Content of the material
- No Standard Real Estate Commission Rates
- Be Leery Real Estate Agent Commission Gimmicks
- Who Pays Real Estate Agent Fees at Closing?
- Who pays real estate commission fees?
- Find an Agent Worth Their Commission
- How much are typical realtor fees?
- Real estate commission splits
- Commission split on a $400,000 home
- Realtor fee calculator
- How commissions have changed over the years
- What is a ‘fair’ real estate commission?
- Is Hiring an Agent Worth the Cost?
- Real Estate Commissions What You Need to Know
- Usually, The Seller Pays The Agent Fees.
- What Does a Real Estate Commission Cover?
- Cost of Working as a Real Estate Agent
- #5. Brokerage Desk Fees
- #6. Local Real Estate Board
- #7. National Association of REALTORS® (NAR)
- #8. Multiple Listing Service (MLS)
- Alternatives to using a real estate agent or Realtor
- How to avoid paying Realtor fees
- Related reading
No Standard Real Estate Commission Rates
It’s important for both buyers and sellers to realize that there are no “standard” real estate agent fees that can be charged by a real estate agent or broker.
While there may in an anecdotal manner be an average or typical real estate agent commission rate that develops in any given market, there is no single commission rate, Realtor fee, or standard real estate commission percentage rate for real estate agents, brokers, and Realtors and the services that they provide.
Naturally, an average will develop over time, yet there is no entity in the US real estate market that dictates or sets real estate agent commission fees.
It comes down to an issue of antitrust law. Specifically, the Sherman Antitrust Act, dated 1890, which prohibits certain business activities that reduce competition.
In essence, real estate buyers and sellers have a choice in who they seek to represent them and the corresponding Realtor fees that they are required to pay for services rendered, and therefore competition exists.
That said, an individual real estate brokerage can mandate that their agents all charge a certain commission when listing a home for sale, that’s perfectly legal and at the discretion of the brokerage. What’s not allowed is colluding among brokerages to use a specific commission rate, in effect, setting prices (commission income) in a market.
It was a landmark 1979 lawsuit, United States v. P Foley, that tied up Realtor fees with antitrust law and both heightened the scrutiny on real estate agent fees and altered the course of how real estate brokers conduct themselves as it relates to compensation from clients.Sherman Act, 15 U.S.C. § 1 Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.
Be Leery Real Estate Agent Commission Gimmicks
Consumers need to be leery of real estate agents who sucker you into circumstances that benefit them and not you. Here are a few examples of ways home sellers get duped:
- Pocket listings or in-house sales – a pocket listing is when you let your real estate agent market your home without letting everyone else know it’s for sale. The agent hopes they are the one who procures a buyer and gets an in-house sale making a double commission. To get the most money for your home, you should have maximum exposure to ALL buyers.
- Coming soon listings – coming soon real estate marketing is similar to pocket listings because the listing agent has an opportunity to sell the house themselves. The property is not being opened up to all the buyers. One of your goals should be a bidding war when selling a home.
- Guaranteed home sale – The guaranteed home sale is a gimmick that has been around for many years. Real Estate agents use it to sucker naive sellers by telling them they will purchase the house if it doesn’t sell. Yippee – they will buy your home for fifty cents on the dollar. Do yourself a favor and hire a winner. Not a real estate agent that uses these kinds of marketing tactics.
- Dual agency – discussed below in detail—is something every seller should avoid. There are no benefits to a seller. The only winner is the real estate agent. Agents often exaggerate the benefits of open houses to increase the odds of dual agency occurring.
Who Pays Real Estate Agent Fees at Closing?
Fees paid at closing are called closing costs. These costs include any charges related to the closing of the transaction, such as loan underwriting and origination fees, taxes, title filing fees, and insurance premiums. They may also include real estate commissions. These fees may be paid by either the buyer or seller or they may be split between both parties.
Who pays real estate commission fees?
Typically commission fees are paid in full by the seller in the transaction. As explained by top real estate agent Rachel Moussa of Flower Mound, Texas, in most places, “the standard is for sellers to pay both the listing agent and the buyer’s agent’s commission. The listing agent puts on the MLS what percentage the seller has agreed to pay cooperating brokers.”
Find an Agent Worth Their Commission
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Find an Agent Worth Their Commission We’ll connect you with three top local agents proven to deliver amazing results for their clients. You won’t regret a dime spent! Find Agent
How much are typical realtor fees?
Realtor fees are typically 6% of the final sale price of a home. The commission is split evenly, with 3% going to the listing agent and their broker, and 3% going to the buyer’s agent and their broker.
The home seller pays both the buyer’s agent and the listing agent’s commission.
How does this actually shake out? On the sale of a $400,000 home, each agent makes about $12,000.
|Buyer’s agent commission||3%||$12,000|
|Listing agent commission||3%||$12,000|
|Total commission paid by seller||6%||$24,000|
Real estate commission splits
If a realtor works for a brokerage (RE/MAX or Coldwell Banker, for example), they don’t get to keep their full commission. Typically, agents split their commission 50/50 with their brokerage.
A 50/50 commission split is common, but some brokerages may structure splits differently. Sometimes, splits may favor the agent more depending on their tenure with the brokerage (as in more experienced agents share less with the brokerage).
Commission splits help cover shared brokerage expenses, like advertising, licenses for technology tools, and office equipment. Because of brokerage commission splits, your agent makes much less than what you’ve paid in realtor fees.
Commission split on a $400,000 home
|50/50 brokerage split||$6,000|
|Agent’s final pay*||$6,000|
» MORE: What’s a real estate broker?
Realtor fee calculator
Use this realtor fee calculator to estimate how much you’ll pay in real estate commission when you sell your home.
Simply enter your estimated home sale price along with the percentage you’ll pay to each agent. Remember, sellers are responsible for covering both the listing agent and buyer’s agent fees.
How commissions have changed over the years
Since the early 1990s, Realtor commissions have seen a fairly steady decline. In 2021, the average commission was 5.5 percent — down from more than 6 percent in 1991.
This isn’t to say the total amount Realtors earned decreased, however. In strong selling markets, home prices are high and sellers receive multiple offers. This allows more room for negotiation on the commission, so Realtors may accept a lower commission to earn a higher amount overall.
As the market slows down, Realtor commissions may rise again and become less negotiable. Even so, a seller with a high-priced listing may still be able to negotiate a lower commission more effectively.
Data on commission rates is based on a survey of 630 of our partner agents, in which we asked them to indicate the typical rates for both buyer's and seller's agents in their area.
The data featured on this page is not meant to imply that commission rates are fixed — commissions rates are always negotiable. These figures represent ballpark estimates of what home sellers can expect to pay in real estate agent fees when they sell their home.
In addition to data from our survey, we also utilized home value data from Zillow, which was current as of May 2022.
What is a ‘fair’ real estate commission?
A commission rate between 5%-6% is standard for most markets to hire a full service real estate agent. This rate should translate as having an agent who is dedicated to selling your home for the best possible price, who is available and communicative, and who is willing to quarterback the transaction from start to finish. If an agent isn’t willing to offer all or the majority of services listed above, you should interview some more candidates.
Is Hiring an Agent Worth the Cost?
Okay, now let’s answer the question you’ve been waiting for: Are real estate agents worth the cost? Well, as we covered earlier, sellers cover the commission for both agents. So, buyers have nothing to lose! But how about you sellers out there? If you’re considering not using an agent or going the “For Sale by Owner” (FSBO) route, first take a look at the stats. The latest data shows the typical FSBO home sold for $217,000 compared to $242,300 when sold by an agent.2 That’s a $25,300 difference!
If you’re considering not using an agent or going the “For Sale by Owner” (FSBO) route, first take a look at the stats. The latest data shows the typical FSBO home sold for $217,000 compared to $242,300 when sold by an agent.2
Sure, around $16,000 of that would go toward the agent commissions. But that’s still almost $50,000 more in your pocket than you would have gained by selling solo! And, even if that difference ($65,000) is only half right in your particular market, you’d still potentially come out ahead by $18,500 by using an agent.
Real Estate Commissions What You Need to Know
Let’s look how at how real estate commissions work.
Usually, The Seller Pays The Agent Fees
The seller pays the real estate agent’s commission in most real estate transactions. The seller paying makes a lot of sense because the home sale will produce a big payout for the seller, and the seller’s agent has to do a lot of work to make that sale happen.
The real estate agent commission can vary and is negotiable but often sits somewhere between 4 percent to 7 percent.
Depending on where you’re located, the most probable commission you’ll pay to sell your home is 5 to 6 percent of the home’s sales price. The average real estate commission will fall between these two figures, at 5.5%.
Since the seller is paying, they must do their due diligence before hiring a real estate agent. If you are selling a home, you need to interview multiple real estate agents to find one that fits your specific needs and has a personality that you can work with and feel comfortable with.
Once you hire the real estate agent, they will sell the home and ensure that you get the best possible deal from the transaction. Typically, real estate agents do not get paid until the home sells.
What Does a Real Estate Commission Cover?
A real estate commission covers all the work that goes into buying and selling property. Trust us, a great agent does a lot to help you buy or sell a house. A seller’s agent shows you how to stage your home for buyers and—since they know what similar homes in your area are selling for—they help you price it right. They also put your home in front of a ton of buyers using a multiple listing service (MLS), social media and ads. This helps you get your home sold quickly and for top dollar.
Meanwhile, a buyer’s agent studies home listings that match your needs and price range. They help you arrange a home inspectionand oversee any necessary repairs or contract adjustments so you don’t get a bad deal. They do everything they can to help you find and purchase a dream home that’s within your budget.
Beyond those differences, both types of agents give you the confidence that a real estate professional is on your side, and they offer many similar services. For example, both agents:
Meet with you in person to understand your needs and answer any questions you have
Educate you on current market conditions
Give you access to an MLS—which offers more options to buyers and visibility to sellers
Refer other needed pros (mortgage lenders, photographers, inspectors, attorneys)
Schedule home showings
Negotiate the best price for you
Represent you throughout the sale and act in your best interest
Help you through the mountain of paperwork
A good agent tackles these tasks day in and day out. Their experience helps you avoid rookie mistakes. Sure, you can try to handle all these things by yourself. But, when you’re sitting in the hot seat of a real estate transaction, you’ll quickly realize that agents are worth their weight in gold!
Cost of Working as a Real Estate Agent
Total Estimation: $600 – $900/year
Real estate agents have annual costs they pay to keep their active status. The fees to work as a real estate agent come from 2 main sources: brokerages and membership dues. These costs give you tools, resources, and, with some brokerages, training. Here is a breakdown of the annual fees to be a real estate agent:
#5. Brokerage Desk Fees
Brokerage fees, also known as desk fees, are the costs to hang your license at a brokerage. The reason why brokerages charge fees are because they give resources, tools, and training to agents. This includes insurance, legal resources, office supplies, internet, training, leads, and even coffee. Desk fees can vary based on your location. They can become more costly in populated areas.
#6. Local Real Estate Board
Estimation: $450 – $800/year
A big part of your annual fees will go to your local real estate board. So, you might be wondering, “what is the purpose of the local real estate board?” This is where you get access to tools, resources, and other perks to doing your job well.
This includes membership into the National Association of REALTORS® and your state’s association of REALTORS®. You will also have access to the Multiple Listing Service (MLS). Finally, you get invitations to holiday parties and social events to expand your network. Your local real estate board connects you with the world of agents.
#7. National Association of REALTORS® (NAR)
Estimation: $185 ($150/year + $35 Entry Fee)
The National Association of REALTORS® (NAR) is the countrywide network of agents that connects them on real estate matters. When you join the NAR you will adopt the designation of REALTOR®. This shows clients that you are committed to a code of ethics and a higher standard of professionalism.
#8. Multiple Listing Service (MLS)
The Multiple Listing Service (MLS) is a data-driven database to learn about properties. This service has shared information from agents and brokerages about real estate property. So, it's a vital resource when learning about new homes.
Alternatives to using a real estate agent or Realtor
Many sellers think real estate agents’ commissions as too high and try to avoid them.There are three main ways of selling a home without such high costs:
- For sale by owner — At its most basic, this might involve putting up a yard sign, printing and distributing some flyers, and telling everyone you know your home’s for sale. It’s cheap and sometimes works, especially in hot real estate markets. But the risk of undervaluing or overvaluing your home is high
- Flat-fee MLS listing by owner — The MLS is the Multiple Listing Service. It’s the online resource that real estate agents use to let other agents and buyers know that a home is available. Owners can add their listings (which may appear on Realtor.com and Zillow, too) by paying a flat fee — or a smaller flat fee with a success charge on sale
- Trimmed-down services — Some agents offer lower commissions for a more basic service. You might get a menu — from MLS alone through increasingly complete levels of service — from which you choose what you want and how much you’re willing to pay
Are these better ways to sell? That will depend on many factors, including:
- How strong your local property market is
- How good you are at appraising your own home’s value
- How much effort you’re prepared to put into finding a buyer
- How confident you are in your ability to shepherd your sale through to closing
If you’re sure you can handle all those as well as an agent, feel free to sell without enlisting one.
But for many people, working with a real estate agent, broker, or Realtor gives them peace of mind they’re getting the best price on their home from the most qualified buyer.
How to avoid paying Realtor fees
In 2019, just 11 percent of home sales were sold by owners without the help of an agent, according to the National Association of Realtors (NAR). In addition, NAR says, for-sale-by-owner homes (FSBOs) typically sell for less money than homes sold by Realtors. In many instances, FSBO sellers already know the buyers who end up purchasing their homes. Buying without a Realtor is also doable, but the jury is out about whether it’s a wise move — especially in this market.
When you shop around for Realtors, ask them from the outset what their commission is and compare the terms of each person you talk to. If you think the fee is too high, talk to them about lowering it.
“In certain situations where there’s a competitive environment for a prime or trophy listing, Realtors sometimes will negotiate the commission upfront,” Duffy says. “For example, if I’m listing a $4 million home at 6 percent, that’s a lot of money. In a situation like that there is greater flexibility to negotiate the commission — if you get $100,000 or $80,000 instead of $120,000, it’s still a good payday.” If the transaction is being handled on both sides by agents from the same brokerage, you might have more leverage as well.
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