The standard real estate commission rate nationwide is approximately 6% of the final sale price of a home. This fee is typically split down the middle between the listing and buyer's agents who handle the transaction.
Generally speaking, the home seller is responsible for paying the full fee — though in some circumstances, there may be room for negotiation.
Read on for a more in-depth explanation of how realtor fees work and how to save big on commission without sacrificing service.
What percentage do real estate agents make?
While realtor commission fees vary from region to region, in a traditional real estate transaction, sellers can expect to pay between 5.06% to 5.85% of the home's final sale price, according to our research.
The nationwide average is approximately 5.45%.
The full fee usually first goes to the agent who worked with the home's seller (the listing agent), who receives 2.5% to 3.5% of the proceeds. Then, the selling agent will send the other 2.5% to 3.5% to the agent who worked with the buyer (the buyer’s agent).
It is important to note that while the national average rests between 5% and 7% of a home's final sale price, individual real estate agent's rates vary.
It's always a good idea to shop around before committing to a specific person or agency, so you can find someone whose price (and personality!) is the right fit for you.
So, let's say you sold your home for $250,000 and worked with an agent on a 6% commission fee.
This means that the agent who sells your house would earn $15,000 for their efforts. He would then typically split this profit with the buyer's agent, meaning that each agent gets about $7,500 for their efforts.
What does this mean for sellers?
If you’re working with an agent, make sure that you consider their fees when you’re setting the sale price of your home since their commissions will eat into your overall profit.
For example, if your home sold for $250,000, you would only receive $235,000 after paying your agent.
Sellers usually work with their realtor to determine an appropriate listing price based on the value of similar properties in the area.
New or unique features in the home will also add to the overall value.
Things like a newly remodeled kitchen, a view of the nearby mountains, and the ease of access to local public transportation can all increase a home's selling price.
Who pays realtors?
Realtors are generally paid by the home seller out of the proceeds generated from the sale. While the 5-6% fee is lumped together for simplicity, the seller’s agent will keep only a portion of it. The other part goes to the buyer’s agent and their broker.
It might seem strange that the seller would pay the fee for the buyer. One way to think of it is as a marketing cost for your home that attracts buyers' agents in your area.
The specific details of how much your realtor will be paid will be laid out in your listing agreement, a document that you sign once you’re officially ready to let an agent work for you.
Real estate agents are typically only paid when they close a sale.
Do realtors keep the entire commission?
Agents typically don't work independently, but rather through a brokerage. A brokerage is a company whose name is on the sign in the front yard and all other advertising materials.
The brokerage requires its agents to pool their commissions between 1% and 2% of the final sales price.
The brokerage provides coverage and support to the agent. It does things like paying the Multiple Listing Service fees, advertising costs, and other expenses associated with property transfer.
Newer agents might need to turn in half of their earned commission while agents who have been with the firm longer and have a track record for success might get to keep up to 75% of it.
Can you negotiate realtor commission?
Sometimes you can negotiate a lower fee. There are two common situations that make these negotiations easier:
You are relocating locally and are using the same real estate agent to sell your current home and help you find your new one.
You have an interest in purchasing a home, and your agent is also representing the seller in the transaction.
Because there is only one real estate agent in both of these scenarios, it is possible to work with them to reduce their fee by up to 50%.
Using our previous example, if the home assesses for a value of $250,000, instead of charging a 6% fee of $15,000, you can ask for a flat fee of 3%, or $7,500.
You can do this because the agent in question is BOTH the buyer's and seller's agent — so they don’t have to split the fee.