Are Realtor Fees Included in Closing Costs?

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By Steve Nicastro Updated February 19, 2024


Realtor fees or real estate commissions are typically not included in a seller's closing costs, as they are paid separately by the seller at the time of closing.

For instance, in a $354,200 home sale with a commission rate of 5.49%, the total commission cost would amount to $19,400. However, this figure does not encompass other seller closing costs, such as transfer taxes, attorney fees, and title insurance.

In total, seller closing costs could contribute an additional 1-3% to the seller's expenses, which vary depending on the location and sale price of the home. So, the total sale costs could reach 8-9% or more, equating to $40,000 or higher for the seller. 

Fortunately, there are ways for sellers to reduce these costs. One effective method is to use a discount real estate broker, such as Clever Real Estate, which connects you with top-performing realtors for a flat fee of 1.5% – much lower than the national average listing agent commission of 2.83%, providing substantial savings on your home sale.

Realtor fees vs. closing costs: What's the difference?

What is realtor commission?

Realtor commission refers to the fee paid to real estate agents for facilitating the home sale. 

Commission is typically calculated as a percentage of the home's sale price, often falling within 5-6%, and split between the buyer's and seller's agent. Our survey found a nationwide average of 5.49%, with 2.66% to the buyer's agent and 2.83% to the listing agent.[1]

Unlike salaried professionals, realtors do not receive payment upfront when they take on a new client. Instead, they earn their commission upon the successful closing of a deal.

The seller typically covers the entire commission, which gets deducted from the home sale proceeds upon closing.

🏡 Insights on realtor commission 

Commission rates can vary depending on location and property type. For example, rates tend to be higher in states like West Virginia than Hawaii, due to differences in home prices. Commission rates may also be higher for land sales than single-family homes, as agents seek to offset lower property values with higher commission rates.

What are closing costs?

Closing costs cover the expenses incurred to complete the sale and transfer property ownership to the buyer. 

For sellers, these costs range from 1% to 3% of the home's final sale price. For example, on a $500,000 home, closing costs may amount to $5,000 to $15,000.

Common fees encountered at closing include title and settlement fees, transfer taxes, recording fees, and attorney fees.

While most closing costs are fixed and non-negotiable, they vary based on location. Buyers may also face additional expenses due to lender and underwriting fees.

💡Saving on closing costs: Tips for buyers and sellers

Buyers may reduce closing costs by negotiating with sellers to cover part or all of these expenses in the contract. This tactic is particularly effective in a buyer's market, where buyers hold more negotiating power.

Buyers can also secure a home buyer rebate or commission rebate, to save on their home purchase without any negotiation. Some real estate companies, like Clever, provide buyer rebates or cash back as a standard benefit of utilizing their services.

Sellers may save by comparing quotes for closing services, securing the best rates for things like title insurance and attorney fees. They can also reduce commission rates by using a discount broker.

How to determine home sale costs

Check your listing agreement

If you're preparing to sell but uncertain about your expenses, it's time to review your listing agreement.

For sellers, commission details should be stated clearly in your agent's listing agreement. This agreement may also outline the buyer's agent fee, compensating the agent who brings in the buyer. 

Be mindful of the percentage amounts you've agreed to pay your agent and the buyer's agent, as these are likely your responsibility.

Realtor commission changes coming soon?

Big news for home sellers: You may no longer have to pay for the buyer's agent fees!

Traditionally, sellers have paid the buyer's agent fees, as required by the National Association of Realtors (NAR). But a groundbreaking lawsuit against NAR challenged this established norm. A settlement in March 2024 is set to change the practice, offering more flexibility with agent fees and altering how compensation works, aiming for more choice in real estate transactions.

While these changes are expected to roll out by mid-July 2024, for now, the practice of paying buyer's agent fees continues, and sellers likely can't refuse to pay the buyer's agent if contractually agreed upon. Sellers seeking savings can use Clever for a reduced listing fee of 1.5%, instead of the typical 2.5-3%.

Request a seller's net sheet

Sellers can also request a seller's net sheet from their agent, broker, or title company to gain insight into potential commissions and closing costs in specific dollar amounts. 

A net sheet is a spreadsheet or document that contains line items for each expense, with realtor commission and closing costs separated. It takes the projected home sale price and deducts anticipated commission and closing costs to provide a solid estimate.

A net sheet calculation is typically based on a comprehensive home value estimate using a comparative market analysis (CMA), plus a reliable estimate of typical closing costs in your area. 

How to save on your home sale costs

Negotiate a lower rate

Negotiating a lower commission rate with your listing agent is a smart way to reduce home sale costs. You could aim for a listing rate below the market average, such as 2% instead of the typical 2.83%. 

Unfortunately, success in negotiating lower rates isn't guaranteed. An industry report found that only 2 in 10 recent home sellers discussed commission rates with their agent and managed to negotiate a reduced fee.[2]

If you're still determined to negotiate, review the key steps to negotiate realtor commissions.

Use a discount broker

Discount real estate brokers offer to sell your home for a lower commission rate than the typical 2.5–3% charged by traditional realtors, and some charge as little as 1.5%. 

For example, agents within Clever Real Estate's network charge a 1.5% listing fee, well below the average listing fee. If you were selling a $500,000 home, you could save close to $7,000 by partnering with a Clever agent. Find top agents near you today.

Hire a flat fee MLS company

Set on selling your house without a realtor? You can improve your chances of success by hiring a flat fee MLS company. These companies allow you to list your home on the multiple listing service (MLS), increasing its exposure to potential buyers.

The MLS is significant because approximately 86% of all sellers use it, making it the top listing method.[3]

But selling without a realtor can still be challenging, even with the added marketing exposure provided by a flat fee MLS service.

If you're unfamiliar with your local real estate market or lack the marketing expertise required to sell at the highest price, you could potentially lose thousands of dollars. And remember, you may still need to pay the buyer's agent commission fee, unless your buyer is unrepresented.

» LEARN: Pros and cons to selling FSBO

Related reading

Article Sources

[2] National Association of Realtors – "Home Buyers and Sellers Generational Trends Report". Updated 2023.
[3] National Association of Realtors – "Quick Real Estate Statistics".

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