Realtor commission is the payment real estate agents earn for helping buyers or sellers close on a home sale. It’s typically a percentage of the home’s sale price and is paid from the seller’s proceeds at closing.
We surveyed agents nationwide, and found the average real estate commission cost to be 5.32%, including the seller's agent and buyer's agent fee. However, it may trend upward or downward by region.
If an agent represented the seller on a $500,000 home sale at a 3% commission rate, they'd stand to earn $15,000 in commissions (before any brokerage splits or fees they pay out).
Recent legal changes are reshaping how commissions are negotiated, making it more important than ever to understand how they work.
Below, we explain everything you need to know about realtor commissions, including how they work, their typical cost, and what services real estate agents provide to earn their fee.
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How realtor commission works
Realtors aren't paid a salary like other professions. Most agents work on 100% commission basis.
The commission is what an agent earns after closing on a home sale. It's expressed as a percentage of the home's sale price. For example, 5% on a $500,000 sale, means a $25,000 commission check.
Importantly, realtor commissions are 100% negotiable, and successfully negotiating your agent's fee can yield significant savings when selling your home.
Remember that realtor fees don't include closing costs, such as transfer taxes and title insurance, which can add 1–3% to both the buyer’s and seller’s closing expenses.
How much are realtor fees?
Home sellers should expect to pay 5-6% of their home's sale price in realtor commissions, which covers both agents. Nationwide, rates average 5.32%. However, these rates are 100% negotiable.
A home seller and their listing agent typically agree on a commission rate when they sign a contract to work together. This contract — called the listing agreement — outlines the payment, duration, and other terms of the realtor-seller working relationship.
How do realtors get paid?
Realtors earn their commission from the seller’s proceeds at closing. If your home doesn’t sell, you typically don’t owe a realtor commission.
The payment process occurs during the home’s closing, also known as settlement. At this stage, a title company finalizes the transfer of ownership and distributes the sale proceeds, including:
- Realtor fees for the seller’s agent (often referred to as the "listing agent" for listing the home for sale).
- Realtor fees for the buyer’s agent (the agent who represents the homebuyer).
Realtors also share the commission with their broker, who is legally responsible for overseeing the transaction and ensuring compliance with real estate laws.
🏠 What does realtor commission cover?
A realtor's fee is an all-inclusive charge that covers a wide range of services to support both sellers and buyers throughout the real estate transaction process.
For sellers, realtor commission covers:
- Pre-listing services: Home valuation to determine a competitive listing price.
- Marketing: Listing your home on the MLS, promoting it online, and providing professional photography.
- Showings and open houses: Organizing open houses, coordinating showings, and managing inquiries from potential buyers.
- Negotiation and paperwork: Representing your interests during negotiations and handling all required legal paperwork.
- Closing support: Guiding you through the final steps to ensure a smooth closing.
For buyers, commission covers:
- Financial preparation: Helping you get pre-approved for financing and understand your budget.
- Home search: Identifying homes that match your needs and scheduling in-person viewings.
- Offer submission and negotiation: Crafting and negotiating offers to secure the best deal.
Legal and professional guidance: Managing legal paperwork and connecting you with trusted professionals, such as home inspectors and attorneys.
NAR lawsuit: How it impacts realtor commission
The National Association of Realtors (NAR) announced a preliminary settlement agreement, which was finalized on August 17, 2024. These changes introduced significant shifts in how realtor commissions are handled, particularly affecting home buyers.
Key changes under the NAR settlement
Buyers now negotiate commissions directly. Buyers negotiate with their agents and sign a buyer's agency agreement before touring homes. This agreement clearly outlines the agent’s compensation.[1]
Buyers are responsible for agent fees. This changes from the traditional structure where the seller typically covered these costs. Historically, sellers paid the buyer’s agent a commission (averaging 2.58% nationally) as part of the overall commission structure in the listing agreement.
More complex negotiations. Buyers, especially those with limited funds for a down payment, may face challenges. Sometimes, they might negotiate with sellers to include the buyer’s agent fee in the closing costs.
What's happening in practice?
While the settlement shifts the responsibility of negotiating and potentially paying buyer’s agent commissions to buyers, most sellers continue to offer compensation to ensure their homes attract buyer interest.
However, the transition hasn’t been without confusion or resistance.
“Sellers are asking questions about the impact on not offering a commission,” says Brandi Brooks, a realtor based in Memphis, TN. “Once they hear my explanation, they're still offering the buyer's agent a commission, especially with homes sitting longer on the market.”
Many buyers struggle to afford agent fees, which can complicate transactions if the seller doesn't cover the cost.
“My concern is buyers typically have a hard time coming up with their down payment and closing costs,” says Barbara Kuzma, an agent based in Cheyenne, WY. “They don’t have more to pay towards a commission.”
Where realtor commission is heading
Realtor commission rates have been declining since the NAR settlement, which is likely to continue. Many experts believe that overall rates will drop slightly as some buyer agents struggle to compete.
Glenn Phillips, CEO at Lake Homes Realty, explains: “When you have nothing to set yourself apart, you cut price. But that won’t last—weak agents will eventually be pushed out as others offer even cheaper rates.”
The growth of low commission realtors also adds pressure to commission rates. Nathan Richardson, founder of CashForHome.com, says that while some rates may decrease, agents who focus on providing exceptional service and expertise will still earn competitive fees.
Commission structures are becoming more transparent and flexible, allowing sellers to tailor agreements to their needs. Levi Rodgers, co-founder at VA Loan Network, predicts this shift will help sellers balance costs while maximizing their outcomes.
Greater transparency will help buyers and sellers see the value skilled agents bring, making the right representation even more important.
