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Reduced Commission Real Estate Agents – It can be tempting for sellers to try to renegotiate a buyer’s agent’s fee after submitting an offer. However, buyer’s agent commissions in negotiations carry many risks and are highly frowned upon by the real estate community. We’ll explain what you can and can’t do in this article.
Can sellers negotiate buyer agent fees? What if you sell with an agent? Is it okay to ask a realtor to lower the commission? The buyer is asking the realtor to reduce the commission
Reduced Commission Real Estate Agents
Sellers can negotiate buyer agent fees if they list their home for sale by owner (FSBO). Note that this means no listing agreement has been signed with a listing broker and the property is not listed on the MLS. As a result, a FSBO seller will have no contractual obligation to do anything or pay anyone.
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He or she will usually manually list their own home for sale on one or two websites and perhaps place a For Sale sign outside their home.
FSBO homes are effectively off the market because 90% of buyers represented by agents will never see it because it is not listed on the MLS. As a result, the only agents who will inquire about FSBO listings are those trying to hunt down their next seller client. In some markets like NYC, hungry agents call highly valued FSBO leads hundreds of times in a month looking to sign their next full commission listing deal. All of this means that if a buyer’s agent is unlikely to bump into an actual buyer, he’ll be very careful to negotiate a FSBO commission deal with you before he dares to show your home. This contract is sometimes known as a one-time showing contract and it is at this point where you will negotiate the buyer’s agent fee with the buyer’s agent.
Pro tip: Is it starting to make sense why buyers agents don’t come up with both FSBO listings? Why would they risk alienating their client by showing them a FSBO listing, when the buyer needs to Google the address to understand that they can go directly to the owner and cut out the agent. Also, negotiating a custom commission agreement with each FSBO listing owner is extremely cumbersome. Why bother when 96% or more of all listings are on the MLS, where commissions are contractually split by default?
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How Do Home Buyer Agents Get Paid?
If you’ve listed your home with a broker, it’s very difficult to renegotiate the buyer’s agent’s commission. That’s because your real estate listing agent has already offered to pay a contractual commission to the buyer’s agent on your behalf in the MLS. This offer of commission is contractual upon entering the MLS and your listing broker is responsible for it on your behalf.
This means that if you don’t pay the buyer’s agent their commission, your listing broker will have to pay it on your behalf.
Of course this never happens because your listing broker is protected by the exclusive right to sell your signed listing contract. It is theoretically possible that a buyer’s agent’s commission could be reduced after a property is already listed on the MLS. However, most MLS co-brokerage agreements will require that both the listing broker and the co-broker (ie the buyer’s broker) agree in writing to the reduction. Here is an excerpt from the REBNY RLS Universal Co-brokerage Agreement: Commission Reduction Discussion. Any negotiation of brokerage commission reductions must be subject to written approval of commission reductions by both the exclusive broker and the co-broker. If the exclusive broker negotiates a lower commission with the owner without the co-broker’s written approval, the exclusive broker must absorb the full amount of the commission reduction. As you can see from the language above, the buyer’s broker must agree in writing to reduce any commission. If the buyer agrees to a reduction without the broker’s consent, the listing broker must absorb the full amount of the hit.
Our Discretion, Your Advantage Our traditional partner brokers never publicly discount which means less disruption and better execution for you.
Lowering Home Price Vs Increasing Broker Commission In Nyc
No It’s bad etiquette to unilaterally ask a buyer’s agent to take a lower commission, or worse, ask a buyer’s agent to collect their own commission directly from the buyer. Remember that buyers never have to pay a commission or even sign any kind of exclusivity agreement, and it’s the sellers who usually pay the full broker commission. This commission is then split equally between the seller’s agent and the buyer’s agent according to MLS co-brokerage rules. Consequently, asking a buyer’s agent to collect their own fees for you clearly violates the spirit and concept of co-broking. Please think. By doing this aren’t you effectively refusing to co-brake and thus seriously violating MLS rules? Additionally, if you refuse to co-broke, are you effectively not on the for sale by owner list? Worse, the listing broker’s reputation is damaged by a buyer asking the realtor to collect their own fees. Will other buyers’ agents in the future skip the broker’s listings because it’s unclear whether he will co-break or follow MLS rules? Buyers’ agents may avoid listing broker-only properties because they don’t want to be in the awkward situation of asking the buyer to pay their fees.
It’s a completely different matter when the buyer actively asks their agent to lower the commission. This obviously puts the buyer’s agent in a difficult situation. Are they obligated to complete a deal, or do they push back? Fortunately for sellers, this is not a problem for them or their listing agent as long as the issue is initiated by the buyer and discussed directly between the buyer and the buyer’s agent. Sometimes this happens because the buyer is aware of the possibility of the buyer receiving a closing credit, and wants their agent to accept a lower commission to complete a deal, or credit part of the commission to cover their NYC closing costs. This is obviously a scary situation for your regular buyer’s agent who doesn’t usually give discounts and doesn’t expect this type of request. If the buyer’s agent does not agree, the buyer can simply fire the agent and find another agent who is willing to waive or reduce part of their commission. Remember, buyers usually don’t have to sign an exclusive right to represent agreement, so there’s nothing stopping them from switching agents!
Pro Tip: As you can probably tell, discussing buyers’ agent commissions is a touchy and highly sensitive topic. As a seller it is always better to negotiate the price and forgo the commission already contractually paid!
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Disclosure: ® and its affiliates do not provide tax, legal, financial or accounting advice. This material is prepared for informational purposes only, and is not intended to provide, and should not be relied upon as, tax, legal, financial or accounting advice. No representation, guarantee or warranty is made as to the completeness or accuracy of the information provided. Thomas O’Shaughnessy is Vice President of Marketing at Clever Real Estate, a real estate education platform where home buyers, sellers and investors can learn. How to make smart financial decisions.
Josiah Wilmoth heads a content team at Cleaver Real Estate. He is an authority on discount real estate brokers, low commission real estate agents and other companies that advertise realtor fee savings.
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Buying Real Estate
We’ve spent hundreds of hours reviewing the best low-cost realtors and brokers to find the ones that offer the best savings, service and overall value. Read on for an in-depth look at our top picks.
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Clever real estate is the best overall value for most home sellers. Clever’s free service matches you with top local agents nationwide. And when you go through Cleaver, you pay a 1.5% listing fee instead of the usual 2.5-3%.
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The big difference between Clever and other discount brokerages, like Redfin, is
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