How to Save on Real Estate Commission

It’s always a challenge to shake off the sticker shock of closing costs, especially when real estate commissions make up the largest portion. 

But even though they are the bulk of the closing expenses for sellers, they are negotiable and sometimes avoidable. 

Sellers have a variety of tools at their disposal to help reduce the real estate commission, but it’s important to examine each one carefully and determine whether it’s the best option for their particular situation.

While buyers have not historically been directly responsible for the real estate commission as a line item, they still have to face that expense through the listing price, as sellers may adjust the price of the home to help account for a buyer’s agent commission they choose to offer.

Below, the Prevu team shares the most effective ways sellers and buyers can save on real estate commission.

Tips to save on real estate commission

• Sell your home for sale by owner
• Interview multiple brokerages
• Negotiate the commission
• Consider a discount brokerage
• Time the market
• Work with a brokerage that offers rebates

Sell your home for sale by owner

While it comes with unique challenges and can be a daunting process, selling your home for sale by owner (FSBO) is one of the easiest ways to save on real estate commission as you literally eliminate the cost of an agent.

However, embracing FSBO requires diligence, research, and sometimes a steep learning curve. Sellers must be prepared to take on all the responsibilities usually handled by a real estate agent, including market analysis to price the home accurately, staging the home for viewings, marketing the property, negotiating with potential buyers, and navigating the closing process. 

This demands a significant investment of time and effort, and it can be overwhelming for those unfamiliar with real estate transactions.

Effective marketing is crucial when selling on your own. Homeowners must leverage online platforms, social media, and local networks to reach potential buyers, as they will likely not have access to the local Multiple Listing Service (MLS). 

Additionally, understanding the legal requirements and paperwork involved in a real estate transaction is essential. Sellers might consider consulting with a real estate attorney to ensure all legal aspects of the sale are correctly managed, which can incur some costs but potentially result in overall savings compared to traditional commission.

Interview multiple brokerages

Sellers should always interview as many brokerages as possible to gain a comprehensive view of what is available in the market and use this information to negotiate better terms.

Firstly, prepare a list of questions to ask each brokerage. These questions should cover their commission rates, marketing strategies, sales record, and any additional fees that might be involved. Understanding each brokerage's approach to selling your property can help you assess which one aligns best with your expectations and financial goals.

Moreover, discussing your expectations and being upfront about seeking competitive commission rates can prompt brokerages to offer more attractive proposals. Some may be willing to lower their commission or offer a sliding scale commission, where the rate decreases as the sale price exceeds certain thresholds. 

Speaking with multiple brokerages not only has the potential to reduce commission costs but also ensures that you are partnering with a real estate professional who understands your specific needs and is committed to achieving the best possible outcome for your sale. 

Remember, the goal is to secure the best overall value, which includes both the cost of services and the expertise and effort the brokerage will invest in selling your property.

Negotiate the commission

Commission rates are not set in stone and can always be negotiated based on various factors, including market conditions, the value of your property, and the services provided by the agent.

Initiating the conversation requires a delicate balance between acknowledging the agent's value and expertise while expressing your desire to align costs with your financial goals. It's beneficial to approach this discussion with a clear understanding of the standard commission rates in your area, as this knowledge equips you with a solid foundation for negotiation. 

Expressing your research findings and market understanding can demonstrate to your agent that you are entering this conversation from an informed perspective.

Furthermore, be prepared to discuss the specifics of what you're looking for in terms of marketing, staging, and the sales process. Sometimes, agents are willing to adjust their commission rate if they perceive the sale to be straightforward. In such cases, the potential for increased volume or reduced marketing expenses can justify a lower commission rate for the agent.

It's also advantageous to communicate any unique selling points of your property that might expedite the sale or attract higher offers, thereby reducing the agent's workload and marketing expenses. 

If you're bringing something to the table—such as a well-maintained home in a sought-after neighborhood or a willingness to undertake some of the marketing efforts yourself—use these points as leverage in your negotiations.

Consider a discount brokerage

Discount brokerages operate on a business model that provides real estate services at a lower cost than traditional brokerages. Typically, these savings are achieved through streamlined operations, technology integration, or offering a la carte services that allow sellers to choose and pay for only the services they need.

Choosing to work with a discount brokerage does not mean compromising on quality or exposure for your property. Many discount brokerages leverage technology to list properties on the same Multiple Listing Services (MLS) used by traditional agents, ensuring that your property reaches a wide audience. 

The key to successfully working with a discount brokerage lies in understanding the scope of services provided and aligning them with your needs as a seller. For instance, if you're comfortable hosting open houses or negotiating with buyers directly, you can opt for a service package that excludes these services, further reducing your costs.

However, it's crucial to carefully review any listing agreements or buyer representation agreements to ensure you're fully aware of what is included and what responsibilities you'll be taking on.

Time the market

Choosing the right moment to sell can be a worthwhile strategy, as homeowners can maximize interest in their property. This could potentially lead to a faster sale and a stronger negotiating position, which could reduce the need for a high commission rate to incentivize agents.

Traditionally, spring and early summer are considered prime selling times in many markets due to increased buyer activity. 

Many families prefer to move during the summer to minimize disruption to their children's schooling, and warmer weather makes for more pleasant house hunting and moving conditions. Listing your property during these peak times might attract more buyers, leading to a quicker sale and potentially giving you leverage to negotiate lower commission rates with your agent.

Listing during the off-peak season, such as late fall or winter, might require more incentives to attract buyers and agents, potentially negating the commission savings. However, fewer properties on the market during these times can also mean less competition, appealing to buyers looking for a deal or those with an immediate need to move.

Work with a brokerage that offers rebates

This tip is geared more towards buyers, as working with a brokerage that can provide a commission rebate is one of the most effective ways they can save on real estate commission.

In simple terms, a buyer rebate is a portion of the buyer’s agent’s commission paid by an owner given back to the buyer after closing. To enable these savings, buyers should seek out brokerages that specialize in commission rebates.

For instance, Prevu offers buyers up to 1% of their home’s final purchase price as a homebuyer’s rebate, delivered to the buyer upon closing. Depending on the home’s final sale price, the commission rebate can be a powerful tool in offsetting closing costs or replenishing savings after a sizable down payment.

Interested in buying a home this year? Browse listings and see how much you can save with Prevu’s Smart Buyer Rebate.