Is Asking a Realtor to Reduce Commission a Good Idea?

Alternatives are available

Sellers can opt for reduced commission structures for both full-service as well as DIY flat fee MLS listings. For example, the REBNY RLS only requires that listing agents co-broke at least half of the total commission in favor of buyers’ agents.

As a result, sellers are able to take advantage of our 1% for Full Service listing structure, where sellers pay 1% to the listing agent but still offers a competitive 2% to 3% to buyers’ agents.

Other MLS systems are more flexible still, such as the HGMLS where listing agents are only required to co-broke any non zero amount to cooperating buyers’ brokers.

Buyer agents typically make half of the total built-in listing commission that the seller’s agent pre-negotiates with the seller, or typically 3% of a 6% seller paid broker commission.

The co-broke, or commission, paid to buyer’s agents will vary based on the listing and MLS rules of course. For example, in southern Brooklyn the Brooklyn MLS does not require equal co-broking, and as a result listing agents often co-broke only up to 1% to buyers’ agents.

For context, given that the average sale price for a NYC property is $2 million, 6% equates to $120,000 in broker commission. This means your typical buyer’s agent in NYC can earn $60,000 on your average deal!

So is asking a Realtor to reduce commission a good idea? Well, it depends. Savvy buyers who have done their research on the legality and tax implications of a commission rebate can ask their buyer agent friend to give up part of his or her commission.

However, this buyer agent friend might be insulted that the buyer is asking to take away part of his or her livelihood, and furthermore most traditional brokerages prohibit discounts when it comes to commission.

Personally, we always think it’s a better idea to keep personal and business separate. Why not sign up for a Hauseit Buyer Closing Credit and work with a traditional, established partner broker who has already agreed to give you up to 2% back at closing?

Listing agents will have all sorts of reasons for declining to reduce the commission structure. For starters, unscrupulous agents might try to convince sellers that paying 6% in commission is some sort of state or federal rule. If that doesn’t work, they’ll say that their local MLS (RLS for NYC sellers) prohibits anything less.

If that round of reasoning doesn’t work, they’ll say that their local MLS only allows equal commission splits between the buyer’s agent and the seller’s agent, and because buyer’s agents need to be paid a competitive 2.5% to 3% of the sale price, the total commission necessarily needs to be 5% to 6% (i.e. doubled).

This protects buyers’ agents from situations where the listing keeps the majority of the commission and only co-brokes a tiny amount to buy side agents. It is not meant to enforce a 5% to 6% commission regime.

If a savvy seller brings up this point, then the listing agent may resort to belittling any brokers who would accept less in seller broker commissions, and how they’ll be less motivated or less able to provide quality service due to the reduced fee.

This, of course, is completely bogus after all the common real estate agent lies have been exhausted. Listings have value inherently because agents benefit from increased exposure, branding and potential referrals and recruits from having a listing, regardless of its commission structure. It’s up to you to decide whether these scare tactics will prevent you from saving money.