Buying or selling a home is one of the biggest financial transactions most people will ever make. Even a 1% difference in the final sales price can add up to thousands of dollars. That’s a lot of incentive for buyers to minimize their costs, or sellers to maximize their home’s potential.

The most obvious way to save money on a real estate deal is to negotiate the price of the home in your favor. But there are other areas in the real estate sales process where buyers or sellers can lower their costs. One such tactic for saving on expenses is to negotiate real estate brokerage fees.

How much are realtor commissions?

According to the National Association of Realtors, 87% of buyers used a real estate agent or broker to purchase their home while 89% of sellers were assisted by an agent. These agents work on commission and only receive realtor fees after a home sale has been finalized.

The standard realtor commission for a home sale is 6%, which is split between the listing agent and the buyer’s agent. That can turn out to be a substantial sum, considering that a typical home price of $250,000 would net $15,000 in commission. Even a small reduction in real estate broker fees can add up.

Negotiating realtor fees is allowed

In case you're reluctant to broach the subject, negotiating realtor commission with a prospective agent is perfectly acceptable.

"By law, real estate brokerage fees are negotiable," says Rick Smith, director of the California Association of Realtors. "This is part of what real estate brokers do for a living, negotiating. If you’re good at what you do, you should be able to explain why you’re worth what you charge."

How do realtor commissions work?

Once a sale closes, the realtor commission goes first to the listing brokerage company before an agent receives a cut, which can be anywhere from 60% to 85%. The brokerage firm uses its portion of the commission to pay for the expenses of selling a home, which can include everything from marketing to staging a property. Other expenses can include administration fees or transaction coordination fees, which you can ask to have waived or reduced.

Shop around

Whether you're buying or selling, shop around for an agent. Talk to several prospective brokers and research their sales histories for a positive track record. "Find the person you’re most comfortable with and get references on their past performance," says Smith.

Ask the agent what services are offered. Some brokers provide a lot of upfront expenses including photos, videos, marketing and staging. If you feel you’re not getting as much service for the money, then use that to negotiate the commission down. You can also do your own photography, videography and staging to save money. Keep in mind that some brokerages have set policies and can only lower their commissions so far.

Negotiating realtor commission

"Once you've narrowed it down to people you want to work with, just have a normal conversation," says Smith. "'I think you’re good, have checked your references and would enjoy working with you. Would you consider working for less commission or for a specific amount?' The broker can then say, 'no, goodbye' or 'yes, let’s talk about this.'"

A buyer's agent can also be asked to work on a fee structure instead of the usual realtor commission, with the agent being paid directly for his or her services. A fee structure can be especially useful for buyers looking for specific types of homes that may not be on the market, or that are within a certain price range or that have particular floor plans. Agents in this case may need to put in additional work, or even knock on doors to inquire about homes. You can find such agents through the National Association of Exclusive Buyer Agents.

Buying or selling a home is a major financial event in most people's lives. By negotiating realtor fees you can potentially save thousands of dollars.

Next steps to take

If you're buying, getting the right mortgage loan with favorable rates can help you finance your home and build equity – not debt. Once you finally close, you’ll want to protect your new home. Nationwide's homeowners insurance discounts gives you another opportunity to save money during the home buying process.

Insurance terms, definitions and explanations are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in individual insurance contracts, policies or declaration pages, which are controlling. Such terms and availability may vary by state and exclusions may apply.