3-4% Commission in Luxury Real Estate: A Trap for Sellers and Agents
Accepting a 3-4% commission in luxury real estate jeopardizes the sale, discourages the agent and exposes the seller to financial loss.
Luxury doesn't come cheap
In the luxury real estate market, every detail counts. Villas on the French Riviera, castles in Normandy, mansions in Provence, or penthouses in Paris: these properties don't sell like standard apartments.
Yet, many owners are tempted by two recurring errors: imposing a reduced commission of 3 to 4% including tax and refusing to consider the professional valuation of the property . This approach, which seems advantageous on paper, turns out to be a dangerous trap. It devalues the role of the real estate agent, limits the means implemented for marketing, and considerably increases the risks of failure or financial loss for the seller.
However, there's a caveat: in traditional residential real estate, a 3% to 4% commission may sometimes seem reasonable. But in the luxury sector, this model is unsuitable. Selling a luxury property requires tailor-made work: architectural enhancement, rigorous buyer selection, personalized negotiation, and securing financing.
Reducing commissions to a minimum often also means reducing the quality of service . The result: a mandate that attracts unmotivated agents, buyers who are not always qualified, and a transaction that may fail. Conversely, a well-positioned commission is a strategic investment, which benefits both the seller and the buyer.
This article demonstrates why these practices undermine the success of a luxury transaction, how they harm both owners and professionals, and what strategies, on the contrary, can ensure an optimized, secure and rewarding sale in luxury real estate.
For agencies: the value of your work is not negotiable
In luxury real estate, each transaction is unique and requires a considerable investment of time, expertise and resources. Unlike in the traditional market, selling an exceptional property is not just about posting an ad: it involves an in-depth market analysis , an accurate price assessment , a professional presentation of the property , as well as a targeted search for qualified buyers . The negotiation itself is often complex and requires a personalized strategy, combining psychology, legal knowledge and mastery of financial issues.
Accepting an extremely low commission, such as 3% including VAT or less, may seem appealing to the seller, but this approach carries numerous risks for the agency. First, underpayment limits the agent's ability to devote the time and resources necessary to sell the property at the optimal price. This can result in reduced visibility of the property, less targeted viewings, and insufficient promotion on specialized channels, including international networks of high-net-worth clients.
Then, the agent's motivation can be affected. When the agency's margin is limited, involvement in the negotiation decreases, which can reduce the ability to defend the seller's interests while ensuring a fair price for the buyer. However, in the luxury sector, every detail counts, and a less invested agent can make the difference between a successful transaction and a delayed or undervalued sale.
On the other hand, a properly paid agent is a motivated, strategic and fully committed agent . He can mobilize all the necessary resources to enhance the property, select the most serious buyers and negotiate effectively. For the seller, choosing an agency with a suitable commission is not an unnecessary cost, but an essential investment to maximize the sale price and secure the transaction . In short, the value of your work, your expertise and your network are not negotiable: it is paid precisely to guarantee success.
Psychology of agencies or low-cost negotiators: why do they agree to lower their fees?
When a real estate agency or broker agrees to charge a very low commission (3% including tax, or even less), this choice is not neutral. It often reflects a short-term strategy, or even structural fragility.
1️⃣ A lack of self-worth
Many professionals who cut their fees do so because they don't believe they can justify their rates. They think that by offering "less," they will compensate for their lack of reputation, experience, or results. But this logic devalues their profession and sends an implicit message : " my service doesn't deserve better . "
2️⃣ The pursuit of volume over quality
Low-cost agents often prioritize the quantity of mandates over the quality of sales. Their goal is to fill a portfolio in the hope that a transaction will eventually close, even if that means superficial client follow-up, limited promotion, and poor negotiation.
3️⃣ A defensive posture when faced with demanding sellers
Some negotiators, for fear of losing a mandate, immediately give in to the sellers' demands by selling off their commission. This may be attractive in the short term, but weakens their position in the relationship: if they agree to sacrifice their fees upon signing, why would they be credible during negotiations with buyers?
4️⃣ A risky calculation on speed
A low-paid agent often thinks that “a small signed mandate is better than nothing at all.” But in reality, this encourages them to conclude quickly and poorly, without securing the process. The result: fragile compromises, loan refusals, canceled sales.
👉 Accepting a low commission is not a winning strategy. It often indicates a lack of ambition, which impacts the quality of the work provided and ultimately the success of the transaction.
Buyer Psychology: Why a Well-Paid Agent Also Looks Out for You
You might think that a buyer has no interest in a well-paid real estate agent, since the commission is included in the asking price. In reality, it's quite the opposite: a well-paid agent becomes a strategic ally in securing and optimizing the purchase.
1️⃣ An agent invested in the research and selection of properties
When he knows that his work is fairly valued, the agent deploys more resources to identify relevant properties, analyze their price and organize targeted visits. He is not only looking to "close a deal", but to find the ideal property at the right price.
2️⃣ A firmer and more structured negotiation
A poorly paid agent will often try to convince the buyer to accept the asking price, for fear of seeing the sale collapse and losing their small commission. Conversely, a well-paid agent knows that it is in their best interest to defend their client's interests tooth and nail, by negotiating firmly and intelligently with the seller.
3️⃣ Securing the purchasing process
In luxury real estate, a poorly prepared transaction can fail due to a small detail: shaky financing, incomplete diagnostics, or poorly respected deadlines. A properly paid agent is more attentive, more demanding, and more vigilant. They secure each step so that the purchase goes through to the end, which avoids the buyer from serious disappointments.
4️⃣ A climate of trust
A demanding buyer knows that a good professional gives the best of himself when he feels that his work is recognized. A fair commission is therefore not only a remuneration, it is a guarantee of trust and efficiency.
👉 For a buyer, it's better to work with an agent who earns a decent living and fights for you, rather than an underpaid professional who just closes quickly.
Psychology of Salespeople: Why They Often Want to Cut Commission
In luxury real estate, sellers' motivations are often complex and sometimes contradictory. Many owners have two main objectives: to maximize the value of their property and to minimize transaction costs. This combination often leads to an ineffective strategy: wanting to impose a very low commission on the agency, sometimes as soon as the mandate is signed, in the hope of "saving money."
The first motivation, maximum valuation, is based on a sometimes subjective perception of the property's value. The owner is convinced that their castle, villa, or luxury apartment deserves an exceptional price. They hope that buyers will follow their logic, and that the agency, even if underpaid, will succeed in closing the sale at this ambitious price.
The second motivation, the maximum reduction in fees, pushes some owners to negotiate a paltry commission from the outset, often around 3% including tax, or even less. The idea is that the agent must "accept less to work," without understanding that this limitation can have a direct impact on the quality of the service and the final price obtained.
However, this approach is rarely beneficial. A commission that's too low often attracts less experienced or less motivated agents, who lack the resources or time to effectively market the property. The sale can then drag on, increasing the risk that the property will be perceived as "overpriced" or "hard to sell." Serious buyers quickly detect this strategy and can take advantage of it to negotiate downward, thus reducing the final net selling price.
A smart landlord understands that the agency fee isn't just a cost, but a true strategic lever. By accepting fair compensation, they ensure that the agent will deploy all their expertise to enhance the property, target the most qualified buyers, and negotiate effectively. This is how you turn a commission into an investment, not a loss, ensuring that the transaction is completed quickly, securely, and at the best possible price.
For Sellers: Why Too Low a Commission Can Hurt the Sale
Many homeowners believe that a low commission is a way to maximize their net profit. They may spontaneously turn to agencies that offer 3% including tax, or even less, hoping to reduce transaction fees. However, this approach is often counterproductive, especially in luxury real estate. An underpaid agent has fewer resources to promote the property and less incentive to actively negotiate with serious buyers.
In this context, the asking price may seem attractive, but the property risks remaining on the market longer. A well-paid agent can implement more ambitious strategies: professionally showcasing the property, organizing private viewings, targeted communication with wealthy buyers, and careful negotiation to obtain the best price. The result? A faster, more secure sale, and often at a higher price.
Furthermore, some owners overestimate the value of their property and seek to include an excessive margin in the price or to negotiate a lower commission upon signing the mandate. This approach can discourage serious agencies and attract opportunistic buyers, who will take advantage of the situation without any guarantee of concluding at a fair price. In practice, accepting a suitable commission is a sign of seriousness and trust in the agent: it allows them to best defend your interests and skillfully negotiate to obtain the price you really hope for.
In short, for the seller, choosing a reasonable commission is not an additional cost, but a strategic investment. It's about maximizing the net seller price while ensuring that the transaction runs smoothly, securely, and professionally. A well-paid agency is more motivated, more proactive, and more capable of converting a potential buyer into an actual purchaser.
For buyers: a well-paid agent negotiates better for you
For the buyer, the choice of real estate agent makes a major difference in the final price paid. A well-paid agent is not only motivated to present you with the most suitable properties, but also uses all their expertise to negotiate the best price.
Let's take a concrete example: a property listed at €2,000,000 with a commission included. An agent with a 3% commission could sell this property for a final negotiated price of €1,900,000, while an agent with a 6% commission could successfully obtain a price of €1,800,000 for you. Even if the commission percentage seems higher, the actual price paid by the buyer can be significantly lower thanks to the agent's expertise and negotiation strategy.
Investing in a competent and well-paid agent ensures you have a professional who knows the market, can identify a property's strengths and weaknesses, and can convince the seller to lower the price. Conversely, an underpaid agent may not have the time, resources, or motivation to negotiate effectively, and you could end up paying more.
In conclusion, for both the buyer and the seller, the agent's compensation is not a mere financial detail. It determines the quality of the service, the negotiation strategy, and ultimately, the final amount of the transaction. A well-paid agent works for you with seriousness, commitment, and efficiency, maximizing your chances of obtaining the best possible price, while securing the transaction and reducing risks.
The commission as a lever for motivating and securing the transaction
Let's take two scenarios around a property valued at €2,000,000 to illustrate how remuneration influences the vigilance, ambition and negotiating skills of a real estate agent.
1️⃣ Low-paid agent: 3% incl. VAT
-
Price displayed : 2 000 000 €
-
Net seller before negotiation : 2 000 000 / 1,03 ≈ 1 941 747 €
-
Commission displayed : ≈ 58 253 €
In this case, the agent, aware that his commission is limited, is less motivated to check every detail : the buyer's solvency, the ability to obtain a loan, the reliability of the compromise. His unconscious objective is often to close quickly to collect his remuneration, which increases the risk of failure or a poorly crafted compromise.
-
Final price (poorly) negotiated by the agent for the buyer : 1 900 000 €
-
Net seller after negotiation : 1 844 660 €
-
Final commission agent : 55 340 €
The seller, focused on the low commission, risks experiencing complications , because the agent has no incentive to secure the transaction in the long term.
2️⃣ Fairly paid agent: 6% including tax
-
Price displayed : 2 000 000 €
-
Net seller before negotiation : 1 886 792 €
-
Commission displayed : ≈ 113 208 €
Here, the agent knows that his commission is substantial and depends on the success of the transaction . His personal interest encourages him to:
-
Carefully check the buyer's creditworthiness
-
Negotiate to get the best possible price
-
Secure the compromise and finalize the sale
-
Final price negotiated (at market price) by the agent for the buyer : 1 800 000 €
-
Net seller after negotiation : 1 698 113 €
-
Final commission agent : 101 887 €
Even though the net seller price is slightly lower (- €146,547) than the 3% example, the security and quality of the transaction are maximized . The seller can sell with peace of mind, knowing that the sale is protected against the risks of cancellation or loan refusal.
Strategic analysis
An underpaid agent often acts opportunistically and short-circuits the rigor needed to secure the sale , whereas a properly paid agent is naturally incentivized to do everything possible to protect both the seller and the buyer , ensuring a solid compromise and a successful transaction.
In luxury real estate, commission is not a cost but an investment in the security and final value of the transaction . The smart seller prefers to ensure a successful sale rather than save a few commission points at the risk of failure.
🔹 Seller
In luxury real estate, accepting a reduced commission is not a saving, it is a risky bet . By believing you are saving 2 or 3 points, you are jeopardizing the very success of your sale: fewer resources invested, less involvement from the agent, less chance of attracting the solvent buyer who will pay the right price. A properly paid agent becomes your best ally: he filters profiles, secures financing and negotiates with rigor. The real saving, for a seller, is not in the commission but in the successful, fast sale at the right price .
Agency and negotiator -oriented conclusion
Accepting mandates at 3 or 4% is not a winning strategy, but a race to exhaustion . Underpaid, you reduce your room for maneuver, limit your marketing resources and expose yourself to less credibility with colleagues and clients. Defending a fair commission means defending the value of your profession: expertise, legal security, strategic negotiation and high-end support. An agent who assumes the value of their work inspires confidence and attracts quality clients. In luxury, excellence is paid for... and that is precisely what makes the difference between a mandate that drags on and a successful sale.
🏛️ Mega-conclusion: We have the real estate agent we deserve
We have the real estate agent we deserve
Ultimately, a homeowner must ask themselves a simple question: do they want an agent who is looking to “sell quickly to collect their small commission” or a professional who has the means and the interest to secure a solid and successful transaction?
A good luxury real estate agent isn't chosen at a discount. Savvy sellers know how to spot the signs: professional photos, a truly staged property, a network of qualified buyers, and a thoroughly researched mandate. Conversely, an agent who is quick to accept a low commission, an overpriced price, or who presents unstable buyers (uncertain financing capacity, incomplete application) poses real risks: shaky compromise, loan refusal, wasted time, and sometimes even a loss of credibility in the market.
For buyers, too, the logic is the same: a well-paid agent is an ally. It's in their best interest to negotiate seriously on their behalf, verify the solidity of financing, and secure every step. They protect the interests of both parties and ensure the sale goes through to completion.
In luxury real estate, we don't sell out on service; we value expertise. In short: we get the real estate agent we deserve.
