Real estate commissions for land sales often match or exceed the national average rate of 5.49%. However, rates can range from 5-10% depending on the land's location, type, and complexity of the sale, according to Shannon Feick, co-owner of ASAP Properties in Cincinnati, OH.
The rationale behind the higher commission rate is straightforward: Agents earn less from selling a $100,000 plot of land than from a $400,000 house. The land's value, the anticipated challenges in selling it, and the expected time to close the sale all impact the commission rate.
Many land sellers contemplate selling for sale by owner (FSBO) to avoid high commissions. However, without expertise or an immediate buyer, FSBO sales can be challenging and might not lead to savings when compared to using an agent.
To maximize profit while reducing stress, consider using a low-commission real estate service like Clever Real Estate. Clever offers access to experienced realtors at a 1.5% listing fee, providing a cost-effective way to sell your land with professional support. This option allows for free agent comparisons with no obligation to proceed, offering flexibility and potential savings. Get matched with a local agent today!
Realtor commission on land sales explained
In land sales, like residential property transactions, the commission is determined and paid by the seller. This fee typically covers both the seller's and buyer's agent fee, which is split between them.
The average commission rate is 5.49% nationwide. But commissions on land sales, especially for lower-priced properties, can be much higher.
Realtor commission on land sale example
- $1 million lot. A standard 5% commission equals $25,000 per agent, before any brokerage splits.
- $100,000 lot. The same rate yields only $2,500 per agent. It's often considered too low for the required time and effort.
Yet, some brokerages charge a flat fee (e.g., $10,000 on a $100,000 land) instead of a fixed commission rate to ensure agents are fairly compensated.
Factors impacting land commission rates
Rates are influenced by the complexity of the sale, extended listing timelines, and the specialized nature of properties like farmland and vacant lots.
Unlike residential sales, properties such as farmland and vacant lots cater to a niche market with fewer buyers and specific needs, leading to a greater challenge for agents.
Land sales, especially in rural areas, can take a year or more to sell, notes realtor Kristyn Grewell from Edmond, Oklahoma. These longer timelines can result in higher commission rates to account for the agents' prolonged effort.
Finally, the need for percolation tests, access to utilities, and soil quality assessments adds to the sale's complexity. Agents handling these details may request higher commissions for their specialized services.
📊 Fast facts about land sales
- The average farm real estate value in the US, encompassing all land and farm buildings, reached $4,080 per acre in 2023, marking a 7.4% increase from 2022.
- Though only making up 4% of all real estate transactions, land sales grew by an average of 6% in 2021, outpacing the growth of single-family rentals, industrial properties, and apartment buildings.
- Land value accounts for 40% of household real estate assets based on Federal Reserve Board data on household real estate and the cost of structures.
Realtor fees for land sales: 5 things to know
1. Commission on land sales is negotiable
Real estate commissions for land sales are not fixed and typically vary between 5-10%. Importantly, all realtor fees in any property transaction, including houses, vacant lots, or extensive farmland, are open to negotiation.
While negotiating down realtor fees can be daunting, it offers the potential for significant savings.
For example, lowering the commission to 1.5% on a $400,000 land sale could save you $6,000 compared to the typical 3% fee. However, successful negotiation isn't guaranteed, as evidenced by a study showing only 22% of sellers managed to negotiate lower commission.
Criteria for negotiating a lower commission
You generally have a better chance of negotiating lower fees for selling land if you meet the following criteria:
- The land is valued at or above your area's median sales price (or the national median of $417,700.)
- It's a sought-after location and expected to sell quickly, which gives you more leverage in negotiations.
- You can offer to sell or buy multiple properties with the same agent, which could motivate them to agree to lower rates.
- You're open to listing your land at or below market value to attract more offers, which can encourage agents to accept a lower commission.
- You show a willingness to find another agent if necessary, which can pressure the current agent to lower their rate.
You can potentially negotiate a lower commission by making your land more appealing to buyers. Feick, the real estate professional based in Ohio, suggests that clearing the land of debris and ensuring paths are accessible can significantly increase its attractiveness.
Alternatively, Clever Real Estate can streamline this process. Clever secures low listing fees of just 1.5% through pre-negotiated rates with skilled realtors experienced in land sales, offering you considerable savings and eliminating the need for direct negotiation.
2. Land type may affect your rate
The type of land and required services play a significant role in your expected commission rate.
In regions like the southern U.S. or areas with more affordable vacant land, commissions for smaller plots or farmland can reach 8–10%. Higher commissions might also apply to properties posing higher risks for agents, such as undeveloped land or plots without a septic system.
These factors introduce complexities since buyers typically intend to build on the land, expecting it to be suitable for construction. Agents may need to secure septic information or assist in passing a perc test to confirm buildability.
In a buyer's market, subdividing the property for sale into smaller parcels might increase profitability compared to selling it as one large plot.
Consult with an experienced local agent to get help deciding if subdividing maximizes profits or if selling the entire land parcel is more advantageous.
3. Realtor fees go up on special use
Broker fees for land sales can reach up to 10% for properties requiring extensive preparation and marketing efforts.
For example, land designated for mobile homes demands extra tasks such as obtaining maps, septic and drainage information, and water quality tests from wells.
Selling such properties might also need drone photography to provide aerial views that highlight the land's size and boundaries, aiding potential buyers in making well-informed decisions.
For plots meant for manufactured homes, often priced at $100,000 or below for multiple acres, the commission structure looks different. Because these plots have a lower market value than land for residential or commercial development, an agent might consider a $5,000 commission fair. After sharing this fee with the buyer's agent, they might earn $2,500 or even less.
4. Closing costs may be higher on land sales
When selling land, be aware that standard closing costs will apply. But sellers might also face extra expenses unique to land sales, such as surveying, zoning, and environmental assessments, according to Feick, the licensed real estate professional.
Also, expect to pay the following closing costs:
- Escrow services. Provided by title companies, these services involve holding funds and facilitating the closing. Depending on the market conditions, these costs might be paid by the buyer, shared, or covered by the seller.
- Title insurance and search. Buyers are typically responsible for the owner’s title insurance policy and the accompanying title search. These are crucial for verifying the property’s title is clear of issues and are often linked with escrow expenses.
- Transfer taxes. The location of the land sale can dictate additional costs like transfer taxes, calculated as a percentage of the sale price. For example, selling a $1 million piece of land could result in $1,500 in transfer taxes if the rate is $1.50 per $1,000 of property value.
5. You likely have to pay the buyer's agent fee
When selling land, it's common to work with two agents: the listing agent, who markets your property, and the buyer's agent, who represents the potential buyer.
Typically, the seller is responsible for paying the commission fees for both agents, which usually falls between 5% to 10%, depending on the specifics of the land being sold.
As a seller, offering a fair commission rate to the buyer's agent within your market is essential. It not only complies with industry standards but also maximizes your property's appeal to a bigger audience of potential buyers.
🤔 Why do sellers of land pay the buyer's agent?
The main reason sellers pay the buyer's agent fee is to incentivize realtors to bring clients to their property. The National Association of Realtors (NAR) also requires listing brokers to compensate buyer brokers as a condition of listing on Realtor-affiliated MLS platforms, ensuring properties receive enough exposure.
However, a November 2023 lawsuit against NAR challenges the current system, arguing it unfairly raises the cost of sales for sellers by requiring them to compensate buyer's agents, who may not directly serve their interests.
This lawsuit suggests the possibility of future changes to how commissions are structured. No significant changes are expected in the short term, but we will continue monitoring the situation and update our content as needed.
Should I use a realtor when selling land?
Utilizing a realtor for selling land is highly recommended. Despite the higher commissions associated with land sales, the expertise of a realtor proves invaluable for the majority of sellers.
The effectiveness of realtors is reflected in the fact that 90% of all buyers and sellers opt for agent assistance in their transactions. Sellers represented by agents also typically achieve sales prices nearly $50,000 higher than those going the FSBO route, which more than offsets the cost of commissions.
An experienced agent possesses the necessary skills and connections to effectively market your land to a suitable buyer base. Given the smaller market for land compared to residential properties, an agent's network is crucial for reaching potential buyers.
Where to find realtors specializing in land sales
The National Association of Realtors offers an ALC certification for realtors with specialized training and a proven track record in land sales. You can find such accredited professionals through the Realtors Land Institute.
For those mindful of budget, partnering with a low commission agent can be a smart move. Offering comparable services to traditional agents at a fraction of the cost, they enhance your chances of a faster sale and maximizing your returns.
If you're looking to buy or sell a house and weighing your options, Clever can help!
Our fully licensed Concierge Team is standing by to answer questions and provide free, objective advice on how to get the best outcome with your sale or purchase.
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FAQ about commission on land sales
How much is the typical commission on land sales?
How can you save money on broker fees for land sales?
To save money on broker fees for land sales, you can try to negotiate a lower commission rate or list your property for sale by owner (FSBO). However, the best (and easiest!) option is to work with a discount real estate company that provides the full support of a traditional agent for a fraction of the cost. Find the top discount real estate brokerages.