If you hire a real estate agent to help you buy, sell, or rent a house, this professional gets paid through a real estate commission. So how much do you pay, and what for? Is there any wiggle room to negotiate this fee? As a real estate agent myself, allow me to tell you firsthand everything you need to know about real estate commissions, from who pays to how much to where that money goes. Rather than getting paid hourly or weekly fees, most real estate agents earn money only when a real estate deal goes through.
Plus, the process can mean weeks or months of work. However, the commission split varies from one agent to another, with new agents sometimes earning a smaller percentage of the commission than experienced agents who sell more homes or more expensive properties. So what happens if an agent represents the buyer and the seller? Talk about a big payday! I believe it creates a conflict of interest. After all, clients hire me to represent their best interests.
Though people certainly have the option of selling or buying their house without a real estate agent, agents provide clients a wide range of services, including helping you price your home, marketing it on the multiple listing service , social media, and other venues , negotiating with home buyers, and ushering the home sale through closing.
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But there is no such thing as a standard commission percentage rate. If all real estate commissions were the same, real estate brokers would be in violation of state and federal antitrust laws created to protect consumers from monopolistic practices. Agents, therefore, are to set their commissions based on market conditions. Real estate agents typically do not charge their customers homebuyers and home sellers by the hour. Instead, to make money, real estate agents generally take a cut of the sales price of a home, and this cut becomes the real estate agent commission.
Some agents will work for a flat fee instead of a commission, which usually saves the customer money. More on that below. You can negotiate this fee, but the agent might not budge. In that case, you can accept that agent's rate or opt to not use that particular agent.
Whatever you decide to do, the percentage you agree to pay is made when you sign a contract with your agent to list your home, a contract that typically lasts between 90 and days, so be sure you know what you're signing. Local custom usually dictates how much agents set as their real estate commission rate. But your particular home and the housing market both can influence an agent's commission.
Let's say your house is on the low end of the price range for homes, there's lots of competition, and your home is not in the best shape and probably won't show as well as other homes. In other words, this will not be a particularly easy or lucrative deal for an agent. But if your home is on the high end of the price range, there is little competition for a home like yours in the real estate market for the area, and your home is in pristine condition, this will likely be an easy and lucrative sale.
If you're a real estate investor, you also might be able to negotiate a lower percentage rate from your agent if you do repeat business with them. Technically, the seller pays the full agent commission. The seller's agent then usually splits the commission with the buyer's agent. There are other splits regarding commissions. This depends on the agent and their brokerage. For example, there could be several players on any one deal who all get a piece of that commission: the listing agent, the listing agent's brokerage, the buyer's agent, and the buyer's agent's brokerage.
Real estate agents work for real estate brokers. It is only the broker who is paid, and the real estate broker often takes a cut before paying their agents. Because home sellers normally pay the agent commission, they often try to recoup that cost. Some sellers tack the agent's fee onto the sale price of their home. If that is the case with a home you're buying, then you, in essence, are paying the agent's fee in the form of a more expensive house.
Typically, realtors will be more willing to accept lower commission rates for homes that have high values. Our study of commission rates found that in real estate markets where home values were high, realtor fees were typically lower than the national average. For example, commission rates averaged 5. So why would high home values cause agents to lower their rates?
Mainly, it's because the work that agents have to do to sell homes is not significantly different for high and low value homes. Agent's earn commission based on the home's selling price, so they stand to earn a lot more money selling higher value homes — relative to their effort and time investment — than lower value homes.
Furthermore, even if they have to spend more time or money marketing a high cost home, it may be worth it for that agent. Having steady business is valuable for real estate agents — home sellers can use this fact to negotiate lower commission rates. For real estate agents, having consistent streams of clients is crucial to their livelihood. Afterall, real estate agents typically only process around 12 real estate transactions per year— meaning that gaining a deal has a large impact on their income.
To agents, there is more value in having reliable repeat business, than there is in maximizing their commission they earn on any single deal. Because of this, agents often lower rates to attract clients that are likely to use them for future transactions. If you want to save on real estate commission, you have many options, from trying to negotiate a discount to listing your house for sale by owner. But, getting your realtor to lower their fee can be tricky, and selling DIY opens you up to substantial legal and financial risks.
The best strategy for most home sellers is working with a low commission real estate agent. The top discount companies, like Clever Real Estate, provide all the service of a full-commission brokerage — but charge a LOT less.
Our fully licensed Concierge Team is standing by to answer questions and provide free, objective advice on how to get the best outcome with your sale or purchase. Our Concierge Team will be in touch shortly to help. Data on commission rates is based on a survey of 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 September National Association of Realtors.
Collateral Analytics. If you don't love your Clever partner agent, you can request to meet with another, or shake hands and go a different direction. We offer this because we're confident you're going to love working with a Clever Partner Agent.
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