March 1, 2024


Mad about real estate

Broker Commission Agreement – Negotiate Your Realtor Fee Before You Sign

A broker commission agreement in real estate is also called a listing agreement.  This is the contract between the home seller and the realtor which sets forth the terms of the listing (marketing of the home).  Obviously, one of the terms in the broker commission agreement includes the commission you will pay your realtor when the home is sold. What’s important to know is it can and should be negotiated.

The typical commission can be anywhere from three to seven percent depending on certain circumstances.  As expected, the realtor will try to get the highest commission payable.  It’s your job, as an educated home seller, to beat the realtor at their own game.

Somewhere during the interview the issue of commission will inevitably come up.  Regardless of how much the commission is it’s your job to get it lower.  The problem is the realtor is ready and eagerly anticipating this request.  Remember, realtors spend thousands of dollars in training and education. Overcoming commission examples is Real Estate 101 to a professional realtor.

Although there are plenty of responses to the “Will you lower your commission” question, I’m going to teach you the most common response a realtor gives.  Once you know this, you can prepare a counter response and once again pay a lower amount in the broker commission agreement.

Here is the typical objection technique for ‘will you lower your commission’:

“I understand that you want to save money, especially in this real estate market.  However, by paying the commission I have proposed you will still net more with me than with another realtor who will charge less.”

The realtor will provide an explanation to justify their high commission. The following example should illustrate how it might be explained.

Let’s say your home is for sale at $100,000 and the proposed commission is 6{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} or $6,000.  Depending on market conditions you might get full price, maybe five percent less (95{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of asking price), maybe ten percent less (90{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} asking price), etc. Who knows?

Mr. Realtor explains that the average realtor negotiates 94{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of the asking price or six percent less than full price.  In this simple example, the average realtor will sell a $100,000 for $94,000.

Ok. That’s not too bad.

But wait one second.

Mr. Realtor then proceeds to explain that, on average, he gets 98{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of asking price. That implies a price of $98,000 – an incredible $4,000 more.

Once Mr. Realtor feels you’ve seen the light he will then put it all together for you.

If you hire another realtor who has agreed to a 4.5{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} commission then you will receive $94,000 minus that commission for a remaining balance of $89,770. 

But wait one more second second. The news gets even better.

“However, if you hire me, Mr. Realtor, then you should sell for $98,000.  After paying my six percent commission you will have a remaining balance of $92,120.”

Mr. Realtor will put down his pen and paper then proceed look you straight in the eye with his most professional and convincing gaze and ask you very simply, “Would you rather receive $89,770 at closing or would you rather receive $92,120 at closing?”

And there you go.

Now the ball is in your court. Were you ready for this? How can you respond to something as obvious as it’s been explained? What do you say?

Remember, realtors are highly trained to handle commission objections.  Especially Mr. Realtor.  Even if you were able to come up with an acceptable response the realtor will have a dozen other techniques waiting in line.

Once you have learned the objection handling techniques realtors have mastered then you can beat the realtors at their own game and be able to sign the broker commission agreement with confidence.

In summary, a broker commission agreement is also called a listing agreement. The realtor’s job is to get you to pay the highest commission possible. It’s your job to get the lowest commission possible with the same professional service and results.  The realtor is anticipating the ‘lower your commission’ objection and has many objection handling techniques. By understanding the realtors’ techniques you can easily demand a lower commission and sign the broker commission agreement with confidence.