Homeowners pay the commission of a real estate agent, which can range from 5% to 66% of the sale price.
Commissions from home sales make real estate agents rich. It is important to understand how your agent is paid during the home-buying and selling process.
Average real estate agent commission
A typical commission for a real estate agent is 5% to 6% of the sale price. This is $17,500 to $21,000 for a home worth $350,000.
Who pays the real estate commission?
The seller usually pays the commission to the agent as part of the closing costs. The commission is split between the listing agent and the buyer’s real estate agent.
While the buyer does not pay directly for their agent’s services, commissions can impact how much homes are worth. When pricing their home, sellers may include the cost of commissions.
Negotiating a lower real estate
commission
You can negotiate a lower commission rate as the seller with your agent. You may not be able to negotiate a lower commission rate with your agent. According to a Consumer Federation of America report, 73% of listing agents declined to intervene in their share of the commission. It was based on interviews with 200 agents from 20 cities.
CFA points out that you have a greater chance of success in negotiating a lower Commission if:
- The property’s price is very high.
- The agent will help you buy and sell various properties.
- Your agent recruited the buyer’s agent.
You may request your agent to refund a percentage of their commission to the buyer. However, such rebates aren’t permitted in all states.
Legal challenges to “coupled” agent
commissions
In addition to the pending lawsuits in 2019 and 2020, other suits are being filed challenging the “coupling” of agent commissions. This means that the seller pays both the listing fee and the buyer’s agent fees. Decoupling advocates claim that if the commissions were untied so that buyers and sellers would have each pay and negotiate their agent fees, it would reduce the cost of sellers’ commissions and allow buyers to negotiate commissions. This would open the door for more competition.
The National Association of Realtors believes that the traditional commission structure allows more people to buy a home, especially first-time buyers.
Alternatives to traditional real estate
commissions
If you don’t wish to pay traditional commissions as a real estate agent, these options are available.
Use a discount real estate broker.
Home sellers can save money by using discount real estate brokers who charge flat fees or lower commissions. Discount brokers such as Ideal Agent and Clever Real Estate can help you find agents to negotiate lower rates. However, Redfin and other companies have their agents. You’ll need to compare prices and services to find the right fit.
You can sell your house yourself.
Although selling without a listing agent will cut down on the commission, the sale-by-owner option is not for everyone. Selling a home takes a lot of skill, time and patience. Before attempting to do it alone, make sure that you have the energy and time to dedicate to the task.