How to negotiate a commission for a rental listing

Before you dive into commission negotiations, you need to understand why a rental property owner or manager may choose to have their listing labeled as “negotiable” or “no” commission. Here are a few possible reasons:

  • The listing is brand new, and they want to see if they can secure a tenant without paying a broker fee.
  • They are open to paying a commission but have yet to determine what they want to pay and would instead decide when an agent approaches them.
  • They are open to paying a commission but do not want to be tied to a specific amount.

How to prepare for a negotiation

Research the property and area before you approach the property owner or manager. Here are some critical pieces of information to look for:

  • Price change or status update: A decrease in the price change or a recent status update to the listing often indicates a property owner would be more open to a commission. This tends to apply to property owners who initially wanted to see if they could fill the vacancy without an agent first.
  • Date available or days on the market: If a property is significantly past the available date or has been sitting vacant for a while, it increases the chance a property owner or manager is ready to pay a fee.
  • Market analysis for comparable properties: It can help your ability to negotiate when you know what other property owners are offering. This is helpful when dealing with property owners who are open to a commission and unsure about the amount to offer.
  • Move-in specials: Move-in specials and who pays the fee are essential to a client. If the rent for two units is the same, the deciding factor for your client could be how much they have to pay upfront. You can let the property owner or manager know that the other unit is offering a special or paying your commission fee, which makes that unit more desirable for your client.

How to negotiate the commission

Negotiating is expected in real estate, so do not shy away from these conversations. Remember, you and the property owner or manager share similar goals and want to close the deal. The key to a good negotiation conversation is to:

  • Sell your tenant client early and be clear about your concern: Let the property owner know that you have a ready and qualified (secure job, rental history, finances, etc.) client interested in their listing. However, you are concerned about the commission and hope the property owner can address it.
  • Support your commission request with relevant information: Ultimately, you aim to educate them on how a commission can help both parties complete a transaction.
  • Start high and work from there: Be prepared for them to ask about the amount you are requesting for your broker fee. After stating the amount (one-month rent is often standard), stay quiet and wait for the property owner to respond. If they are reluctant to accept an entire month, you can negotiate down to 75% or even 50% of one month’s rent.
  • Offer to bring value to the table: If relevant, you can provide additional value by helping the property owner with the rental application, tenant screening, and lease process to expedite and simplify the process. Please note that this is not a value proposition you should make when dealing with property management companies, as they typically have systems in place.
  • Make it easy and fast for them: Once you’ve agreed on the amount, you must get the agreement signed ASAP. The best practice is to have the form prepared before the call. Then, you can confirm their email, send it to them while on the call, and have them electronically sign it.

Once you get the first rental commission negotiation under your belt, you’ll be ready to take on more! It’s an iterative process so constantly try new strategies to find the ones that work for you.

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