How To Negotiate Commissions

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Commission negotiation is a touchy subject.  To the Real Estate agent, negotiating commission can feel like begging for a paycheck. To the buyer or seller, it can feel like a shell game. In the hopes of clearing the air and maybe even helping smooth the process, I offer these negotiation tips.

Commission Negotiation Tips

  1. How You Go In Is How You`ll Come Out

    Go in as a warrior, and you`ll get a war. Go in haughty, and you`ll be the fool. Go in as a beggar, and you`ll get crumbs. Don`t let greed cloud your judgment. Instead, try approaching the agent like you would an acquaintance or friend. Basically, treat them like they`re human, because they are.

  2. Master BOTH Communications

    Be personable, and communicate your needs clearly. This part may be easier for you than the second part, which is to then be ready to hear the agent`s needs. Speak, but also listen. Hearing what they have to say will give you clues about what kind of person they are, their motivations, level of service, and also help you understand what you can expect from this particular agent.

  3. Know These Key Things

    No matter what you`ve heard, be aware that:
    a) each agent sets his own commission. Offices do not have a house standard – it`s actually illegal to plan together what your commissions will be or state there is such a thing as a standard commission. Anyone who says otherwise is either tricky or dangerously ignorant of the rules that govern their industry. Either way, avoid those people.

    b) Commissions are not a simple number. Agents consider many factors when deciding what commission to work for.  How long something will likely take to sell is a huge consideration. (Agents`expenses continue as long as a listing is active – the longer it`s listed, the more it costs the agent). Other considerations include things like what the marketing plan might be for your particular property, expenses to be covered like driving long distances for showings, etc
    (This graphic illustrates just some of an agent`s expenses – just in case you were wondering )

    Commission Pie Illustration

  4. Interview Several Agents

    By interviewing several agents, you get a feel for what range of commissions you can expect for your area and property. You can also begin to identify which personalities, skills and characteristics each agent offers, and which best suits you. Here`s a piece I wrote on how to interview them.

    These tips will go a long, long way to help you negotiate in a way that gets you the best deal, the best service, and hopefully also the best agent. This is the way to strike up a mutually beneficial relationship that you`ll both enjoy.

    Happy Hunting!

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