What is a 3% Real Estate Commission?

Trevor Wallis

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Trevor Wallis

May 14th, 2021
Updated May 14th, 2021

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3% commission realtor fees | Find low cost realtors | Who pays buyer's agent commission? | How much does it cost? | Save on commission | Negotiate realtor fees | Limited-service agents | 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%.

Hiring a 3% commission realtor is expensive! Paying standard rates on a $350,000 home sale would cost you $21,000 — yikes!

Want to save on commission? Clever pre-negotiates 1% listing fees with local agents (or $3,000 for homes under $350,000). You'll get the support of a full-service agent for a third of the price.

» SAVE: Sell with a top local agent for just 1% or $3k

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. Realtors also spend a LOT of money finding new customers. The 3% listing fee ensures the agent can pay their broker, cover their marketing expenses, and still walk away with a reasonable profit.

» MORE: How much does a 3% commission realtor cost?

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 rewards buyer's agents for helping you sell your home.

» READ: Do sellers pay buyer's agent commission?

How much does real estate commission cost?

Paying a 3% commission can take a lot of cash out of your pocket — especially if you're selling in a higher price range. 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.

Sale price
Total commission
$100,000
$6,000
$250,000
$15,000
$500,000
$30,000
$750,000
$45,000

Paying a lower commission rate could save you thousands of dollars, depending on your home's price.

For example, selling with a 1% commission realtor would lower your total commission to 4%. On a $350,000 home, that would save you $7,000!

» SAVE: Sell with a 1% commission realtor, save thousands

How to pay less than 3% commission

In reality, you may end up paying slightly less than 3% to each agent. On average, sellers in the U.S. pay 2.79% to listing agents and 2.71% to buyer's agents for a total commission rate of 5.50%. But specific agent rates vary based on location, home price, and market conditions.

Still, you have some options to pay MUCH less than the national average to one or both of the agents involved in the sale. Here are a few ideas:

Hire a low commission real estate agent

Hiring a low commission real estate agent is one of the best ways to save on realtor fees when you sell your home.

There are two types of companies that can help you pay well below a 3% listing fee.

Agent-matching services

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.

💰 Compare 1% commission agents and save thousands

Try our free, no-obligation agent-matching service! Clever will get proposals from the top agents in your area — and negotiate discounted rates of just $3K or 1%.

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.

» MORE: Which real estate company has the lowest commission?

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

» MORE: How to negotiate realtor commission

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.

» LEARN: What is a limited-service real estate agent?

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. A discount service may be a better option. Selling with a low commission company like Clever helps you save on realtor fees while still getting all the support you need.

» READ: How to sell your home for sale by owner

Other ways to avoid 3% commission fees

iBuyers

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.

» MORE: Your "We buy houses for cash" questions answered

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