What is a 5% Real Estate Commission?

By 

Trevor Wallis

Updated 

March 25th, 2021

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How it works | Potential savings | Sell for 5% | Negotiation tips | Limited-service agents | Low-commission agents | 5% companies | Other ways to save

What is a 5% commission in real estate?

On average, home sellers in the U.S. pay 5.5-6% in agent commissions. If you can secure a 5% real estate commission, you'll pocket a lot more money from your sale.

But you don't have to settle for just a 0.5% discount. There are discount real estate companies that offer even lower rates than 5% — with some selling your home for as little as 3.5% total commission.

» SAVE: Sell with a top local agent for 4% total commission (or less!)

How does a 5% commission work?

In most real estate sales, the total commission comes out of the seller's proceeds at closing. It's then split between the listing agent and the buyer's agent.

If the seller pays a 6% fee (as they would in most conventional transactions), both agents take home 3% of the property's sale price.

Fee
Rate
Listing agent’s fee
3%
Buyer’s agent fee
3%
Total
6%

That means, when you sell a $350,000 property, $21,000 disappears from your proceeds before you even see the money from the sale — ouch!

But you can slice that amount by $3,500 by working with a listing agent who lowers their rate to 2% and still paying 3% to the buyer's agent.

Fee
Rate
Listing agent’s fee
2%
Buyer’s agent fee
3%
Total
5%

Why does the buyer's agent commission stay the same?

You could also pay 5% total commission by offering a lower buyer's agent fee — but it could make your home more difficult to sell.

This fee is an incentive for buyer's agents to "sell" your home to their clients (that's why they're sometimes called "selling agents"). If you don't offer a competitive rate, agents may steer their clients toward other sellers who do.

Note that competitive buyer's agent rates vary by area. If the market conditions are right, your listing agent may give you the green light to offer a slightly lower commission that's in line with what other sellers are offering.

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

Why do listing agents agree to lower their rates?

Many agents offer lower listing fees to help them stand out from other agents in a competitive market. Discount real estate brokerages like Redfin are also becoming more popular and shaking up the real estate market.

Now, agents compete both among themselves and with these built-in listing fee discounts by offering creative pricing and service structures to win your business.

All this competition can help you score a reduced listing fee to lower your total commission without repelling buyer's agents.

» MORE: How much do real estate agents make?

How much can you save with a 5% real estate commission?

Lowering your total commission to 5% isn't a massive discount compared to the typical 5.5-6% rate. But it could still save you hundreds or even thousands of dollars in agent fees — especially for more expensive properties.

For example, if you sell a $100,000 home, you'll save up to $1,000. But you can save as much as $7,500 on a $750,000 property if you pay a 5% commission rate instead of 6%.

Save up to $10,000 on a $500,000 sale

Clever matches you with a top-rated local real estate agent for 3.5-4% total commission.

How to sell your home for 5% commission

There are four paths you can take to lower your total agent commission to 5%:

Negotiate a lower commission with your listing agent

It's possible to negotiate a lower listing fee, but most agents will be hesitant to lower their rate. Still, your chances of negotiating a discount go up when you check at least one of these boxes:

  • There's a lot of buyer demand in your area
  • A lot of local agents are competing for new business
  • You're selling a high-value property
  • You agree to both buy and sell with the same agent or brokerage

» MORE: How to negotiate a lower realtor commission

Hire a limited-service real estate agent

Limited-service real estate agents provide less support and fewer services to sellers for a low fee. These companies often offer a la carte pricing, allowing you to only pay for the services you need an agent to handle for you while you manage the rest of the sale.

With a limited-service agent, you could pay much less than 5% total commission — but you'll need to be comfortable investing the time and energy into handling a bulk of the sale on your own.

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

Work with a low-commission real estate agent or company

Some companies provide built-in listing fee discounts for sellers, allowing them to sell their homes for 5% total commission or less. These companies come in two forms:

  • Discount real estate brokerages have in-house real estate agents who work for a discounted rate.
  • Agent-matching services connect you (usually for free) with top-rated local agents who agree to sell your property for a pre-negotiated listing fee.

» LEARN: Should you sell your home with a discount real estate agent?

Companies that sell your home for 5% total commission

REX Real Estate

Listing fee
Total commission*
Average savings**
2.5% ($9,000 minimum fee)
5.5%
-$325
*Assumes a 3% buyer's agent commission
**Based on four different sale prices compared to a 3% listing commission

REX Real Estate advertises a 2.5% total commission rate for sellers — but that rate is misleading. REX cuts out the buyer's agent commission and doesn't list your home on the multiple listing service (MLS). This is incredibly risky because it limits your pool of potential buyers and could make your home difficult to sell.

» MORE: How REX Real Estate works (and its risks)

Ideal Agent

Listing fee
Total commission*
Average savings**
2% or $3,000
5%
$3,750
*Assumes a 3% buyer's agent commission
**Based on four different sale prices compared to a 3% listing commission

Ideal Agent matches you with a local full-service agent who works for a well-known brokerage like RE/MAX or Century 21. The company pre-negotiates a 2% listing commission with its partner agents, but you may not have many choices if the one you're matched with doesn't fit your needs.

Companies that charge less than 5% total commission

Clever Real Estate

Listing fee
Total commission*
Average savings**
1% or $3,000
4%
$7,375
*Assumes a 3% buyer's agent commission
**Based on four different sale prices compared to a 3% listing commission

Clever is a free agent-matching service that pre-negotiates 1% listing fees (or $3,000 for homes under $350,000) with top local agents nationwide. You'll be able to interview and compare several agents from well-known brokerages like Keller Williams and Coldwell Banker before choosing the one that best fits your needs.

» LEARN: How Clever helps you save thousands without sacrificing service

Redfin

Listing fee
Total commission*
Average savings**
1.5% (minimum fees vary by market)
4.5%
$5,875
*Assumes a 3% buyer's agent commission
**Based on four different sale prices compared to a 3% listing commission

Redfin offers a 1.5% listing fee to sellers in more than 80 U.S. cities. But, if you both sell and buy with Redfin's in-house agents, you'll receive a 0.5% commission rebate, dropping your listing fee rate to 1%. Be cautious, though — Redfin agents handle a lot of transactions which could limit how much dedicated service they can provide.

» MORE: Read the full Redfin review

Alternatives to paying a 5% real estate commission

For sale by owner (FSBO)

You can avoid realtor fees completely by selling FSBO. This is a great option if you're comfortable handling the entire sale yourself. But you'll have to decide if the savings are worth the extra responsibilities and risks that come with a DIY sale.

» MORE: How to sell your house for sale by owner

Flat-fee MLS companies

Flat-fee MLS companies list your home on the multiple listing service — an agent-only database of properties for sale in your area. You can pay a low, flat fee to get your home in front of buyer's agents (and on popular listing sites like Zillow and Realtor.com), but you'll have to manage the rest of the sale on your own.

» MORE: What you need to know about flat-fee MLS listings

iBuyers

iBuyers, like Opendoor and Zillow Offers, use advanced technology to make all-cash offers on properties. These companies let you sell your home for a competitive price without listing on the open market. However, they're only available in a few cities and come with strict guidelines for the properties they'll buy, so very few sellers will actually qualify.

» MORE: What Is an iBuyer?

"We buy houses" companies

If you need to sell your property quickly, a "we buy houses for cash" company can make you an all-cash offer, no matter the property's condition. However, this offer will be well below market value since these companies plan to fix up and resell the property for a profit.

» MORE: Should you sell to a "We buy houses for cash" company?