Maximizing Your Home Sale: The Art of Negotiating Broker Commissions

By Tim Lockhart

Tim is a 6th generation Texan, grew up in Arlington TX, and after having served 20 years as an Air Force Civil Engineering officer and managing over $1 Billion in facility construction and renovation projects, he retired in 2013. The experience, work ethic and leadership gained in the Air Force propelled him in only 4 years to build a real estate business ranking in the top 5% of agents worldwide in Keller Williams Realty the #1 Real Estate Company in the World. Tim is a Certified Military Relocation Specialist providing the highest level of service to his clients.

In the dynamic world of real estate, negotiations are at the heart of every transaction. One crucial aspect often discussed is broker compensation.

First and foremost, it’s essential to recognize that in real estate, everything is negotiable. When a listing agent meets with potential sellers, the goal is clear: maximize the net proceeds from the sale. Net proceeds, calculated as the sales price minus closing costs and outstanding liens, determine the seller’s ultimate takeaway.

Closing costs encompass various elements, including the commission paid to both the seller’s and buyer’s representatives. The negotiation of these commissions is where strategic decisions come into play.

Why should sellers consider compensating the buyer’s broker? By broadening the marketing scope, sellers increase their chances of securing the highest and best offer the market can offer. Marketing efforts not only target potential buyers directly but also reach out to other real estate professionals, expanding the pool of potential buyers.

Now, let’s consider the implications if buyers are required to pay for their representation. Cash buyers may adjust their offered price based on these costs, potentially lowering the seller’s net proceeds. Financing-dependent buyers, especially those relying on government-backed options like FHA and USDA loans, may face financial constraints. Veterans using VA financing are restricted by regulations preventing them from paying for buyer’s representation out of pocket, making it crucial for sellers to consider this factor.

Moreover, a growing number of non-represented buyers enter the market.  Surprisingly, around 20% of real estate contracts in escrow do not close, and this is when both sides are professionally represented.  When a non-represented buyer is in contract, the percentage of contracts that fall through and do not close increases significantly. Therefore, if attracting the largest pool of qualified buyers is a priority, including compensation for the buyer’s agent is a strategic move.

For any inquiries about buying or selling a home, feel free to reach out for a consultation. Your real estate journey starts here!