Are Real Estate Commissions Negotiable?
The short answer is “yes.” The longer answer is “remember that you get what you pay for.”
The standard commission for most areas of the country is 6% of the total price, 3% of which goes to the listing agent and 3% to the buyer’s agent. Some areas are different. Here in Hampton Roads, 6% is the standard cost.
There are two important points for you to think about when you are deciding on a real estate agent. First, if 6% is standard, that means whether you hire a bad agent or a good agent it costs you the same. So make sure you hire a good agent. For example, we have a real estate team. For the same cost you could hire my entire team and our collective years of experience or hire a solo agent. So choose wisely.
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The Maroon Group Podcast
Second, there certainly are “discount” brokers in the market who promise to sell your home for cheaper than the standard commission. Again, beyond just remembering that you get what you pay for, let’s break down how this actually works and if it is truly valuable for you or not.
Let’s say, for example, a discount broker will charge you 4% total, that is, 2% for them and 2% for the buyer representing the agent. My team charges 6% total and keeps 3% as the side that represents you on the sale. On average, of the 3% revenue to our team, we spend 1% on a split with our broker (every real estate agent has to pay their broker), another 1% on marketing the home which leaves the last 1% as profit. We all know taxes are high so of that 1% profit we only keep around two-thirds.
So, the discount broker only has 2% to work with for revenue. Let’s say the discount broker also pays 1% to their office (again, that’s common). Now there is 1% left to either be profit or used for marketing. Do you think the discount agent is going to give away their profit or give away the money they used to market your home? This is not a nonprofit charity; this is a business. So they are not going to give away their money. Instead, they are giving away your marketing.
Ultimately, many discount agents will tell you they will still give you “full service,” but just look at the numbers and determine for yourself if that’s true or not.