Buying a Home? How to Negotiate Your Real Estate Agent Commission

If you’re in the market to buy a home, you may want to brush up on your negotiation skills.  

As the consequences of the National Association of Realtors (NAR) settlement continue to unfold, homebuyers may need to negotiate who is responsible for covering their real estate agent commissions and the amount of those commissions.  

As of August 2024, the average commission paid to a buyer’s real estate agent is 2.55% of the home sale price, according to a recent report from Redfin. That adds up to an average of $15,377, according to the report. 

Before the NAR settlement, this commission was paid by the seller of the property. Now, however, it may become the buyer’s responsibility if the seller chooses not to cover the amount. This is new for buyers, sellers, and their agents.   

It’s important not to assume the seller will cover your agent fees, only to learn that they won’t— and then the deal falls apart. Some buyers may not be able to afford the down payment and closing costs on a home in addition to the agent’s fees.  

That’s why you need to have the commission discussion before you start working with an agent.  

In hotter housing markets, where competition for a limited number of homes for sale is high, sellers may not feel as though they need to cover the buyer agent’s fees to make the sale. But in cooler markets or those where there are more homes for buyers to choose from, sellers may decide to pay the commission to make their properties more desirable. 

“It’s a new world for agents,” said Jonathan Miller president and CEO of Miller Samuel Inc. a real estate appraisal and consulting firm. “It’s been this standard practice for decades and that’s being changed.”  

Benefits of negotiating your real estate agent’s commission 

This changing landscape may have benefits for homebuyers. More transparency about the role agents play in the homebuying process, what sorts of services will be provided, and better communication about what the buyer expects from their agent can create a stronger working relationship.  

“You are in control over what compensation will be, how and when it is paid,” said Mark Stapp, professor of real estate at Arizona State University.  

Will the agent be able to point out potential red flags in a property that might not be visible to the naked eye? Can the agent help the buyer in structuring an offer to be more competitive? Does the agent have a network of home inspectors, real estate attorneys, and other professionals that may help the buyer navigate the closing process? 

Chicago-area real estate broker, Debra Dobbs, has been negotiating compensation with clients for years. She explains the services they can anticipate.  

“The first thing the buyer should do is determine whether they feel capable of handling the transaction themselves or if they feel that a buyer's agent might be able to provide a service that's of value to them,” said Dobbs. “It makes for a more educated buyer, and it helps a buyer understand that we do more than just show properties.” 

How to negotiate your real estate agent’s commission 

Once you’ve decided to work with an agent, you should find one you trust. Then it’s time to discuss compensation. Commissions can vary by agent, so this is something you will need to discuss.  

“The most important thing a buyer and a prospective buyer's agent can do is have an open, transparent conversation and get away from the discomfort of having a talk about the finances of the transaction,” said Dobbs.  

In some cases, sellers may still choose to pay the commission of the buyer’s agent. If they think they may have a harder time selling their property, they may decide that it’s worth it to pay for the buyer’s agents.  

In other cases, buyers may be able to ask their agents for different commission structures.  

“The buyer can negotiate, can ask for a fee structure that's based on a menu of services,” said Dobbs.  

This could look like a buyer telling an agent that they only want help finding resources for repairs or the home inspection and managing the process for them, while they go and see houses on their own.  

“That would be an opportunity for the buyer if they felt they weren't in a financial position to ultimately be able to pay their buyer agent,” said Dobbs. “Or if they feel the buyer agent should only make “x” dollars, then that would be an opportunity to structure something that might be more in line with how that particular buyer wants to work.”  

Other options might be a commission cap or a sliding scale, according to Dobbs.  

A commission cap would involve a buyer stating that they are willing to pay a certain percentage of the purchase price up to a capped home price, such as $500,000. If they wound up purchasing a more expensive home, the fee would stay the same.  

A sliding scale would involve a buyer offering compensation based on the amount of time they work with an agent.  

For example, they might offer a set amount if they are under contract with an agent for 30 days and offer a different set amount if they are under contract for 60 days. This way the compensation depends on the amount of work done by the agent.  

Regardless of the structure you choose, experts recommend that you understand the services that will be provided by your agent and compensate them fairly for their work/  

“Be realistic, reasonable and fair when negotiating compensation,” said Stapp. “There is more work than is commonly known or accepted by the average person. Negotiate service, not fee. The fee should be reflective of the scope of work actually carried out by agent.”