When you’re ready to sell your home, one of the more important questions to ask is, ‘what percentage do realtors make?’ In New York, most realtors charge a 6% commission. You’re probably thinking, ‘that’s such a big amount!’ Especially since the commission is normally paid by the seller, although from a different perspective, you can say it’s also paid by the buyer since the commission is built into the selling price. If you’re selling a $1 million home, that’s already $60,000 off from the gross price. You’ll be receiving only $940,000, plus you may have to pay taxes.
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How the percentage realtors make is split
Generally, the national standard percentage realtors make is 6% of the home’s selling price, although it can range between 5% to 6%, depending on the real estate market, the selling price of the home, and your negotiation with the realtor. This 6% is split between the buyer’s agent and the seller’s agent. Usually, each agent will get 3% each, but at times, the buyer’s agent gets a little bit more. If the agent works for a brokerage firm, the brokerage firm gets 50% of the agent’s commission. In the end, with a brokerage firm, an agent gets 1.5% of the 6%.
In the case above, in a $1 million home, if the percentage commission is 6%, the buyer’s agent and seller’s agent get $30,000 each. If the buyer’s agent or the seller’s agent works for a brokerage firm, then the buyer’s agent or seller’s agent splits the $30,000 with the brokerage firm, with each getting $15,000.
Can you negotiate the percentage realtors make
The percentage realtors make is one of the largest costs in selling a house. In New York, although 6% is the standard percentage, the average real estate commission is 5.10%. This means you can negotiate the percentage commission the realtors make. If you are the seller and you get any percentage lower than the standard, even if it’s ½ of 1%, it translates to hundreds or thousands of dollars saved.
A realtor may accept a lower commission if the property is easy to sell in a buyer’s market, the home is high-end with a high listing price, the agent is providing fewer services than they normally do in a sale, the realtor represents both buyer and seller (dual agency), your house is move-in ready and beautifully staged already, when you are using the same agent to buy and sell simultaneously or to sell multiple properties, the agent is relatively new with little experience, or it is the time of the year where it is off-season or there is a low inventory of new homes for sale.
Here are some tips in negotiating the percentage commission realtors make.
First, know the market so you know your negotiating leverage. Check the demand for homes like yours in the area and how many neighboring homes have recently sold. If your property is in a hot neighborhood that will sell easily, you can use this as leverage in negotiating with the agent that your house will quickly sell, whether with that particular agent or another one.
Second, interview multiple realtors. You’ll be able to hear different pitches and different valuations of your property. This will help you compare the terms of the listing agreements and establish the most reasonable listing price. Shopping around for an agent will help you find the best fit for you in terms of price point and customer service.
Third, ask the agent why they are worth their broker’s commission. You will hear many different answers and it will help you evaluate the different services each realtor will most likely provide.
Fourth, if you’re accepting a dual agency (which means you will be using only one agent for the buyer and seller side), you can surely reduce the commission because the percentage won’t be split anymore between the buyer’s agent and seller’s agent.
Fifth, sell in the off-season so you can negotiate with an agent when their business is slow. In New York, peak buying and selling seasons are spring and fall. During the winter months between December to February, there are fewer homes on sale, and thus, fewer homes to choose from. An agent who wants to earn money in the off-season months will probably agree to a reduced percentage commission.
Sixth, offer to take on some of the work. For example, you can professionally get your home staged and have professional photos taken for the listing.
Lastly, if you just really want to save on commission, you can list your home For Sale By Owner (FSBO). This allows buyers to get in touch with the sellers directly. Some services allow homeowners to place their homes on the multiple listing service (MLS) used by local real estate agents for a flat fee. Studies, however, show that FSBO listings get an amount substantially lower than what you could get with an agent. Most buyer’s agents would not show a FSBO listing to their client because they know they’re not going to get any guaranteed commission.
Signing with a realtor for their percentage
Once you’ve found a realtor who appears to be a good fit for you in terms of price point and customer service, you can then sign a listing agreement with them. Unless you are a real estate professional who has been in the industry for a long time, it’s always better to have a lawyer review any contract you sign.
In New York, real estate attorneys are standard in closing a home sale transaction. Should you need assistance, we at the Law Offices of Albert Goodwin have represented both buyers and sellers in buying or selling a home. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at [email protected].