How You Can Avoid Paying Real Estate Commission

If you're going to be selling your home by employing an agent then you will wind up paying real estate fees in some way. The agent will charge you a percent of the final selling price. The seller will pay this commission at the closing, however, the seller will not be paying real estate commission if the deal falls through.

The question then becomes exactly how much will the commission be that the seller is paying out?

The percent is decided between the seller and his realtor before the home goes into the local MLS or Multiple Listing Service. It is important if you are going to be paying real estate commission to an agent, to ensure you are not having to pay too much. Unfortunately, the percent paid is NOT generally going to be negotiable. In fact, most brokers will NOT let their own agents negotiate their commission. And, if the broker does permit their own agents to lower their commission, many realtors themselves will not be willing to do so. For that reason it is very important if you are planning on selling your house that you check with the agent beforehand whether they might negotiate their commission. If the agent just isn't willing to lower their commission, then simply continue your search to get a better realtor.

Of course, when it comes to paying real estate commission, you should also be sure you aren't paying too little. Unless you are working with a flat fee listing service, in which case you are not paying a commission, but rather a one-time flat fee, you want to make sure that the agent is not reducing their commission too much or the agent won't be as motivated to work for you. They are going to work harder for their clients who are paying out a higher commission. Try to strike a balance where you will get a good deal when it comes to paying real estate commission, but where you will not be totally cutting your agent out of the mix.

So what is the right deal?

First of all, you should understand that without any negotiating, a normal real estate transaction has the seller paying 6% of the final purchase price with 3% going to the selling agent and 3% going to the buying agent. Keep in mind, each of those those realtors must then pay their broker his portion. A broker normally gets anywhere from 20% - 50% of their agent's commissions.

Therefore, even though the seller may be paying out 6% in commissions, just 3% of that goes to the seller's agent (and that agent just gets about 70% of that). Therefore, keep in mind that you are just trying to negotiate down that 3%. If the realtor is prepared to meet you half way then you've got a great deal. Put simply, your realtor should be ready to cut 1.5% out of their 3% commission. As a result, the seller will just be paying 4.5% of the final selling price (3% to the buying agent and 1.5% to the selling agent).

Once again, in the event that your realtor is not willing to negotiate when it comes to paying real estate commission, then get a better agent.