Realtor fees (commissions) and closing costs are both paid at the end of a real estate transaction — but they're not the same thing.
Realtor fees are compensation paid to agents for their services, usually 5–6% of the home's sales price, and almost always covered by the seller. Closing costs, on the other hand, are a separate set of fees (typically 2–5% of the price) that cover the administrative and legal expenses of transferring the property, such as title insurance, escrow fees, and loan origination charges.
Because both are paid at closing, people often confuse them — but keeping them separate gives you a clearer picture of what you’ll actually owe when buying or selling a home.
In a $363,500 home sale (the average U.S. home value) with a commission rate of 5.57%, the total commission cost would amount to $20,200. However, this figure doesn't encompass other seller closing costs, such as transfer taxes, attorney fees, and title insurance.
Fortunately, there are ways for sellers to reduce these costs. One effective method is to use a low commission realtor like Clever Real Estate, which connects you with top-performing realtors for a flat fee of 1.5% – much lower than the national average listing agent commission of 2.82%, providing substantial savings on your home sale. Take this quick quiz to connect with top agents and achieve big savings on your home sale.
Realtor fees vs. closing costs: What's the difference?
| Cost | Percent cost | Dollar cost |
|---|---|---|
| Realtor commission | 5–6% | $25,000-30,000 |
| Closing costs | 1–3% | $5,000-15,000 |
| Total | 6–9% | $30,000-45,000 |
*Figures based on a $500,000 home sale example.
What is realtor commission?
Realtor commission refers to the fee paid to real estate agents for facilitating the home sale.
Commission is typically calculated as a percentage of the home's sale price, often falling within 5–6%. Our survey found a nationwide average of 5.57%, with 2.75% to the buyer's agent and 2.82% to the listing agent.[1]
However, commission rates can vary depending on location and property type. For example, rates tend to be higher in states like West Virginia than Hawaii, due to differences in home prices. Commission rates may also be higher for land sales than single-family homes, as agents seek to offset lower property values with higher commission rates.
Unlike salaried professionals, realtors don't receive payment upfront when they take on a new client. Instead, they earn their commission upon the successful closing of a deal.
The seller typically covers the entire commission, which gets deducted from the home sale proceeds upon closing.
🔍 Realtor commission changes: What you need to know
The recent NAR lawsuit settlement has introduced significant changes to how commissions are handled, granting sellers more leeway to negotiate commission rates and the option not to offer a buyer’s agent commission. This change makes real estate deals more transparent and flexible, potentially lowering costs for sellers.
As a result of these changes, there may be more room for commission negotiations. Sellers might find themselves discussing with buyers who will bear the cost of the buyer’s agent fees, which could influence both the terms of the sale and the final sale price.
What are closing costs?
Closing costs cover the expenses incurred to complete the sale and transfer property ownership to the buyer.
For sellers, these costs range from 1% to 3% of the home's final sale price. For example, on a $500,000 home, closing costs may amount to $5,000 to $15,000.
Common fees encountered at closing include title and settlement fees, transfer taxes, recording fees, and attorney fees.
While most closing costs are fixed and non-negotiable, they vary based on location. Buyers may also face additional expenses due to lender and underwriting fees.
💡Saving on closing costs: Tips for buyers and sellers
Buyers may reduce closing costs by negotiating with sellers to cover part or all of these expenses in the contract. This tactic is particularly effective in a buyer's market, where buyers hold more negotiating power.
Buyers can also secure a home buyer rebate or commission rebate, to save on their home purchase without any negotiation. Some real estate companies, like Clever, provide buyer rebates or cash back as a standard benefit of utilizing their services.
Sellers may save by comparing quotes for closing services, securing the best rates for things like title insurance and attorney fees. They can also reduce commission rates by using a discount broker.
Why the distinction matters
Understanding the difference between realtor fees and closing costs helps you:
- Budget realistically: Buyers need to plan for thousands upfront in closing costs, while sellers should account for both commission and closing costs when estimating their net proceeds.
- Negotiate smarter: Some fees are flexible. Buyers can ask sellers to cover part of their closing costs, and sellers can shop around for lower title and attorney fees or negotiate agent commissions.
- Stay compliant: With recent changes to how commissions are handled (thanks to the NAR settlement), separating these categories ensures you know which costs are negotiable and which are not.
Buyer vs. seller closing costs
Who pays what at closing?
- Sellers: Usually pay realtor commissions (5–6% of the sale price) plus 1–3% in seller closing costs like transfer taxes, title fees, and attorney fees.
- Buyers: Usually pay the bulk of closing costs, often 2–5% of the loan amount. These include lender fees, appraisal, escrow, and prepaid taxes/insurance.
In a $500,000 sale, that could mean the seller pays $30,000–40,000 total (commissions + closing costs), while the buyer owes $10,000–25,000 in their own closing costs.
How to determine home sale costs
Check your listing agreement
If you're preparing to sell but uncertain about your expenses, it's time to review your listing agreement.
For sellers, commission details should be stated clearly in your agent's listing agreement. This agreement may also outline the buyer's agent fee, compensating the agent who brings in the buyer.
Be mindful of the percentage amounts you've agreed to pay your agent and the buyer's agent, as these are likely your responsibility.
Request a seller's net sheet
Sellers can also request a seller's net sheet from their agent, broker, or title company to gain insight into potential commissions and closing costs in specific dollar amounts.
A net sheet is a spreadsheet or document that contains line items for each expense, with realtor commission and closing costs separated. It takes the projected home sale price and deducts anticipated commission and closing costs to provide a solid estimate.
A net sheet calculation is typically based on a comprehensive home value estimate using a comparative market analysis (CMA), plus a reliable estimate of typical closing costs in your area.
How to save on your home sale costs
Negotiate a lower rate
Negotiating a lower commission rate with your listing agent is a smart way to reduce home sale costs. You could aim for a listing rate below the market average, such as 2% instead of the typical 2.82%.
Unfortunately, success in negotiating lower rates isn't guaranteed. An industry report found that only 19% of recent home sellers discussed commission rates with their agent and managed to negotiate a reduced fee.[2]
If you're still determined to negotiate, review the key steps to negotiate realtor commissions.
Use a discount broker
Discount real estate brokers offer to sell your home for a lower commission rate than the typical 2.5–3% charged by traditional realtors, and some charge as little as 1.5%.
For example, agents within Clever Real Estate's network charge a 1.5% listing fee, well below the average listing fee. If you were selling a $500,000 home, you could save close to $7,000 by partnering with a Clever agent. Fill out this short quiz to find top agents near you today.
Hire a flat fee MLS company
Set on selling your house without a realtor? You can improve your chances of success by hiring a flat fee MLS company. These companies allow you to list your home on the multiple listing service (MLS), increasing its exposure to potential buyers.
The MLS is significant because approximately 86% of all sellers use it, making it the top listing method.[3] And a study analyzing MLS home sales found that homes sold outside the MLS system typically fetched around $5,000 less than those listed on the MLS.[4]
But selling without a realtor can still be challenging, even with the added marketing exposure provided by a flat fee MLS service.
If you're unfamiliar with your local real estate market or lack the marketing expertise required to sell at the highest price, you could potentially lose thousands of dollars. And remember, you may still need to pay the buyer's agent commission fee, unless your buyer is unrepresented.
» LEARN: Pros and cons to selling FSBO
