Traditionally, the seller’s agent charges a 5 – 6% commission, which he or she collects when the property sold. Of course, if the seller changed their mind during the process and canceled the listing agreement, the agent would not earn a commission, despite expending out-of-pocket costs, such as advertising, as well as his or her time spent marketing the property. Negotiating real estate commissions when selling a home is always worth trying.
With New York City’s high prices, a 6% commission is quite a large sum of money. Since the seller pays the commission, it is up to him or her to negotiate a lower rate. Depending on market conditions, brokers and agents have been willing to do so, particularly under certain circumstances.
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Negotiating Commissions When Buying and Selling
You have more negotiating power with your agent if you plan to use the same one to handle the sale and your new purchase. The agent and brokerage will earn commissions from each transaction, and therefore may provide the seller with a lower commission rate.
If your property sells for $1 million, the total commission is $60,000, based on a 6% commission rate. The brokerages representing the buyer and seller typically co-broke and split this fee equally. The 3% fee for each brokerage, is further divided between the agent’s brokerage and agent, which is dependent on their commission co-brokered.
Therefore, your agent collects at least a 1.5% commission on the sale. To gain the business of selling and helping you buy a home, he or she may accept a lower commission rate if approved by his or her brokerage.
A Less Experienced Agent
If an agent is starting or who has little experience may offer a lower commission rate to drum up business. You should approach this cautiously, however. Sometimes, you get what you pay for, and you do not want the agent to learn and gain experience at your expense. If you are going down this route, ask the right questions. You are seeking answers that raise your confidence in his or her qualifications, ability to handle situations that may come up and negotiate properly.
Higher Priced Properties
An agent may negotiate a lower rate if you are selling a high-priced property. After all, the commission’s dollar amount is significant. Remember, New York City’s high housing prices mean the threshold is higher. The luxury market starts in the $3 million to $5 million range. You can certainly ask for a lower rate on your $1 million property, though.
For Sale by Owner
The For Sale by Owner (FSBO) segment traditionally did not use a brokerage. However, there are situations where the agent will provide individual assistance for a discounted commission rate. We are wary about FSBO listings, however. New York City is a complex market, and you do not have full access to the agent’s expertise and marketing power. There are also other services a listing agent provides, such as home staging.
Does it Matter for Buyers?
The seller may not pass these commission savings on to the buyer. He/she may reap the rewards, without sharing the gain with you. After all, you are looking at comps, and basing your offer decision on the property’s estimated fair market value.