Buyer Asking Realtor to Reduce Commission

As a buyer, is asking a Realtor to reduce commission a good idea? Most buyers seem to think that they can get a better deal by forgoing buyer agent representation. After all, if there’s one less agent, there must be commission to spare to perhaps directly benefit the buyer right?

We’ll explain the many pitfalls of this line of thinking, why it’s not as easy as it sounds, and what you can do alternatively to earn some of the broker economics in a transaction.

Asking the listing agent to reduce commission

Buyers typically think they can save money without a buyer’s agent by simply asking the listing (i.e. seller’s) agent to reduce their commission. After all, if the seller’s agent doesn’t have to split half the commission with a buyer’s agent, he or she must be able to share that good fortune with the buyer right?

Listing agents also like to feed this narrative by claiming that by not having to split the commission, there is more money to go around in the event that they need to step in to help “close the gap” between a buyer’s bid price and a seller’s ask price.

Predictably, a savvy buyer might think that the cleverest strategy is to bid conservatively without a buyer’s agent, and to force the seller’s agent to use his or her commission to help close the gap by an amount close to half the commission (i.e. what they would have split anyway had the buyer had an agent).

This strategy only works in a soft market

The problem with this strategy is that it only works in a buyer’s market where ideally you are the only bidder. If the seller has no other offers, then the listing agent may be desperate enough to reduce their commission in order to make a deal happen.

However, as soon as there is another potential offer in the works, you can bet that the listing agent will do everything in his or her power to shop your offer, and to especially encourage other direct buyers to beat your offer so they can keep all 6% of the commission.

Think about it, not only is there a monetary incentive, but a listing agent might be outright offended that you are trying to reduce their commission.

Buyer asking Realtor to reduce commission, what happens next? Is it a good idea? How can the buyer verify the broker fee has been reduced?

Furthermore, by having submitted an offer, you actually increase the chance that the listing agent is able to get another offer because of the increased competitive dynamic.

A listing agent may ignore your request altogether

Furthermore, in a seller’s market where a listing is getting a lot of traffic or offers, the listing agent may outright deny a buyer asking Realtor to reduce commission. The listing agent may simply say no, that’s too complicated, or that they can only submit offers based on price, etc.

Simply put, there is really no way of you forcing the listing agent to reduce their contractually agreed upon commission with the seller, nor do they have any obligation to reduce their commission simply because you chose to be unrepresented.

Pro Tip: The only way to contractually ensure that you will get some of the buyer agent commission is to sign up for a buyer agent commission rebate, which means your buyer’s agent signs a rebate agreement with you in advance of making any offers saying they will rebate you a certain portion of their commission.

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Problems with verifying commission reductions

There is typically no way for the buyer to verify that the seller is going to get a commission reduction when making an offer, despite any verbal assurances from the listing agent.

Furthermore, a sneaky listing agent will push back and say that they want to present your counter first and see how low the seller will go, before deploying his or her commission at the last moment to help close the gap.

As a result, even if you want the listing agent to offer to reduce his or her commission sooner, perhaps in order to get a deal locked in sooner, the listing agent is incentivized to hold out and see if the seller will naturally go lower first.

If the seller does go lower on price, then the listing agent won’t have to reduce his or her commission as much, or at all.

Zero verification of commission reduction in NYC

In markets like NYC where offers are typically submitted by email, and are wholly non-binding, it’s impossible for the buyer to verify what the commission will be since the listing agreement is a separate, private agreement.

Not that it will do the buyer any good to see the listing agreement, which the seller’s agent will almost definitely refuse to share due to confidentiality.

After all, the seller and the listing agent would need to sign a new agreement to reduce the commission, and if they do so, the seller will then be able to use this against the listing agent for all future scenarios. Why would the listing agent agree to that?

This is actually quite a serious issue for the listing agent, who must be pretty sure that the deal will get done if they agree to reduce their commission.

If the deal falls through, the next time a direct buyers comes by, the seller may proactively ask the listing agent to reduce their commission, thus destroying any chance of the listing agent earning all 6% going forward.

Verifying commission with offer contracts in Florida

It’s slightly easier to verify that the commission will be reduced in states like Florida where a  standard “As Is Residential Contract for Sale and Purchase” is used, and there is a section for “Additional Terms” where you could potentially specify a reduced commission percentage with your counter-offer.

However, keep in mind that the same issues occur where the listing agent is incentivized to reduce their commission only at the last possible moment, and only if there isn’t another direct buyer offer they can work with.

If a listing agent specifies in the offer contract that they’re willing to reduce their commission, then you can bet that the seller will factor that in the next time they get an offer if it doesn’t work out with you.

Pro Tip: Are you buying a home in Miami or NYC? If so, estimate what your closings costs might be with our interactive Miami Buyer Closing Cost Calculator and our Buyer Closing Cost Calculator for NYC.

Asking your buyer's agent to reduce commission

Asking your buyer’s agent to reduce his or her commission is one of the worst things that you can ask for, especially if this isn’t something they have agreed to before beginning your working relationship.

It’s akin to a client in any other industry asking you to take a salary pay cut so they can get a better deal on whatever your company is selling.

There are many reasons to say no

First of all, your request could be rejected for a whole host of reasons or excuses such as:

  • It’s illegal to give you a “kickback” on the commission. This is actually not true in New York, Florida and approximately 40 states as of this writing. Commission rebates are completely legal in New York and in Florida.

  • My brokerage won’t allow it. This is a valid excuse that’s almost impossible for a buyer to prove. Some brokerages may indeed have corporate policies against rebating and other types of discounting in order to protect their reputations or the pricing power of their other agents.

  • I can’t afford it. Some agents may simply pull out a sob story, and tell you about having to pay hospital bills for their mother or pet snake.

  • I promise to treat you after we close. Some agents will simply promise to take you out, or to treat you to a nice closing gift, after their commission check has cleared. Be wary, often times they’ll pull out the sob stories about not having any money left after they’ve gotten paid.

  • There’s not enough money to go around. The buyer’s agent may explain how they won’t have much left after a 50% commission split, and paying another 50% or so in federal, state and local taxes (i.e. in NYC). Or they might claim that the co-broke on this is low, though there’s often no way for you to confirm this yourself without MLS access.

As you can imagine, the list of potential reasons to reject your request for a commission rebate is endless. This is not the path you want to go down.

You risk ruining your friendship

If you’re like most New Yorkers and Miamians, then you have at least 5 real estate agent friends, one of whom is most likely your buyer’s agent. After all, when they go around offering a “free service” without any contracts or strings attached, how many friends would say no?

However, you risk putting your friendship at risk the moment you ask your friend to reduce their commission, i.e. asking to take food off their table. How awkward will it be if they say no, or if you get into a dispute about it? We’ve seen way too many friendships end over this failed method.

Pro Tip: You can avoid all of this awkwardness altogether by signing up for a Hauseit Buyer Closing Credit. All of our vetted partner brokers have already agreed to rebate you up to 2% or more of the purchase price at closing. Best of all, there are no middleman fees to Hauseit for our in-network partner brokers, meaning your broker will keep their portion of the commission.

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Getting commission reduced for new developments

Often times new developments will offer commission and other incentives to buyers’ agents that are much higher than the typical 3% that you’ll see in re-sales.

For example, many new developments in Miami will offer anywhere from 5% to 7% of the sale price in buyer agent commission. As a result, it can be extremely tempting for a buyer asking a Realtor to reduce commission to ask to keep all of the co-broke if they don’t have a buyer’s agent.

However, this is harder in practice than it sounds. For starters, the developer’s listing agent may simply reject your attempt to collect the buyer agent commission because it is illegal. This argument isn’t unsound because technically, commission can only be paid to licensed individuals.

You have no insight into the actual commission being paid

More problematically, no matter what the listing agent tells you, there is no way for you to verify how much the listing agent will be paid in commission on a deal.

For example, a listing agent may claim that they get paid 1% per transaction regardless of whether the buyer has an agent or not, which is not unreasonable in a new development with hundreds of similar units that the listing brokerage is exclusively contracted to sell.

This listing agent may then claim that the developer will just reduce the price by the buyer agent commission if you don’t have a buyer’s agent.

This is again impossible to verify. Think about it. How do you know for sure that the listing agent doesn’t collect both sides of the commission, or a bonus in some other format, for bringing in a direct buyer?

Furthermore, how can you verify that the developer reduced the price because you didn’t have an agent, or because the listing agent simply got them to counter lower?

Isn’t it conceivable that the listing agent already knows the developer has a certain amount of room, and thus is able to tell you that they’ll reduce the price by the amount of the buyer agent fee, “because you’re a direct buyer?” How do you know the price reduction has a direct casual relationship with you being unrepresented?

And don’t even think about asking the listing agent for a copy of their listing agreement with the developer. No self-respecting brokerage firm would reveal the contents of such an important agreement to a random prospective buyer. An agreement like that falling into the wrong hands could be disastrous from a competitive standpoint.

Pro Tip: Why not avoid all of this headache by simply signing up for a Hauseit Buyer Closing Credit? When your Hauseit affiliated buyer’s agent submits an offer for you, he or she will contractually be entitled to earn the buyer agent commission via MLS universal co-brokerage agreements. Think about it, on a 7% co-broke, you could earn 2/3 of the commission, or 4.67% of the sale price.

A Full Service Listing for 1%

Sell your home with a traditional full service listing for just one percent commission.

Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 148 Lafayette Street, New York, NY 10013.

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