How Much is Real Estate Agent Commission

How Much is Real Estate Agent Commission

Real Estate Commissions Are Typically Between 5-6%

The first thing that you should know about these commissions is that they typically are around 5-6%. This figure includes the commission for both the buyer’s agent and the seller’s agent. Each one usually takes about 2.5% of the home’s value for their services.

While 5% might not sound like a lot, consider that as of May 2020, the average home price in the US was $284,600. Therefore, the average homeowner paid about $14,230 in commissions.

Imagine what you could do with $14,000 extra in your pocket. That could pay for a small car (or be a nice extra down payment on your next property!).

Of course, for homes worth $500,000 or $1 million, the stakes get even higher. If you’re selling one of these properties, you could easily be looking at paying two new cars’ worth of commission.

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Flat-Fee Real Estate

Of course, there are listing agents who work for a flat fee—such as $100 or $500. This can obviously benefit sellers (and ultimately buyers) in terms of cost savings, but the drawback is that these agents may offer limited representation.

A traditional real estate agent will be your partner throughout the entire homebuying or selling process. A seller’s agent will help you stage your home, take professional photos, get your home on a multiple listing service, advertise, schedule and host open houses, and negotiate on your behalf.

Similarly, buyer’s agents will help you determine your must-haves, find the right property, take you to showings, negotiate offers, and recommend other professionals (such as a home inspector).

Flat-fee or discount brokerages may cost less, but you could end up getting what you paid for. Still, there are full-service agents who work for a lower commission or flat fee. If you decide to go this route, be sure to find out ahead of time which services the agent offers to make sure that what you will get matches your expectations.

Average Yearly Realtor Commission

Do you know the average Realtor commission? Many people think they know how much real estate agents make in commission for some odd reason. Most people think that real estate agents make money hand over fist.

The national average for real estate agent commission is, in fact, not what you think.

While the top agents make an excellent income, the average agent does not. In fact, the average income is lousy!

According to The National Association of Realtors, in 2020, the average yearly commission was $43,330. Real Estate agent commission was down from the year before, which was $49,700. So the average commission was not very good for making a great living.

Income was generally in line with experience. REALTORS® with sixteen years or more experience had a median gross income of $71,000, while REALTORS® with two years or less experience had a median gross income of $9,300.

It is essential to note that unlike most businesses with an 80/20 rule, whereby 80 percent of the business is done by 20 percent of their members, it is 93/7 in real estate. Yes, you read that correctly – 93 percent of all real estate transactions are done by 7 percent of the agents.

The other thing that should be understood is that real estate commissions are usually split in four ways. The listing firm, the listing agent, the selling firm, and the selling agent typically split the commissions.

Consumers should also understand that there is a difference between a Realtor® and a real estate agent.

What is included in a real estate agent’s commission?

A full service real estate agent will provide a high level of offerings that go toward giving you a great selling experience and boosting exposure to your home.

An agent’s services fall into a few main categories:

Guidance on pre-sale improvements

Agents have seen a lot of houses. They will have an eye for the small but impactful improvements you could make to help it sell for more. The best agents will go above and beyond to help their clients get the job done.

“We had one seller — they had stuff everywhere, it was super dirty, the furniture wasn’t working the way they had it. But the house was over a million dollars. We went through the whole process of making a list of things that they needed to do,” shares top-selling agent Sandra Rathe of her experience selling the home of a client in South Florida. “This particular client had a lot of paperwork from their business. So we called in our intern; we bought a shredder and sent it over with the intern.”

Pricing strategy

An agent will put together a comparative market analysis in the form of a thick packet featuring charts, facts, figures, and photographs of houses. The analysis will show you what your home is worth based on comparable sales in the neighborhood, market trends, and local price per square foot. This key tool is going to help you set a realistic price that helps you attract offers right off the bat in a fraction of the time it would take a non-professional to determine.

Marketing services

As part of their commission, at a minimum agents should offer expert home prep and staging, professional photography, marketing flyers and pamphlets, direct mail, automatic postings of your listing on major home search sites, local advertisements, exclusive previews for other brokers, and open house coordination. Advanced agents may also offer development of a virtual tour.

“Our team actually meets the photographer out at the house to make sure that all the right angles are taken,” shares Moussa.

Offer management and negotiations

When you receive one or more offers, an agent will help you determine the strength of the offer and work with you to proceed on responding to buyers. They’ll advise on whether to accept, reject, or make a counteroffer, while putting together offer spreadsheets to identify the best offer in bidding war situations.

If a buyer requests repairs after the inspection, an agent will help you push back where appropriate and advise on when to concede. Should the appraised value be lower than the contract price, an agent can help you determine whether to ask the buyer to make up the difference or if you should lower your price.

Market knowledge and neighborhood expertise

Great real estate agents know what local buyers seek in homes and which of your home’s attributes to highlight. Whether your sunroom is the only one like it in the area or your location can’t be beat, an agent will skillfully incorporate these features into your home’s listing description and immediately be able to recognize what makes your house or the surrounding area special.

Moussa summarizes an agent’s services and the ultimate goal:

“The agent puts everything into the MLS, asks detailed questions about the home, writes the property description, and then markets it. We do Facebook Ads, door hangers, whatever we need to do to get it out so that every possible buyer’s agent can see the home. The listing agent’s responsibility is to bring as many offers as they can to the seller.”

Real Estate Commissions What You Need to Know

Let’s look how at how real estate commissions work.

Usually, The Seller Pays The Agent Fees

The seller pays the real estate agent’s commission in most real estate transactions. The seller paying makes a lot of sense because the home sale will produce a big payout for the seller, and the seller’s agent has to do a lot of work to make that sale happen.

The real estate agent commission can vary and is negotiable but often sits somewhere between 4 percent to 7 percent.

Depending on where you’re located, the most probable commission you’ll pay to sell your home is 5 to 6 percent of the home’s sales price. The average real estate commission will fall between these two figures, at 5.5%.

Since the seller is paying, they must do their due diligence before hiring a real estate agent. If you are selling a home, you need to interview multiple real estate agents to find one that fits your specific needs and has a personality that you can work with and feel comfortable with.

Once you hire the real estate agent, they will sell the home and ensure that you get the best possible deal from the transaction. Typically, real estate agents do not get paid until the home sells.

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What do realtor fees cover?

Realtor fees compensate agents for the time they devote to your transaction. This typically includes the following services. 

For buyers
🔎 Identifying properties that meet your needs and budget
🏠 Scheduling showings and attending open houses
📝 Writing and submitting offers
For sellers
💲 Researching comparative sales and developing a pricing strategy
🎀 Assisting in preparing the home for sale
💻 Listing the property on the multiple listing service (MLS)
📣 Marketing your property listing
For both
🤝 Negotiating deals
🎉 Facilitating closing

Realtor fees also typically cover some basic expenses agents may incur as they guide you through the home buying or selling process. This includes paying for things like:

  • Professional home photography
  • Printed flyers
  • Home staging
  • Drone photography
  • Video tours

Always check with your agent upfront to learn what services they do and don’t include in their standard fees so you’re on the same page.

Who Pays the Real Estate Commission?

Precisely who pays a real estate agent's commission is where things get a little tricky. Standard practice is that the seller pays the fee. However, the seller usually wraps the fee into the price of the home. So, the buyer ultimately ends up paying the fee, albeit indirectly.

Let’s say, for example, that a buyer and seller (each with a real estate agent) agree to a deal on a home for $200,000. Assuming the real estate commission is 5%, the fee would be $10,000 ($200,000 x 0.05). The fee comes out of the cost of the home—it is not added to the sale price. So, although the buyer would pay $200,000, the seller would receive $190,000 from the sale. (This is an overly simplified example as closing costs and other fees would apply.)

When is the commission owed?

The real estate commission will automatically be deducted from the sale proceeds at the time of closing. Until then, no money to the real estate agent will be owed.

How to avoid paying Realtor fees

In 2019, just 11 percent of home sales were sold by owners without the help of an agent, according to the National Association of Realtors (NAR). In addition, NAR says, for-sale-by-owner homes (FSBOs) typically sell for less money than homes sold by Realtors. In many instances, FSBO sellers already know the buyers who end up purchasing their homes. Buying without a Realtor is also doable, but the jury is out about whether it’s a wise move — especially in this market.

When you shop around for Realtors, ask them from the outset what their commission is and compare the terms of each person you talk to. If you think the fee is too high, talk to them about lowering it.

“In certain situations where there’s a competitive environment for a prime or trophy listing, Realtors sometimes will negotiate the commission upfront,” Duffy says. “For example, if I’m listing a $4 million home at 6 percent, that’s a lot of money. In a situation like that there is greater flexibility to negotiate the commission — if you get $100,000 or $80,000 instead of $120,000, it’s still a good payday.” If the transaction is being handled on both sides by agents from the same brokerage, you might have more leverage as well.

How Can You Increase Your Real Estate Commission?

In the real estate business, a real estate agent is in ultimate control of how much they make. A real estate agent can increase their real estate agent commission in a few ways:

  • Being both the buyer’s and seller’s agent. If you list a property and then find a buyer for it, you get the full commission, rather than having to split it with the other agent. This is called dual agency.
  • Negotiating better rates with your broker. You might need to go to another broker if your current one is too expensive or if it’s just not a good fit.
  • Negotiating a higher sale price for your listings. As a seller’s agent, it’s in your interest to make sure your sellers get the best price for their house, every time.
  • Selling more houses. Real estate is very much a numbers game. If you can’t increase each individual commission, you can increase your total real estate commission by selling more properties.
  • Getting into bigger markets. Waterfront properties and luxury properties are naturally going to make more money for a Realtor, though they may be more of a challenge to sell.
  • Providing additional services. A real estate agent can provide services such as home staging for their listings, as well as sell packages such as superior photography and videos.

Your actual commission rate isn’t likely to waiver from 4% to 6% total. The ceiling is going to be set by the area you’re in, even with negotiations. But the amount that you, as a Realtor, make in commission is somewhat under your control because you can always do more.

How is the Commission Paid to the Realtor?

Real estate commissions are paid once the home sale is closed. If you’re interested in a real estate career, you will need to be prepared to wait. A closing can take anywhere from 30 to 45 days, depending on how complex the sale is, and how sluggish the mortgage lender is. (

Cash sales can go much faster, but they’re rare.

While doing their due diligence, the escrow company will collect the money from the buyer. They will then pay out the seller, the agent’s commission, and other closing costs (such as inspections, property taxes, and other fees). The home buyer will then receive the deed once everyone has been paid.

Whether you’re the buyer’s agent or the selling agent, you’ll have to be aware that the sale can fall through. And if the sale does fall through, you’re not going to make a thing. If you can’t sell the property, you’re not going to make a thing. This is part of the uncertainty that can be inherent to being a real estate agent or associate broker.

Factors that influence commission rates

In addition to regional trends, there are a number of factors that influence how much you end up paying in realtor fees when you sell your home.

Most of the factors that affect how much an agent might charge for a given home sale stems from the fact that realtor fees are negotiable. Agents will lower or raise the amount they charge depending on:

  • The home
  • The client
  • The current state of the real estate market

Based on our research,working with repeat clients is the most common reason that real estate agents agree to accept lower rates.

Here's a full breakdown of the most common factors that cause agents to lower their commission rates:

Conversely, our survey showed that the most common reason that listing agents negotiate for higher rates was that home sellers requested expensive marketing.

Below, we've included the full breakdown of all of the factors:

How home value affects average real estate commission rates by state

Typically, realtors will be more willing to accept lower commission rates for homes that have high values.

Our study of commission rates found that in real estate markets where home values were high, realtor fees were typically lower than the national average. For example, commission rates averaged 5.12% across the states with the highest median home values — which is markedly less than the national average of 5.49%.

Based on our survey's findings, homeowners in the five states with the highest property values would pay 11% less in realtor fees when they sell their home than residents in the states with the five lowest home values — as a percentage relative to their home's sale price.

So why would high home values cause agents to lower their rates? Mainly, it's because the work that agents have to do to sell homes is not significantly different for high and low value homes.

Agent's earn commission based on the home's selling price, so they stand to earn a lot more money selling higher value homes — relative to their effort and time investment — than lower value homes.

Furthermore, even if they have to spend more time or money marketing a high cost home, it may be worth it for that agent.

Consider the following example, where the listing agent earns 57% more per hour selling a $500,000 home than they would selling a $250,000 home, even after factoring in the marketing costs and time commitment:

Home sale price $250,000 $500,000 Time to sell 10 weeks 12 weeks Out of pocket marketing cost $500 $1,000 Time spent actively selling (eg showing, marketing, etc.) the home 30 hours 34 hours Commission earned $4,500 $9,000 Net commission earned per hour of time actively marketing/showing the home $150 $235

» MORE: How to negotiate realtor commissions with your agent

Why realtors lower their fees for repeat clients

Having steady business is valuable for real estate agents — home sellers can use this fact to negotiate lower commission rates.

For real estate agents, having consistent streams of clients is crucial to their livelihood. After all, real estate agents typically only process around 12 real estate transactions per year— meaning that gaining a deal has a large impact on their income.[1]

To agents, there is more value in having reliable repeat business, than there is in maximizing their commission they earn on any single deal. Because of this, agents often lower rates to attract clients that are likely to use them for future transactions.

Related reading

Do I Need A Real Estate Agent? Learn The TRUTH: If you think the best way to save money on realtor fees is to forgo working with a realtor, you’ll want to read this. Learn exactly what agents do to earn their commission and what you’ll need to do if you opt to buy or sell without one.

How Much Should I Spend on a House? Find Out Now!: Worried about keeping within your budget? Check out this piece, which lets you know how much you should spend on your home based on your monthly income. 

20 Ways to Save Money When Buying a Home: There aren’t coupons or discount codes when it comes to buying a house. But you CAN still save money. This guide provides 20 smart ways to save on your home purchase. 

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