Can Realtor Fees Be Negotiated? Here’s What Homebuyers Need to Know
When buying a home, you want to get the best value every step of the way, but can Realtor fees be negotiated? We take a closer look at agent commissions.
A buyer’s agent is there to guide you through the entire homebuying process, from finding the right property to arranging viewings and negotiating the best deal. Naturally, these services come with a cost. But many buyers, especially first-timers, aren’t familiar with how agents get paid. You might even be asking yourself, “Can realtor fees be negotiated?”
Buying a home can be stressful — and expensive. It’s only natural to wonder if there’s any wiggle room on commissions so you can save some money.
In this article, we looked behind the curtain at real estate commissions and consulted Andretta Robinson, a northern Illinois real estate agent with 19 years of experience, to help walk you through the strategy and etiquette of negotiating agents’ fees as a buyer.
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First of all, yes, agent commissions can be negotiated
Regardless of whether an individual’s professional designation is a licensed real estate agent or a Realtor® (a Realtor® is a licensed agent who is a member of the National Association of Realtors), most agents are paid through commissions, which are a percentage of a home’s sales price.
Historically, agent commissions ranged from 5% to 6% of the home’s sale price, split between the buyer’s and seller’s agents, with the seller typically covering both fees. However, the landmark National Association of Realtors (NAR) settlement decoupled these commissions.
Now, sellers are no longer required to pay the buyer’s agent fees, and buyers must negotiate directly with their agents. Still, many sellers choose to cover the buyer’s agent commission to help attract more offers or expedite the sale.
Despite the changes, in many markets, sellers continue to pay the buyer’s agent commissions. That said, buyers should still factor in the cost (usually around 3% of the home’s sale price) when budgeting and negotiating offers.
You may be wondering if there’s a standard percentage that goes to the commission. There isn’t one, as that would be price fixing, which is against the law.
What’s price fixing?
There’s a lot you want to make sure is fixed before you buy a home. Price is not one of them, at least with regard to commission fees. In fact, brokerages are forbidden from establishing set sales commission percentages.
Why the vagueness? Can’t brokers make it clear and easy by setting a standard percentage for their fees?
The Sherman Antitrust Act prohibits agreements that stifle competitive pricing. If agents on the seller’s and buyer’s sides set a standard rate, that would take away your ability, as a consumer, to negotiate and shop around for a more affordable experience.
The advantage of the antitrust policy is that it allows you some control over commission rates. The downside is that it may leave you in the dark as to what the first step is if you want to discuss fees. We’re here to help.
Why would a buyer negotiate fees?
Traditionally, the seller typically handled the agent fees and the associated negotiations. However, under the new rules, buyers are now expected to cover these fees themselves.
In many cases, this works to the buyer’s advantage, helping them edge out the competition. In some instances, agents themselves ask buyers to pay the fees. Robinson says she’s been in this situation.
“During the era of the foreclosure market and short sale market, which was in 2008, the price points for the homes were pretty low,” she says. (You may remember 2008 as not the happiest time in real estate history.)
Lower-priced homes mean lower agents’ fees, so in some cases, the home prices during that time fell so far that the fee dipped below a level Robinson was comfortable with. “I would go to the buyer and ask the buyer to cover the difference of the fee,” she says.
Regardless of the listing price, a home sale requires the same amount of skill and work from the agent. That’s important to remember when talking about commission. What homework does Robinson wish buyers did before entering price negotiations? It’s seeing the value agents bring to the home purchase transaction.
“If they don’t understand the value of what my services are, I will pull out my list of values, show them my hundred-point list of things that take place during a transaction, and usually when I finish with that, they understand why I’m asking for the commission.”
