Can you negotiate the buyers commission on a sell?

Gilbert, Arizona
Buying & Selling Real Estate
4yFollow

Can you negotiate the buyers commission on a sell?

Brandon Patrick
Member since 2020 · 35 posts · 30 votes

Hello,

I am interested in selling my two Airbnb properties and buying an apartment complex.  After that I don't plan on doing any other transaction for a couple years unless it is to sell my primary residence for a bigger home with a growing family. I was thinking of getting my realtor's license for my own deals, but I don't think I have the time since I am a full time Loan officer. 

Right now a lot of selling agents are offering 1% commission with the buying agent receiving 3%. Both of my investments are located in a Lake Town valued between $550k-$600k. My question is can I or should I try to negotiate the commission with the buying agent or agents of my two properties? Lets just say in today's market I sell both of my homes for $1M. That would be a total of $40,000. 

Side note. I know some people might have different opinions on Airbnb's and apartments, but as Airbnb owners know it can come with alot of work. Especially since mine are 200 miles away from where I live in vacation town. Party goers in the summer and snow birds in the winter. It just takes too much of my time dealing with routy guest and damaged property.  Instead of hiring a management company 20% in the summer and 15% in the winter I prefer to just roll both of them into an apartment complex near by that I can easily maintain even if it means less of a return.

0Reply
45 views

Most Popular Reply

Curtis Bluth
Real Estate Agent · Gilbert, AZ · Member since 2022 · 37 posts · 19 votes
4y
Quote from @Brandon Patrick:

Hello,

I am interested in selling my two Airbnb properties and buying an apartment complex.  After that I don't plan on doing any other transaction for a couple years unless it is to sell my primary residence for a bigger home with a growing family. I was thinking of getting my realtor's license for my own deals, but I don't think I have the time since I am a full time Loan officer. 

Right now a lot of selling agents are offering 1% commission with the buying agent receiving 3%. Both of my investments are located in a Lake Town valued between $550k-$600k. My question is can I or should I try to negotiate the commission with the buying agent or agents of my two properties? Lets just say in today's market I sell both of my homes for $1M. That would be a total of $40,000. 

Side note. I know some people might have different opinions on Airbnb's and apartments, but as Airbnb owners know it can come with alot of work. Especially since mine are 200 miles away from where I live in vacation town. Party goers in the summer and snow birds in the winter. It just takes too much of my time dealing with routy guest and damaged property.  Instead of hiring a management company 20% in the summer and 15% in the winter I prefer to just roll both of them into an apartment complex near by that I can easily maintain even if it means less of a return.

Hi Brandon,

Technically the buyer agent’s commission should be negotiated with their buyer client, however in practice it’s typically half (or a specified portion) of the commission that is agreed upon by the listing agent with the seller. So for example, if a listing agent negotiates the industry norm of 6% to list, it’s very likely that the buyers agent will get 3%.

That said, there is definitely an art to commissions and I would caution you on simply pushing for the lowest number. There are plenty of agents in the world, and they’re not all built the same. You may get a lower price on paper, but you’ll also likely receive less experience and assistance that you would normally get with a better agent that likely ‘know their worth’ and don’t take listings under their preferred commission split.

Myself for instance, I always recommend 2.5% or more going to a buyers agent since they do a lot of work during a transaction and should be compensated accordingly. In the past I’ve gone as low as 2% as the listing agent depending on relationships, competition, or potential future business that could come from the listing. 

You should also consider the reality of our current marketplace and the ability to sell properties is getting frothy with the rapidly changing debt markets. Agents like myself know that we’re valuable now more than ever getting properties sold for sellers hoping to cash out, and expected to be compensated for it. Plenty of 1-off agents are already disappearing, so the true producers will be the ones left.

my advice? Pay for quality service, and expect quality service. An agent should be an advisor and a team player, not a used car salesman. And if you hire a great agent that helps with the negotiating on deals, you can expect them to help you get a great deal on your apartment purchase as well.

Best of luck and hope this helps!
1Reply
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Curtis Bluth
    Real Estate Agent · Gilbert, AZ · Member since 2022 · 37 posts · 19 votes
    4y
    Quote from @Brandon Patrick:

    Hello,

    I am interested in selling my two Airbnb properties and buying an apartment complex.  After that I don't plan on doing any other transaction for a couple years unless it is to sell my primary residence for a bigger home with a growing family. I was thinking of getting my realtor's license for my own deals, but I don't think I have the time since I am a full time Loan officer. 

    Right now a lot of selling agents are offering 1% commission with the buying agent receiving 3%. Both of my investments are located in a Lake Town valued between $550k-$600k. My question is can I or should I try to negotiate the commission with the buying agent or agents of my two properties? Lets just say in today's market I sell both of my homes for $1M. That would be a total of $40,000. 

    Side note. I know some people might have different opinions on Airbnb's and apartments, but as Airbnb owners know it can come with alot of work. Especially since mine are 200 miles away from where I live in vacation town. Party goers in the summer and snow birds in the winter. It just takes too much of my time dealing with routy guest and damaged property.  Instead of hiring a management company 20% in the summer and 15% in the winter I prefer to just roll both of them into an apartment complex near by that I can easily maintain even if it means less of a return.

    Hi Brandon,

    Technically the buyer agent’s commission should be negotiated with their buyer client, however in practice it’s typically half (or a specified portion) of the commission that is agreed upon by the listing agent with the seller. So for example, if a listing agent negotiates the industry norm of 6% to list, it’s very likely that the buyers agent will get 3%.

    That said, there is definitely an art to commissions and I would caution you on simply pushing for the lowest number. There are plenty of agents in the world, and they’re not all built the same. You may get a lower price on paper, but you’ll also likely receive less experience and assistance that you would normally get with a better agent that likely ‘know their worth’ and don’t take listings under their preferred commission split.

    Myself for instance, I always recommend 2.5% or more going to a buyers agent since they do a lot of work during a transaction and should be compensated accordingly. In the past I’ve gone as low as 2% as the listing agent depending on relationships, competition, or potential future business that could come from the listing. 

    You should also consider the reality of our current marketplace and the ability to sell properties is getting frothy with the rapidly changing debt markets. Agents like myself know that we’re valuable now more than ever getting properties sold for sellers hoping to cash out, and expected to be compensated for it. Plenty of 1-off agents are already disappearing, so the true producers will be the ones left.

    my advice? Pay for quality service, and expect quality service. An agent should be an advisor and a team player, not a used car salesman. And if you hire a great agent that helps with the negotiating on deals, you can expect them to help you get a great deal on your apartment purchase as well.

    Best of luck and hope this helps!
    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    4y

    @Brandon Patrick The best way for you to reduce the number of buyers looking at your property, resulting in a lower sale price, is to offer a reduced commission to the buyer agent side. Buyer agents will naturally guide their clients to other properties. I got a great deal for my buyer on a REO where they offered only 2% on the buyer side….thank you very much for shooting yourself in the foot.

    0Reply
  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    4y

    @Brandon Patrick

    well, you are a licensed Realtor you said.... ???

    Anyway, a 4% commission is still pretty good from what I am used to..  Usually the commission is 5% to 6%.  Since you are the seller, you can decide the broker cooperation being offered...  The commission is the payment for the agent's services, I think you know that.  If you don't want their services, sell it yourself... with or without your license.

    0Reply
  • Kathleen McDowell
    Realtor · Scottsdale, AZ · Member since 2018 · 65 posts · 47 votes
    4y

    Hi Brandon.  As the seller, you determine the commission you'll pay to your listing agent, and how much of that commission will go to the buyer's agent.  I always remind my clients you get what you pay for. In my experience, listing agents agreeing to list below 2.5% will not do the job of a top agent, who recognizes their value and will likely expect compensation in the 2.5-3% range.  These agents will provide enough value in sale price to make up for any increase in commission paid out. I always recommend my clients split the listing commissions 50/50 with the buyer's agent.  The buyer's agent does a great deal of work finding properties for their clients and a fair market commission will attract the most buyer's agents and potential buyers.  Getting your RE license is a big commitment of both time and money and you'd only be saving half the commission, as buyer's agent commission would still need to be paid.  My recommendation that would most likely net you the greatest return is to offer no less than 5%, splitting it 2.5% to your listing agent and 2.5% buyers.  In this market, many properties that are listed and not prepped, priced and marketed correctly are sitting for a long time, and ultimately earning the seller much less than if they'd selected an agent based on the value they bring in terms of pricing strategy, staging strategy (repairs, etc) and marketing strategy. On a side note: Totally agree with you on ABNB vs MF.  Here in Scottsdale, we have a number of ABNB investors wanting to get out within a year of purchase due to underestimating the amount of time involved in managing their property. And PMs here typically charge 25%, which makes it challenging to cash flow. Best of luck and let us know what you decide.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free