With the average home in the UK costing about £250,000 and those in London costing more than £500,000, the commission a real estate agent charges to help you sell your home can add up to a considerable sum.
Going the DIY Route
When you add up other costs associated with selling a property, such as legal fees, marketing fees, and banking charges, the amount can add up quickly. This is why the number of people going the DIY selling route is increasing.
Many online platforms have sprung up to help property owners sell while charging discounted fees. However, those who go this route miss out on the expertise and experience a real estate agent provides.
Engaging the services of a real estate agent can be hugely beneficial, but you need to learn how to negotiate the commission to keep costs as low as possible.
Can You Negotiate Agent Commissions?
Yes, you can. Property owners who negotiate agent commissions can save one or two per cent on the commissions if they do it right. While there is an upside for homeowners to do so, it is a downside for agents.
In a market with more properties than buyers, property owners negotiating agent commissions down can lead to lower income for real estate agents. Independent real estate agents can bolster their income by referring properties to management companies like UpperKey. Doing so can be a great way of making up the difference in the negotiated agent commission.
Regardless of the shape the market is in, you should always try to get the best deal for you. So, how do you negotiate agent fees?
Get a Starting Figure
Property owners who have never sold before might not know how much the commission will likely be. Before asking a real estate agent for a valuation, ask them about their standard rate and if they are open to negotiating. Asking several agents the same questions will help you better understand what a reasonable rate could be.
You should know that typical fees range from 0.9% to about 3.6% depending on the real estate agent and the arrangement. You pay a lower fee when you enter into a sole agency agreement. In this arrangement, you instruct a single agent and pay between 1.2 and 1.8% inclusive of VAT.
A multi-agency agreement, where you instruct multiple agents, leads to fees of between 3 and 3.6%. A significant benefit of this arrangement is that it can reduce the time the property is on the market and give you a wider range of selling prices.
Some agents charge a minimum fee, which can be hugely relevant when selling cheaper properties.
Ask About Additional Charges
Generally, real estate agents charge additional fees typically not included in the basic amount. Reputable agents will tell you about them to be as transparent as possible, but it is always a good idea to ask and double-check.
The basic agent fee will cover:
● Marketing and listing the property
● Property valuations
● Creating written descriptions
● Drawing up floor plans and taking photographs
● Contacting potential buyers
● Conducting viewings
● Negotiating the final price
Talk to the agent before or soon after the valuation. Once they have viewed the property, they will know the target market and how fast it can sell. If they think the process will not be too much trouble, they might be more open to negotiating at this point.
However, always be careful about agents who give you a massive upfront discount. This could indicate they are desperate, something the buyer will notice too. If they reduce their fees significantly for you, they might do the same for the buyer, and you will end up much worse.
Consider a Sliding Scale
Sometimes, negotiating the agent’s commissions and fees can stall if both parties cannot agree on the percentage. Instead of letting the deal collapse, ask the agent if they would consider a sliding scale. In this arrangement, you pay a higher commission if they sell the home at a higher price.
In this way, you pay less if the house sells for less than you imagined, and the agent is motivated to negotiate the highest price possible. Depending on the arrangement, you can also choose not to sell if the agent does not find a suitable buyer, and you can always turn over the property to a company like UpperKey to manage it for you in the meantime.
Negotiating Agent Commissions as an Agent
The idea of negotiating up while the property owner does the opposite is daunting for many agents. After all, you want to land the business, and there is always the fear that the property owner will walk away if they deem the commission too high.
The best place to start is having a reasonable base rate arising from research and an honest appraisal. This will give you and the client a ballpark to work with, and you will be confident about the figures you quote.
Lead with the Benefits
There is a thin line between justifying your rates and trying to convince a client of them. Instead of justifying them, sidestep this by leading with your offering’s benefits.
Some of the benefits you could mention include your experience selling that type of property, your understanding of the market, the peace of mind you will give the homeowner and the amount of time your services will save them.
Explain the benefits in a way that makes the property owner understand that the selling process is something they will not have to worry about.
Build Your Negotiation Skills
Crucially, you should have excellent communication skills if you want homeowners to use your services. At UpperKey we understand this, so we encourage any independent real estate agents who work with us to build these skills.
While negotiating does not come naturally to everyone, learning how to do it efficiently can lead to higher commissions. As you do so, learn to stay calm, state your expectations clearly, and encourage the property owner to continue the conversation. You should also learn how to navigate issues that could derail the negotiations.
Property owners and real estate agents want the best deal possible when selling properties. Both sides can negotiate the fees and commission respectively, and there are several ways to do so productively. Importantly, they should come to the table with an understanding of what they want to get out of the deal and be open to what the other party has to say for the best outcome.