Can You Negotiate Real Estate Agent Commission?

When a real estate agent represents a buyer or seller in the purchase or sale of a home, they’re almost always paid a commission for doing the heavy lifting to get the sale across the finish line. While real estate agent commissions are and have always been negotiable, a recent National Association of Realtors® settlement successfully challenged how those commissions were determined. Now, buyers and sellers are being reminded — or perhaps learning for the first time — that both sellers and buyers can negotiate their agent’s commission, either as a percentage of the sale or a flat fee.

Here’s how real estate commission works, and how to negotiate real estate agent commission.

How does real estate commission work?

When a home is sold, the buyer and seller each pay their agents for facilitating the sale. That compensation usually takes the form of a commission, typically paid out closing from the sales proceeds. Commissions are negotiable, and must be disclosed in a written agreement between an agent and the client they represent.

The buyer’s agent is a licensed professional who represents the buyer in all aspects of the transaction. The seller’s agent or listing agent is a licensed professional who represents the sellers’ interests. Each agent is legally obligated to represent their clients’ best interests.

What do real estate agent commissions typically cover?

Agents are paid a fee, called a commission, for performing different services during a real estate transaction for the client they represent. The services may vary depending on whether the real estate agent is representing a  buyer or seller. These services are negotiable and should be decided on after a conversation with a potential agent.

Here are some services that a real estate agent’s commission covers when working with a home buyer or seller: 

Seller's agent services

• Advise the seller on what, if any improvements need to be done to increase the odds of selling quickly and for the most money
• Perform a market analysis to see what similar homes in that neighborhood or area have sold for
• Develop a selling strategy based on current market conditions
• Create an accurate and compelling listing of the home’s attributes that will be seen by buyers’ and their agents. The listing could include a smart floor plan, a 3D Tour and professional photos.
• Market the home through flyers, signs and open houses
• Show the home to interested buyers
• Evaluate offers
• Ensure that deadlines are met by the buyer and seller
• Tap networks of contractors or service providers to help the seller before the sale

Buyer's agent services

• Educate buyers about the home buying process
• Assist them in finding a loan officer to determine what they can afford
• Show them affordable homes in person and online
• Share deep knowledge of the market to help buyers evaluate homes and pricing
• Help buyers craft a competitive offer based on comparable homes in the same area and current market conditions
• Help buyers decide whether and which concessions to ask for from sellers
• Tap into networks of contractors and service providers before, during and after the sale
• Ensure that deadlines are met by the buyer and the seller
• Communicate with the seller’s agents to resolve issues that may arise after inspections or appraisals are completed
• Coordinate with loan officers to ensure the sale closes on time

How are commissions determined?

Commissions are established by agreement between the buyer or seller and the agent.

Buyer’s agent commission

The recent National Association of Realtors®  settlement sets new rules for how agents interact with their clients. While not all agents or brokerages are subject to these new rules, the changes will impact the majority of the industry. The new rules took effect on August 17, 2024, and require that agents obtain signed agreements prior to touring a home with a buyer. These buyer agreements — sometimes called buyer’s agency agreements — take different forms, but they all provide a good starting point for buyers to discuss commissions.

The agreement establishes how much your agent will be paid, how they’ll be paid, and what services you can expect in return. Arrangements could involve the buyer’s agent receiving a percentage of the purchase price, a flat fee, or even an hourly rate. 

A note on touring agreements
If you’re just starting to shop for a home, you may be asked to sign a touring agreement or limited services agreement that establishes a short-term relationship with the agent for the sole purpose of touring a home. These touring agreements are required for in-person or virtual live tours, and give you an important opportunity to get to know an agent before you commit to an ongoing buyer’s agreement. (An important note: You don’t need a written agreement to speak to an agent at an open house or to ask them about their services.)
 
Zillow’s Touring Agreement covers only touring activities and expires seven days after you sign it. The agreement does not require a fee, and doesn’t bind you to work with this agent to buy a home. If you choose to work with that agent to buy a home, it’s advisable to have a conversation with the agent that spells out their services and terms of compensation before signing a buyer's agreement with them.

Seller’s agent commission

As with buyer agreements, sellers will also enter into a signed agreement with their agent, called a listing agreement. The listing agreement can be structured in any legal way that you and your agent agree to, and must include the amount or rate of any payment you’ll be making to the agent. Every agent knows that commissions are negotiable so you don’t have to feel uncomfortable bringing it up, and, in fact, it should be a normal part of the conversation.
 
A listing agent should be able to tell you what kinds of marketing they’ll be conducting on your behalf and what that will cost. They should also be able to explain the pros and cons of various forms of agent compensation, including how potential buyers are likely to respond. For instance, agreements where commissions are paid from the sales proceeds might be favored by buyers who are looking to minimize the amount of cash they have to pay out at closing. Just know that the recent settlement eliminates any requirement that you offer any compensation to the buyer’s agent from the sales proceeds, though you are free to do so.

A note on steering
It’s important to note that agents are not allowed to steer buyers to certain houses based on  the compensation offered. Steering based on commissions offered was at the heart of the lawsuit and settlement that facilitated these industry changes. For instance, some sellers may offer to pay the commission for a buyer’s agent, but the agent should not consider those commissions when deciding which homes to show you. Also, any payments that a listing broker is proposing to offer a buyer’s agent must be disclosed to you in advance and in writing to get your sign-off.  

How to negotiate real estate agent commissions

Your agent understands that commissions are negotiable, and should be prepared to discuss it with you. Talk to your agent about your situation and expectations. What commission is the agent proposing and what is the scope of the services they’ll be providing? Different types of markets require different strategies.

The agreement you’ll be signing with your agent includes the amount and type of compensation you’ll be paying for the services you are receiving. You can raise the subject of commissions at any time, and discuss the different ways commissions can be paid.

If you're a buyer...

Talk about strategy
If you’re a buyer in a competitive market with few sellers and lots of buyers, you can expect your agent to do a lot of work finding homes in your price range and helping you craft strategies to submit a winning bid. Agents are experts in your local market, and can tailor strategies to your situation and the market.

Calculate the fees
Do the math and play out the scenarios. For instance, if you decide you’d like to pay a flat fee to your agent, determine how that affects your home-buying budget and the amount you would have to bring to the closing. 

Get the details
If you are paying a percentage of the sale, be clear about what percentage you’ll be paying, the services covered and how that also affects your budget. Be clear about whether you will be paying the fee out of pocket or whether the seller has agreed to pay it from the sales proceeds.

You also can interview agents and see who is offering the most competitive rates and services. 

If you're a seller...

Take stock of the market you’re in
If you’re a seller, consider the market you're in. Different types of markets require different strategies. For example, if you’re in a seller’s market, you can expect higher interest in your home, assuming it’s in good condition and reasonably priced. This could mean the agent might not have to spend as much money on marketing but could have to spend more time with you weighing offers and possibly crafting a counter offer. In a buyer’s market, you can expect your agent to recommend strategies for attracting buyers. Be clear about what services you’re getting.

Think about how your role
Consider what you’re willing and able to do to help the home sell quickly and for the most money. Fixing up the property so that it’s in its best shape can help attract buyers looking for a turn-key home, and could require less work on the part of the agent. A home poised to potentially sell more quickly could give you more leverage to negotiate a lower commission.

Get creative
If you’re also looking to buy a home, and plan to use the same agent you’re using to sell your home, you could negotiate the commissions based on the sale of your home and the purchase of a new one. The same could hold true if you can bring the agent new business by recommending other sellers or buyers.

Get specific
Listing a home for sale calls for strategies and listing tools to help your home stand out to buyers. Discuss what the agent is prepared to do to help your home sell, whether that be open houses, a 3D Home Tour on the listing, or other special marketing tools and tactics.

Interview agents
And, as with buyers, you can interview agents and see who offers the most competitive rates and services. 

Can buyers and sellers use the same agent?

The practice of a single real estate agent representing both the buyer and the seller in the same transaction is called “dual agency.” 

Zillow believes that buyers and sellers deserve to work with an agent who is committed to their best interests and represents only them. Dual agency puts consumers at a disadvantage because buyers and sellers have different interests in the transaction that could come into conflict if the same agent represents both parties.

Some have likened dual representation to a lawyer representing the plaintiff and the defendant in the same lawsuit. A lawyer couldn’t fairly and fully advocate for both sides equally, and for many, the same thinking applies to agents.

Do I have to use an agent?

According to Zillow research, nearly 9 out of 10 home buyers use an agent to help them find, negotiate for, and close the deal on their new home. 

If you choose to forgo an agent, you will need to be well-versed in determining fair market value, negotiations, spotting red flags, inspections, keeping paperwork on track and in compliance, closings and legal and financial disclosures.

Some consumers are comfortable enough to go it alone, but the vast majority of consumers end up working with an agent who prioritizes their needs.

What to know before you sign an agreement with an agent

Do your research before signing an exclusive agreement. You want to be sure the agent is the right fit. Finding an agent who is an expert in your local market, understands the market conditions and what it’s going to take to sell or buy a home there can ease the path forward as you make your next move.