3% listing agent fees | Who pays the buyer's agent commission? | How much does it cost? | How to save | Negotiation tips | Limited-service agents | Low-commission companies | For sale by owner | Other ways to sell
What is a 3% real estate agent commission?
In a conventional real estate transaction, the seller typically covers a 3% commission fee for both the agents involved in the sale:
- The listing agent gets 3% for selling the property
- The buyer's agent gets 3% for bringing their client to buy it
Because each agent gets about 3%, the total commission rate is roughly 6%.
How 3% commissions work
Buyer’s agent fee
Specific commission rates vary by location and situation, so you may end up offering less than 3% to each agent.
You'll negotiate the total commission rate with your listing agent when you sign your contract. Whatever rate you agree on will come out of your proceeds at closing.
No matter what rate you agree to, realtor commissions are expensive. For example, a 6% commission on a $350,000 home sale would come to about $21,000 — yikes!
Luckily, there are ways to lower your realtor fees and pocket more money from your sale. Read on to learn more.
Why do listing agents typically get 3% real estate agent fees?
Listing agents typically charge between 2.5-3% in commission for listing, marketing, and selling your home.
That may seem like a lot, but your agent does a lot to help you sell your home, including:
- Advising you on an appropriate listing price
- Professional photography
- Listing your home on the local multiple listing service (MLS)
- Marketing your home to attract qualified buyers
- Hosting showings and open houses
- Helping you evaluate and negotiate offers
- Assisting with paperwork leading up to and during closing
- And a lot more
And keep in mind that the agent doesn't actually get to pocket the entire listing fee.
Most listing agents work under a real estate broker who gets a cut of all their sales. The agent also pays for a lot of marketing expenses themselves while they're selling your home. The 3% listing fee ensures the agent can pay their broker, cover their expenses, and still walk away with a reasonable profit.
» LEARN: Seriously, what is a listing agent?
Why do sellers offer a 3% buyer's agent commission?
The seller pays a 3% buyer's agent commission to incentivize other agents to show the home to their clients
Buyer's agents point their clients to different listings and talk to them about the pros and cons of each one. These agents are your allies — they help sell your home to their clients (which is why they're sometimes called "selling agents").
But if you want their help you have to make it worth their while. Offering a competitive buyer's agent commission will compensate buyer's agents for helping you sell your home.
Why do sellers offer a 3% buyer's agent commission?
Paying a 3% commission can take a lot of cash out of your pocket — especially if your home is more expensive. And remember you have to pay 3% to both agents for a total commission of 6%.
Here's how much a 6% total commission will cost you at four different price points.
Getting the total rate down when you sell could save you thousands. For example, lowering your listing fee to 1% (for a 4% total commission) on that same $350,000 home mentioned earlier could potentially save you $7,000!
Try Clever’s free agent-matching service
List with a top-rated local real estate agent for just 1% or $3,000.
How to pay less than 3% commission
In reality, you'll likely end up paying less than 3% to each agent.
On average, sellers in the U.S. pay 2.77% to listing agents and 2.68% to buyer's agents for a total commission rate of 5.45%. But specific agent rates vary based on location, home price, and market conditions.
Still, you have some options to pay even less than the national average to one or both of the agents involved in the sale. Here are a few ideas:
- Negotiate a lower rate with your listing agent
- Hire a limited-service real estate agent
- Hire a low-commission real estate agent or company
- Sell your home for sale by owner (FSBO)
Negotiate a lower commission with your listing agent
It's possible to talk your listing agent into selling your home for a lower fee — but it could be difficult to land a significant discount.
Because listing agents have to pay both their broker and expenses out of their commission, they'll be hesitant to take a lower rate. After all, they still need to turn a profit.
Still, your chances of negotiating a better rate go up when you check one (or more!) of these boxes:
- You're selling a high-value property
- There are a lot of agents competing for seller customers in your area
- You're in a hot market where homes sell quickly and easily
- You agree to sell and buy with the same agent or brokerage
- You agree to sell to a buyer your listing agent represents
Hire a limited-service real estate agent
You can usually get a lower commission rate by working with a listing agent who offers fewer services and less hands-on support to their clients.
Many of these limited-service agents offer an a la carte pricing structure, allowing you to only pay for the specific tasks you need an agent to handle. You'll take care of everything else.
Experienced sellers who are comfortable handling a lot of the details of selling a home on their own will have the most success with a limited-service agent. You can save A LOT of money on listing fees, but you'll have to invest more sweat equity to sell your home.
Work with a low-commission real estate company
There are two types of companies that can help you pay well below a 3% listing fee.
Discount real estate brokerages
Discount real estate brokers (like Redfin) offer built-in commission discounts for sellers — no negotiating required! While you can save a bundle by selling with one of these companies, you should also understand the risks.
Discount brokers have in-house agents who often work with significantly more clients than a traditional realtor. Because they're handling so many more transactions, they often have to make customer service sacrifices to keep up. This could lead to you getting less dedicated support throughout the sales process.
Agent-matching services connect buyers and sellers with real estate agents in their area — usually for free!
But the best companies take their services a step further — they pre-negotiate discounts with local agents so you can save money when you sell your home. Because the agents get a steady stream of new clients from the agent-matching service, they can accept a lower rate while still making a profit.
Sell your home for sale by owner (FSBO)
You can eliminate the 3% listing agent’s fee by selling your home yourself — also known as selling FSBO. If you’re able to find a buyer without an agent on your own (maybe you’re selling to someone you know), you may be able to avoid paying any realtor fees whatsoever!
But most FSBO sellers should still offer — and expect to cover — a competitive 2.5-3% buyer’s agent fee to attract more qualified buyers and increase the likelihood of a successful outcome.
Keep in mind that selling your own home takes a lot of time and energy. You have to advertise your property, coordinate showings, negotiate offers, and handle the closing process yourself.
While you won't have to pay a listing agent’s commission, you could miss out on more than you save if you price your home incorrectly or negotiate poorly.
For many sellers, that risk and extra commitment aren't worth it. But if you know what you're doing and the market conditions in your area are right, you could pocket a lot more money from the sale.
Other ways to avoid 3% commission fees
iBuyers, like Opendoor, use advanced technology to make fast, all-cash offers on properties — usually without ever laying eyes on them.
These companies only operate in a few cities and follow strict guidelines for the types of properties they'll buy, so most sellers won't qualify.
But if you do qualify for an offer, iBuyers can make the selling process much more convenient since you don't have to deal with the uncertainty and hassle of listing your property on the open market.
You also won't have to pay agent commissions — but that doesn't mean you'll save more money. iBuyers charge hefty service fees, usually between 5-15%.
» LEARN: What is an iBuyer, anyways?
We Buy Houses for Cash companies
These companies make all-cash offers on nearly any property, no matter its condition or location.
"We buy houses for cash" companies could be an option if you need to sell a property quickly — especially if it would need a lot of repairs before you could list it on the open market.
In most cases, you won't have to pay any agent fees since you'll work out the deal directly with the buyer, but don't expect to get top dollar for your home. They'll offer well below market value for your property to make sure they can fix it up and sell it for a profit.