Real estate agent commission fees are split between agents
“The seller pays around 6% commission and the buyer’s agent will take roughly half of that, so the total commission price is split between the two agents,” explains Shawn Hartmann, a top real estate agent in St. Paul, MN, who has over 16 years of experience and more than 400 transactions under his belt.
You can estimate how much 6% commission will be for your home sale using the chart below:
|Home sale price||Total agent commission (6%)||Commission per agent (3%)|
Commission varies if you or your buyer goes without an agent
Since the average 6% commission covers both agents’ fees, you may end up paying more or less commission, depending on you and your buyer’s situation.
According to the National Association of Realtors (NAR), around 88% of home buyers purchase properties through real estate agents or brokers, while about 6% buy their home directly from the builder. The remaining 6% of buyers decide to house-hunt without help from an agent. In this situation, the seller would only pay their own agent’s fees, effectively cutting the average commission in half.
On the flip side, you might choose to sell your home without help from a listing agent and only owe the buyer’s agent’s commission at closing. According to NAR, only 8% of sellers sold For Sale By Owner (FSBO) in 2020 — and for a good reason. The median sale price for a FSBO home is about $60,000 less than for agent-assisted sales. For most sellers, the marginal (if any) cost saving on commission is not worth the extra work.
In a final scenario, you might opt for dual agency, meaning that just one agent represents both you and the buyer. In this case, the agent should remain neutral and represent the best interests of both parties. However, since this setup entails nearly unavoidable conflicts of interest, eight U.S. states have outlawed dual agency, and watchdog groups have advised other states to do the same.
Commission fees vary regionally
Another factor that can impact the amount commission agents make is the local market. For example, the average commission in San Francisco is 5.04%, while in Miami, the going rate is 5.95%. For insight into the average agent commission fee in your city, check out HomeLight’s Real Estate Commission Calculator.
You can negotiate commission, but you get what you pay for
Technically, sellers can negotiate with listing agents for a lower fee thanks to U.S. antitrust laws regarding price-fixing. These laws require that the price of services be determined freely based on supply and demand and not agreed upon by competitors. Hartmann estimates that less than half of his clients attempt to negotiate the commission.
Before you limber up your negotiation muscles, it’s important to realize that the more experienced an agent is, the less likely they are to lower their price. Top-selling agents in high demand can pass on lower commission home sales, whereas a new or struggling agent may be more likely to accept a job for less money.
“I would say, honestly, the better agents aren’t going to give up on their commission,” shares Hartmann, who goes on to make an even more pertinent observation.
“It translates to how they’re going to operate when they’re selling. If they’re struggling to negotiate their own worth, they’re going to have a difficult time negotiating on your behalf when it comes to selling your home.”
Data proves just how big of a difference working with a top agent can make for your home sale: The top 5% of real estate agents sell homes for an average price of around 10% higher than their peers.
Limited service agents charge less but offer less value
Some agents offer sellers a limited range of services for a lower commission or a fixed-rate. According to NAR, a limited-service agent is an agent that does not provide at least one of the following services:
- Arrange appointments with buyer’s agents to show potential purchasers the property
- Accept buyers’ offers and present them to the seller
- Advise sellers regarding the merits of purchase offers
- Help sellers develop, communicate, or present counter-offers to buyers and their representatives
- Participate in negotiations on the seller’s behalf
Usually, limited service agents only help the seller list their property on the Multiple Listing Service, making the listing available to a network of brokerages. Some limited-service companies offer fee-for-service options where sellers can explicitly choose the level of assistance they want.
With a limited service agent, a portion of the money you save on commission will likely go toward marketing and other costs that would normally be included in a full-service agent’s fee.
Furthermore, the commission payment structure incentivizes your agent to sell your home at the highest possible price. In contrast, flat-fee agents have no vested interest in trying to get the highest price for your property. Don’t expect them to weigh in if you’ve set your listing price too high or too low.
Find a great agent to get the most bang for your buck
Considering everything that real estate agents do for sellers, from advising you on repairs to staging your home and linking you up with a network of home-selling professionals, the national average 5.8% commission fee is a small price to pay. However, the crucial part of this equation is knowing that your agent is a cut above the rest.
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