flat fee company, it's not easy.
B.P.•  August 30, 2016 Edit
This article is horrendous. Obviously, you've never worked in the real estate industry. Highly competitive, crazy hours, on call 24/7 because the business never sleeps, high liability, lots of driving, organizing inspections, photographers, aerial photos/videos, meetings with title companies, mounds of paperwork, and everyone is trying to take a piece of the pie that you MORE THAN EARN--your broker, your insurance, your clients, the MLS and realtor board dues--everyone. This is the most important and one of the most expensive, decisions/purchases someone can make. Having someone who is a professional, ethical, and your advocate to make sure everything is taken care of, done properly, and your interests are protected is INVALUABLE. All commissions are negotiable, but that doesn't mean you take advantage of your agent. You get what you pay for in this industry. Any realtor with experience is never going to agree to something like a 3% split. Using a realtor to pre-market and market your home on the MLS, social media, open houses, title company home tours, staging, etc. is a TON of work and costs us a pretty penny up front. We are far more invested in you and the success of selling your home for the most money in the least amount of time, than you are invested in us. Every listing we take is a risk. The best thing you should do is interview several agents in the area. Ask them what their average days on market are, how many listings they have vs how many buyers they've represented in the past year, what records have they set or broken in surrounding neighborhoods for price per square foot, (etc), how many of their listings received over asking price, what they would suggest you do to make your home market ready, ask them to walk you through their comps for your home and how they determined a value range for listing your home--all of these things are what separate a typical agent from a great agent. That, and the level of service they provide. A great agent will go above and beyond. How do you find these agents? Ask your neighbors, look on facebook, read reviews... In most cases you'll find that agents don't need to discount you because they sell your home at a price that you otherwise would not get if you used an inexperienced agent or no agent at all, and therefor, you actually make back far more than the 1-1.5% you're asking us to take out of our pocket. That's 33% of our paycheck. If someone asked you for 33% of your paycheck, how would you react? And while you may think that agents are rolling in the dough--they're not. The average agent has 11 transactions a year according to realtor.org. A nickel is twice as large as a dime, but worth half as much. Don't be cheap and don't be stupid--selling and purchasing your home is not the time to be either.
Butters•  October 19, 2016 Edit
Your post which should probably be a book has made me decide that I will certainly sell my house myself.
SS•  January 16, 2018 Edit
I will sell myself also and get a lawyer - Real Estate is a rackett - the Broker rides off the back of the agent and the state and licining board rides off the back of the industry ... BS rackett and the fees ... not to mention the Broker /business owner dosent pay a wage - these poor agents are commission only and they pay the broker to work for them ??? hummm
Annoyed•  November 1, 2017 Edit
If realtors work so hard then why hasn't my realtor showed my house in 2 months? The only people I've gotten to see it were through social media.