What Is a 5% Real Estate Commission?

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By Steve Nicastro Updated April 11, 2024

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Selling your home? Keep an eye on the costs, especially real estate commission rates. Typically, commission comes to around 5% of your home's sale price, slightly below the national average. Here’s what you need to know about 5% commission realtors:

  • According to Clever's survey, sellers usually pay around 5.49% in total commission, covering both the seller's and buyer's agent fees
  • Similarly, our study found that most sellers (71%) who worked with an agent paid 5% or more in commission.[1]
  • Traditionally, the seller pays it all, but changes may be coming due to the recent National Association of Realtors (NAR) lawsuit. Industry experts think total commission rates could fall below 5%.
  • It's possible to lower these costs. You can try to negotiate a lower rate with your agent. Or you can use a discount broker that charges less than typical rates. 

Clever Real Estate can also help by securing a 1.5% listing fee with experienced agents from well-known brokerages like Keller Williams and RE/MAX. This approach offers you the expertise of a leading agent while keeping the listing fee well below the national average of 2.83%. 

💰 Get a 1.5% listing fee — no negotiating required

How 5% realtor commission works

Understanding how a 5% real estate commission works is key when selling your home.

Before signing a listing agreement, the seller decides on the commission for their agent (the listing or seller's agent) and the buyer's agent. This decision sets the stage for how much each will be paid upon the home's sale.

  • Listing agent's commission. This agent helps price, market, and sell the property. They usually earn between 2% to 3% of the sale price. According to Clever's survey, they earn about 2.83% nationwide. For context, Anywhere Real Estate (behind Coldwell Banker and Century 21) reported an average rate of 2.45%.[2]
  • Buyer's agent commission. The agent who brings the buyer to the table also earns a commission, generally between 2.5% and 3%, with the national average at 2.66%.
  • Total commission cost. For a home selling at $400,000 with a 5% total commission, the agents would earn a combined $20,000. The seller typically pays this amount at closing from the sale proceeds.

Understanding the 5% real estate commission helps sellers navigate their home sale with confidence.

Important update on realtor commission changes! 

The traditional practice where home sellers pay commission fees for both their agent and buyer's agents is set for a change. Sparked by legal challenges, a $418 million settlement with NAR is paving the way for a significant shift in how real estate commissions are handled.[3]

This move will likely end the seller's obligation to pay the buyer's agent fees, encouraging direct fee negotiations between buyers and their agents, promoting competition, and potentially improving service quality.

Clever's CEO, Luke Babich, anticipates the NAR lawsuit settlement will reduce the average commission rate for buyer's agents from 1.5% to 2%, bringing the overall national average down to about 4.5%. 

Although targeted to begin in July 2024, these changes could face delays. We'll continue to monitor and report on how these adjustments could affect you.

How to pay less than 5% real estate commission 

OptionBest forWrong for
Discount brokerFull-service agents at a lower costSellers who want traditional brokerage services
Sell FSBOFull control over a transactionSellers uncomfortable handling sale negotiations, paperwork
Cash home buyerFast, hassle-free saleSellers aiming to maximize sale price
Direct negotiationsSellers comfortable with negotiationSellers who want a faster, more straightforward process

Looking to sell your home and eager to save on commission without waiting for industry shifts? There are effective strategies to reduce those fees to less than 5%. 

Option 1. Use a discount real estate broker

Discount brokers are your go-to for selling your home at a fraction of the typical commission rate. Where most brokers might charge an average listing fee of 2.83%, discount brokers often only ask for 1-2%.

This difference may not sound like much, but it could mean saving $4,000 to $8,000 on a $400,000 home sale. And the best part? The top-notch discount brokers ensure that saving money doesn't mean compromising on service or support. You'll still receive excellent assistance every step of the way, just at a lower cost.

Company
Clever Rating
Listing Fee
Availability
4.8
Our rating
1.5%
Nationwide
Find Agents
On listwithclever.com
Good agents, but limited choice
4.5
Our rating
2%
Nationwide
Learn More
On listwithclever.com
Great savings, but some risks
4.5
Our rating
1.5%
26 states (select markets)
Learn More
On listwithclever.com
Best overall

Clever Real Estate

Find Agents
On listwithclever.com
4.8
Our rating

Listing Fee

1.5%

Customer Rating

5/5 (3,180 reviews)

Editor's Take

Overview

Locations

Clever Real Estate is the best option for most sellers looking for an agent. The company matches you with multiple full-service agents from local brokerages, including top brands like Keller Williams and RE/MAX. It offers a low 1.5% listing fee no matter which agent you choose.

Pros

  • Get matched with top-producing local agents in minutes.
  • Guaranteed 1.5% listing fee (half the usual rate).
  • Free agent matching service with no obligation to commit to any realtor.
  • Large agent network offers great selection compared to similar services.

Cons

  • No guarantee you’ll get matched with a specific agent or brokerage.
  • Add-ons like professional home staging and drone photography may cost extra.

Clever Real Estate offers a lower commission without sacrificing quality. Through its free service, you can find top-rated agents in your area and sell for just a 1.5% listing fee (much lower than the average realtor commission rate).

How it works: You take a short online quiz (five questions) to help Clever understand your situation and preferences. Then Clever matches you with vetted agents in your market who are a good fit. If you don’t like the agents Clever recommends, you can request more matches until you find the right fit — or simply walk away.

Why it’s great: You can use Clever to compare top-producing local realtors from major brands like Compass, Century 21, and Coldwell Banker. Each realtor in Clever’s network has agreed to offer lower commission rates, which lets you focus on choosing the best agent instead of worrying about the price. You get the same savings no matter what.

Clever is available nationwide.

Good agents, but limited choice

Ideal Agent

Learn More
On listwithclever.com
4.5
Our rating

Listing Fee

2%

Customer Rating

4.9/5 (7,007 reviews)

Editor's Take

Overview

Locations

Ideal Agent is a solid option if you’re looking for a top agent. The company vets its realtors thoroughly, so you’ll likely get a quality agent.

However, you might not get to choose who you work with, since Ideal Agent usually has only one or two realtors in a given area. Even if you get a top-performing agent, there’s no guarantee that they’ll be the right fit for your sale.

Ideal Agent’s listing fee of 2% is a bit lower than the traditional rate. But if you want to save money, other brokerages offer even lower fees while still maintaining high-quality agents and service.

Pros

  • It's easy to get matched with a real estate agent.
  • The 2% listing fee is lower than the traditional rate.
  • Customer service gets excellent reviews.

Cons

  • You likely won't get to choose which agent you work with.
  • There are no savings for buyers and limited savings for sellers.
  • There's limited ability to manage your listing online.

Ideal Agent is a real estate company that matches buyers and sellers with real estate agents.

Compared to similar companies, Ideal Agent has some of the strictest performance criteria for the agents it lets into its network. This vetting process means you're more likely to be matched with a top agent, although it also means there are fewer agents overall to choose from.

The company also offers a discounted listing fee of 2% (min. $3,000) compared to the 2.5–3% that realtors traditionally charge.

While Ideal Agent’s primary service is agent matching, the company also has a cash buyer program. With this program, Ideal Agent solicits multiple cash offers for your home from various investors. While you’re unlikely to make as much as you would selling on the open market, a cash buyer provides the convenience of a fast closing.

Read our full Ideal Agent review

Ideal Agent is available nationwide.

Did you use Ideal Agent? Leave a review for the chance to win a $250 Amazon gift card.
Great savings, but some risks

Redfin

Learn More
On listwithclever.com
4.5
Our rating

Listing Fee

1.5%

Customer Rating

4.8/5 (156,106 reviews)

Editor's Take

Overview

Locations

Redfin is a reputable discount real estate brokerage that offers significant savings, particularly if you buy and sell with the brokerage. But watch out for high minimum fees, which vary by market and can be high in some areas. Redfin's agents also work with a lot of clients, and they don’t always have time to provide as much hands-on service as you may need.

Pros

  • Redfin's low listing fee of 1.5% offers excellent savings.
  • Clients who buy and sell with Redfin can save even more.
  • You can easily manage your listing online or via Redfin’s app.

Cons

  • Agents provide limited one-on-one service.
  • Customer reviews have recently become more negative.

Redfin is a discount real estate brokerage that offers a listing fee of 1.5% — about half of what realtors traditionally charge. If you buy and sell with Redfin, you can get a 0.5% rebate, bringing your listing fee down to 1%.

The company can offer these savings because of its team-based service model. Various members of the Redfin team handle different stages of the transaction, which allows agents to take on a high volume of clients. With this model, Redfin agents tend to provide less one-on-one service than traditional realtors.

Redfin is one of the largest brokers in the country, operating in 100 major cities across the US and Canada. But it has almost no coverage outside of large cities.

Read the full Redfin review.

Redfin is available in Washington D.C. and most major cities in the following states: Arizona, Arkansas, California, Colorado, Florida, Hawaii, Illinois, Indiana, Maryland, Massachusetts, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia.

Did you use Redfin? Leave a review for the chance to win a $250 Amazon gift card.

Option 2. Sell FSBO

Choosing to sell your house without a realtor allows you to bypass the typical listing agent fees, which average 2.83%. This approach could mean you're only responsible for the buyer's agent fee in the current system. 

FSBO appeals to those who seek full command over their home sale, presenting an opportunity to save on commission costs.

However, going the FSBO route requires careful consideration of whether the potential savings justify the additional efforts, time commitment, and risks of managing the sale yourself. 

Keep in mind these two statistics: 

  • Studies indicate that homes sold through agents tend to secure nearly $50,000 more on average compared to FSBO sales.[4] 
  • Our research on FSBO statistics also reveals that over one-third (36%) of sellers make legal mistakes without professional guidance, highlighting the potential pitfalls of navigating a home sale without an expert.

Selling FSBO? Get your home listed on the MLS! 

The MLS is a crucial tool in the real estate market, acting as the primary database where agents search for properties on behalf of their clients. Being listed there significantly increases your home's visibility to potential buyers.

For FSBO sellers, the answer lies with flat fee MLS listing services. These companies offer a cost-effective way to list your home on the MLS for a low, one-time fee. 

Flat fee MLS services not only put your property in front of a vast network of buyer's agents via the MLS, but also ensures it appears on popular real estate websites like Zillow and Realtor.com, further boosting your chances of finding the right buyer.

Option 3. Sell to a cash home buyer

Selling to a company that buys houses for cash suits those looking for a quick and hassle-free sale. Here are the key points to consider.

Pros

  • Fast closings (1-2 weeks)
  • No contingencies, which reduces the risk of the deal falling through

Cons

  • Usually pay below market value.
  • Less flexibility in negotiating price and terms.

Compare offers from several cash buyers to get the best deal when selling your house for cash. You can do this with a realtor’s help or use a free service like Clever Offers to ensure you get a fair price.

Option 4. Negotiate with an agent directly

When working with a real estate agent, knowing that you can negotiate realtor fees is important. These fees can vary by location, the brokerage, and the services provided; there's always room to discuss a better rate. 

However, knowing that not everyone succeeds in these negotiations is also crucial. According to an industry study, only 22% of home sellers could negotiate lower commission rates with their agents.[5] Preparing and understanding negotiation strategies is key if you're considering selling with a realtor and want to try negotiating fees.

FAQ

What exactly is a 5% real estate commission?

A 5% real estate commission typically occurs when the listing agent charges a slightly reduced commission, around 2–2.5%, and pays the buyer's agent commission. Under the traditional home sale, sellers are responsible for paying the buyer's agent commission (2.5–3%), bringing the total real estate commission to around 5%.

In today's real estate market, sellers pay an average of5.49% nationwide in commission fees. However, discount brokerages, such as Clever or Redfin, can offer big savings.

How is a 5 percent commission for a realtor split?

A 5% commission will generally be split between the listing agent and the buyer's agent. Nationwide, the listing agent earns slightly more (2.83%) compared to the buyer's agent (2.66%), although this may vary by market. Each agent may also split their commission with their respective brokerage.

Can I negotiate a 5% commission with a realtor?

You may be able to negotiate a 5% or lower commission with your realtor, but it depends on the price of your home, where you live, and average commission rates in your area, among other factors. To pay a 5% or lower total commission rate, you'll likely need to pay your listing agent a 2% commission — instead of the traditional 2.5–3% — while still offering a competitive buyer's agent commission.

However, real estate commissions are always negotiable; you may be able to negotiate a lower listing agent fee and try to offer a lower buyer agent's fee. However, it can be difficult to negotiate a lower rate with a traditional agent, and studies show most homeowners are unsuccessful. The best way to save on listing fees is with a low-commission real estate agent.

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Our experts continually research, evaluate, and monitor real estate companies and industry trends. We update our articles when new information becomes available.

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