Let's Make a Deal: 6 Tactics for Negotiating Your Real Estate Agent Commission

You’ve just delivered the best listing presentation of your life. You nailed it. Every question, every objection — done. The prospective client is reaching for the pen to sign the listing agreement.

They pause.

“I have one more question.”

“Sure…”

“Will you reduce your commission?”

Ahh, the dreaded commissionectomy. No one wants to take one. Few real estate agents even want to handle the question.

But handle it you must. It’s going to come up, no matter how skillfully you cover various scenarios in your listing presentation.

You’ve just entered into the realm of negotiating your real estate commission, also known as your paycheck.

Here are six tactics to consider using the next time this question is posed.

1. Explain how real estate agent commissions are paid

Many (most?) sellers really have no idea how agents get paid. You might hear this comment, “Six percent seems like a lot.” The seller likely thinks that you are personally pocketing the entire commission that they are agreeing to pay.

One compelling tactic to explain the real estate agent commission is to use a dollar bill and a pair of scissors. Explain that the dollar represents the entire commission paid.

Now cut it in half. Literally cut the dollar bill in half as you explain that half of the commission goes to the buyer’s agent brokerage, and half goes to your seller’s brokerage.

Now cut off a slice of the bill that represents your brokerage’s split. Explain to your client that there are four parties involved in receiving the commission — you, the listing agent, the buyer’s agent, and both brokerages.

Some agents use this tactic and continue to cut off additional pieces of the dollar bill to represent marketing expenses, licensing fees, and taxes. Personally, I think that is taking it too far. It’s almost a certainty that your client also pays taxes and has business expenses. You won’t get much sympathy or understanding there.

Slicing the dollar bill is effective for explaining that there are multiple parties splitting the commission. It is also a good time to mention that your payment is zero until the home sells, and that you are assuming all the costs and risks until it does.

2. Go back to your marketing plan

In the listing presentation, you have (hopefully) covered your marketing plan: how you plan to get the home sold. An effective tactic in the commission reduction question is to go back to that plan and reiterate what you’re going to do, while explaining that it costs you money to market the home.

“A reduction in commission would mean a reduction in available services. We can review and decide which of the items in the marketing plan would have to be removed to make up for my loss of income.”

When faced with a decision of which services to limit, many sellers will come around.

Pro tip

Don’t use the word “discount” in commission negotiations. Everyone likes a discount. Refer instead to “limited service” — something far fewer people will enjoy.

3. Play the negotiation card

There’s an old standby in the commission negotiation world, and it works very well:

“If I can’t negotiate a full commission for myself, how well do you think I will negotiate for YOU? I will be tough and professional on both the fees you pay me, and the price I get for your home, particularly at the negotiating table.”

Old school, but it works.

4. Demonstrate the value you bring

Talking about your marketing plan is one thing. Backing up your plan with statistical data brings a whole new dimension to the negotiation.

Try converting percentages to dollars; they are easier for people to relate to. Say you are talking about listing a $200,000 home. One percent of that is $2,000, which is what your seller is asking you to take off your commission.

“Mr./Mrs. Seller, we’re talking about $2,000, right? I agree, that is a lot of money. But take a look at these statistics. The average home in this area sells for 95 percent of list price. So the average agent will get $190,000 for your home. However, I get my sellers an average of 97 percent of list price. That’s $194,000 for your home. Even with my full commission, you will put more money in your pocket with me than you would with the agent willing to reduce their commission. It’s not how much you pay that matters, it’s how much you make, right?”

5. Let others do the talking for you

It’s one thing for you to tout your marketing plan, your negotiation skills, and your sales stats. It’s much different when a satisfied client touts those things for you.

Show your client the reviews and testimonials you received from past real estate clients. Play a video testimonial or two. Slide over a piece of paper with past clients’ names, email addresses and phone numbers (assuming, of course, you have their permission) and say, “I encourage you to contact some of my past clients. They will verify everything I’ve told you today. And they will tell you I received the same full commission I am asking from you.”

6. Finally, don’t get defensive

It’s easy, really easy, to get defensive about your commission. Don’t do that. Put yourself in your seller’s shoes: They’re negotiating, too. They want every dime they can get from the sale of their home — as would you. Be understanding and sympathetic, but firm. Most of a commission negotiation stems from confidence. If you are confident that you’re worth your full commission (and you are!), then the seller will pick up on that. “Buying” a listing by reducing your commission doesn’t serve you, or your client.

Be open, honest and firm. Most clients have no idea how real estate commissions are distributed. Helping them understand what you do to earn it, and how what you do will benefit the seller is another opportunity to demonstrate your value. Clients will most likely appreciate and better understand your role, and be willing to enter into a listing agreement with you — at full commission rates.