Commission comes up more than just about anything else in real estate conversations. The general public is under the impression real estate agents make too much money. That can be true in booming markets where houses “accidentally” sell before the agent has done any work. In a typical market though, an agent will earn every penny of his or her commission.
Knowing what you are paying and knowing what to expect and demand for what you are paying in fees is an important part of the selling process.
For buyer’s agents, the commission covers the agent’s time.
For listing agents, the agent has personally covered the majority of marketing expenses (photos, brochures, signage, advertising). The commission pays back those costs, then the agent’s (and agent’s team’s) time.
And for both agents, the Brokerage also gets cut of the commissions earned.
Nobody is paid until the deal happens, except in the rare case of a retainer being paid. No sale? No commission.
Should you ask for a discount?
Asking for a discount up front is the wrong strategy. That’s like asking a track and field athlete to skimp on calories and wear dollar-store running shoes for their big race. A discount rate at the beginning may lead to lesser marketing or service throughout your listing.
You can ask for a discount on a commission, but you’ve got to know when to ask and in what situations it actually makes sense to ask for one. Because there’s no standard rate for commissions, a commission is 100% negotiable when you’re working with a listing agent. This should give you comfort because it means you can negotiate down if the service wasn’t up to your standards. For example, if the agent brings you an offer 20% lower than what they promised you at the start, then you could ask if they’re going to slash their commission by 20% too.