Updated June 27, 2019
The standard real estate commission rate across the United States is approximately 6% of the final sale price of the home. This fee is typically split down the middle between the listing and buyer's agents.
If you're looking to save on realtor commission fees, there are a number of options you can choose from. The problem is that there's often a catch: many discount agents and brokerages offer limited services and support exchange for their reduced fee.
Your best bet is listing with a full-service, low-commission real estate agent via a trusted real estate referral company.
These companies offer top local agents a high volume of new business in exchange for a reduced fee for their clients. In other words, you get the best of both worlds: full service for a fraction of the typical cost.
Here's everything you need to know about real estate commission fees - how they work, which companies offer the most value, and how to save thousands without sacrificing service.
What Is a Commission and How Does it Work?
A commission is a percentage of sales that goes to the person selling the product or service. In real estate, real estate brokers make a set percentage of the sale price of the house in compensation for services rendered.
These services include listing your home, putting up signs for your home, holding open houses, printing marketing materials, and negotiating the sale price.
Both the listing agent and the buyer's agent split the commission for the sale of a home. When there is only one agent, the seller keeps half of the commission.
The commission rate and division are usually outlined in the contract for the sale of the house.
What Is the Average Commission for Selling a House?
The industry standard rate for a commission is 6% split between both the buyer's and the seller's agent.
The commission rate started in the 1960s and has stayed the same, despite the rise in home sale prices.
While the commission rate is negotiable (and about 80% of Americans are negotiating the commission rate), the seller's agent usually makes between 3%-4% of the sale of the home, and the buyer's agent makes between 2%-3%.
The seller pays for both agents' commissions in traditional real estate transactions.
As more commission negotiations take place, it's becoming common to see people turn to flat-fee real estate agents who provide some or all the services provided by a full-service agent for a smaller flat fee, rather than charge a large percentage as a commission.
What Is the Average Cost of Using a Realtor?
As the price of homes increases, so does the averagecommission fee realtors receive. With the average home in the U.S. selling at around $228,200, the seller can expect to pay as much as $13,692 of their profits to realtor fees.
If you are selling a piece of vacant land, the percentage increases to 10% or even 20%, making the payment on a $40,000 plat cost as much as $8,000.
Do Real Estate Brokers Make a Salary on Top of Their Commissions?
In some industries, sales employees make a base salary and then a commission off of every product or service sold.
That's not the case in real estate, however. Real estate agents work for a brokerage, and the brokerage provides benefits to the real estate agents for a percentage of every commission the agent receives.
The real estate agent doesn't even get to keep all of their split in the commission.
The brokerage typically keeps 30% to 60% of the commission to pay for marketing supplies and brokerage fees.
How Do I Save Money on Commissions?
6% off the sales price of your house is a lot of money for anyone, and the higher the selling price, the more money it will be.
So how do you offset some of those costs? Do you have to pay a commission?
There are a few ways you can reduce the costs of commission in real estate.
List with a Flat Fee Real Estate Broker
The first thing to try is listing with aflat fee real estate broker.
Using a full-service, flat fee real estate broker means you end up paying a maximum 1% of your sales while still reaping the benefits of working with a real estate broker.
Make sure you do your research, though! Not all flat fee real estate brokers are full-service, meaning you do more of the marketing, scheduling, and document gathering.
Are Realtor Fees Negotiable?
Another option worth considering is negotiating your realtor's commission rate. Choose your negotiations wisely.
If the market has a low supply of homes available, the realtor would be crazy not to accept a lower commission rate on a home that will sell in no time flat.
If you try to negotiate with the commission of a house that is more difficult to sell, however, you may end up compromising on service.
Be careful not to go with the realtor who is champing at the bit to lower their rates. Some agents will do the minimum amount of work they can get away with for a lower commission rate.
It's in your best interest to make sure you are still getting high-level service for the price you are paying.
For Sale By Owner (FSBO)
An option that many consider, putting your home on the market yourself in an act to save money maynot be the right strategy.
Many buyers put offers on homes listedFor Sale By Owner that is far less than asking price, just because the owner is saving money by doing it themselves. That, along with the time, energy, and expertise put into selling your home, and it often turns out to cost more than hiring a traditional agent. There are many ways to save on commission, but selling your home yourself isn't one many recommend.
Selling your home for the first time is a daunting and exhilarating task. If you danced when you found out how much money you'll make from selling your house, and then stomped on your hat when you heard the agent's commission rates, you're not alone.
Although the price you'll pay in commissions when you sell your house varies, researching in advance can help you cut the commission costs and put more money back in your pocket. No matter what you do, however, there will still be closing costs, which are also usually split between the home buyer and seller.
Looking for a way to save on realtor fees? You need Clever. We partner with top-rated, full-service agents across the country from major brands and brokerages (Keller Williams, Century 21, RE/MAX, and more) who have agreed to list your home for a flat fee of $3,000, or just 1% for homes that sell for more than $350,000.
Give us a call at 1-833-2-CLEVER or fill out the form below to interview top low-commission agents in your area - our referral service is 100% free and there's no obligation to sign!
FAQs About Realtor Commission Fees
1. Are realtor fees included in closing costs?
Yes, realtor fees are included in the closing costs. The largest part of the closing costs is real estate commission, usually ~6%, split between the listing agent and buyer's agent and paid for by the seller. While closing costs vary by state and transaction, the seller will likely also pay any attorney fees, title transfer fees, taxes, and a closing fee. The buyer will pay fees related to their mortgage, including a loan origination fee, credit report fee, and underwriter fee; and additional necessary fees like the appraisal fee, title search fee (to ensure there are no liens), survey fees, and their portion of taxes.
2. How are realtor fees calculated?
Realtor fees, or commission, are calculated based on the sale price of the home. Commission rates are usually around 6% and are split between the listing agent and buyer's agent.
3. Do you pay realtor fees when buying a house?
No. Real estate commission is usually around 6% of the purchase price of the home and is paid at closing by the seller, unless you negotiate something else.
4. How can I avoid paying realtor fees?
While it's likely impossible to completely avoid paying realtor fees, you can save by selling your home for sale by owner (FSBO) to avoid a listing commission. If your buyer also doesn't have an agent, you can use a transaction coordinator to further mitigate your fees. They will charge a flat fee for document services to complete the real estate transaction. You can also lower your fees by using a flat fee or low commission agent.