Content of the material
- Real estate agent vs. Realtor®
- How to save big on commission fees
- Try to negotiate a discount yourself
- Sell your home for sale by owner (FSBO)
- Work with a brokerage that offers built-in savings
- Bottom line: Whats a fair realtor fee?
- How the real estate agent commission is set
- Are Realtors overpaid?
- Average real estate commissions by state
- Who Pays Real Estate Agent Fees at Closing?
- Be Aware of Other Closing Costs
- Is Hiring an Agent Worth the Cost?
- Why a real estate agent is worth the commission
- Who pays realtor fees?
- Why does the seller pay the buyer’s agent?
- When and how do you pay realtor fees?
- For Sale By Owner
- What do these fees cover?
- How commissions have changed over the years
- What Does a Real Estate Commission Cover?
- FAQs about realtor commission
- The bottom line on Realtor® fees
Real estate agent vs. Realtor®
First, a quick primer: A Realtor® is not exactly the same thing as a real estate agent, though there is a lot of overlap between those two job titles. A real estate agent is someone who’s been licensed by the state to help transact real estate (and is usually also a Realtor®, but not always); A Realtor® is a member of the National Association of Realtors® (and is almost always also a practicing real estate agent or broker).
How to save big on commission fees
If you want to save on real estate commission, you have a few different options:
Try to negotiate a discount yourself
Realtor commissions are always technically negotiable, and you can always ask your agent for a discount.
If you're selling an expensive home in a hot market — or if you're planning to buy and sell with the same agent — you may be able to negotiate a small discount.
However, many realtors won't budge on their rates for individual customers.
Sell your home for sale by owner (FSBO)
Another way to lower realtor commissions is by cutting out the listing agent altogether and selling your home DIY. However, we don't recommend this route for most sellers.
Most FSBO sellers end up selling their homes for less than market value, which can drastically limit your actual savings. And selling on your own is a time-consuming process that can open you up to substantial legal and financial risks.
Work with a brokerage that offers built-in savings
The best strategy for most home sellers is working with a low commission real estate agent. The top discount companies, like Clever Real Estate, provide all the service of a full-commission brokerage — but charge a LOT less.
With Clever, you'll get full service for a 1% listing fee (a third of the 3% commission rate many realtors charge), which lets you keep more money in your pocket when you sell your home.
Clever matches you with top local agents from well-known brokerages like Century 21 and Keller Williams. Interview as many agents as you want until you find the best match for you. Try Clever for free with no obligation — or walk away at any time.
Bottom line: Whats a fair realtor fee?
Realtor fees depend on multiple factors, including your home, your local market, and the level of support you need. In most cases, if you work with a traditional real estate agent, you’ll likely end up paying the average commission rate for your state.
To save money, you might be considering an alternative approach, like selling FSBO or working with a limited service agent. But, if you choose one of these money-saving options, you won’t get the same level of service as you would with a traditional full-service agent.
Enter Clever. The company delivers discounted rates with all the benefits of working with a full-service realtor. Plus, its helpful concierge team will walk you through your entire transaction.
Clever connects buyers and sellers with a local member of its agent network who will provide a full-service experience for a 1% listing commission (compared to the traditional 2.5-3%).
Clever’s partner agents are from big-name brokerages. They’re vetted top performers in their region. And Clever’s pre-negotiated low realtor fees with them can help you save big!
How the real estate agent commission is set
Realtor Kevin Deselms says the commission percentage is based on several factors. This can include local real estate market conditions.
“But the amount is often based on negotiation between the seller and the listing agent or the agent’s brokerage,” he says.
In other words, the commission is negotiable. And some agents are willing to give discounts, either within the listing agreement or later.
In fact, about three out of five sellers get a discount on their agent’s commission.
“Commission rates have been trending down in recent years,” says real estate broker Matt Buttner.
“This is mostly because of the internet and technology,” he says. “The MLS now automatically syndicates the listing out to real estate websites like Zillow and Realtor.com. So a listing agent’s job is easier.”
Discounts are given for many reasons.
“Say, for example, a client is selling one house and buying another using the same agent. In this case, the agent is more likely to offer a discount,” says real estate attorney and Realtor Bruce Ailion.
“Or say the property is in a hot market and competitively priced,” Ailion says. “It might take less work to sell. That could lead to a discount.”
Are Realtors overpaid?
Though home sellers may feel that Realtor fees of up to 6 percent are too high, Duffy argues that they’re not high enough. After all, a lot goes into listing a home, such as:
- Performing a comparative market analysis to establish a competitive price
- Arranging for photo shoots, sometimes including aerial shots via drone
- Writing descriptive listing copy to attract interest from other Realtors and potential buyers
- Providing staging guidance
- Showing the property multiple times to prospective buyers
- Hosting open houses on weekends
- Providing yard signage
- Making sure listings are populated on all major property search websites
- Helping the seller review and negotiate buyer offers
When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers. And with the volatility of the current market and record low levels of inventory, Realtors frequently deal with multiple potential buyers to help you get the most out of your property.
Average real estate commissions by state
Overall, the national average Realtor commission in 2021 was 5.5 percent, according to data from Clever. In most states, the commission ranged between 5 and 6 percent. But in states like California and New Hampshire, where expensive properties abound, the commission was typically under 5 percent. Find the average commission in your state in the table below:
|State||Average commission rate|
Who Pays Real Estate Agent Fees at Closing?
Fees paid at closing are called closing costs. These costs include any charges related to the closing of the transaction, such as loan underwriting and origination fees, taxes, title filing fees, and insurance premiums. They may also include real estate commissions. These fees may be paid by either the buyer or seller or they may be split between both parties.
Be Aware of Other Closing Costs
Paying the realtor isn’t the only closing cost you’ll encounter before you buy or sell your home. Closing costs are also something to consider.
Unlike realtor fees, the closings can (and likely will) be negotiated during the sale. This is when having a good realtor comes in handy, as they’ll need to negotiate who will pay the closing costs during the sale. In addition to the realtor fees, closing costs can include:
- Taxes or homeowner’s association fees
- Recording of the deed
- Surveyor costs
- Loan processing
Of course, this is just a short list, and every home sale is unique. You might have only some of these or additional fees that need to be paid. Typically you can expect the total closing fees to be about 3.5 percent of the closing costs. However, depending on where you live, this number can jump between 2 percent and 7 percent.
As we mentioned earlier, who pays the closing fees is negotiated before an offer is accepted. If a seller wants to get rid of a home quickly, they might offer to cover some or all of the closing costs. However, if a buyer wants to make a competitive offer, they might offer to cover all closing costs.
Is Hiring an Agent Worth the Cost?
Okay, now let’s answer the question you’ve been waiting for: Are real estate agents worth the cost? Well, as we covered earlier, sellers cover the commission for both agents. So, buyers have nothing to lose! But how about you sellers out there? If you’re considering not using an agent or going the “For Sale by Owner” (FSBO) route, first take a look at the stats. The latest data shows the typical FSBO home sold for $217,000 compared to $242,300 when sold by an agent.2 That’s a $25,300 difference!
If you’re considering not using an agent or going the “For Sale by Owner” (FSBO) route, first take a look at the stats. The latest data shows the typical FSBO home sold for $217,000 compared to $242,300 when sold by an agent.2
Sure, around $16,000 of that would go toward the agent commissions. But that’s still almost $50,000 more in your pocket than you would have gained by selling solo! And, even if that difference ($65,000) is only half right in your particular market, you’d still potentially come out ahead by $18,500 by using an agent.
Why a real estate agent is worth the commission
Having a real estate agent on your side as a buyer can make home shopping less stressful — and you may find better properties, or get a better deal, than you would have on your own.
For sellers, it’s a better way to list your home and bring in more prospective buyers.
And for both sellers and buyers, it helps to have a professional on your side who can help navigate the complexities of such a big real estate transaction.
Also, “buyer’s agents work much harder for their money,” says Buttner. “They often work with a particular buyer for months. They show them multiple houses and make many offers before something sticks.”
For this reason, the buyer’s agent sometimes makes a bit more than the seller’s agent.
“A lot of brokerages that charge less than 6% will still offer the buyer’s agent a full 3%,” Buttner says.
Remember that an agent’s hard work is not rewarded with every client. Those national average salary statistics collected by the BLS and other sources don’t show this unpaid effort.
“Not all transactions result in them getting a commission,” says Ailion. “So the costs associated with transactions that don’t close must be factored into those that do.”
Ailion understands that 6% may seem high. But, he adds, you really get what you pay for.
“Like a good doctor or lawyer, I believe a good agent is worth their fee,” Ailion says. “You’re dealing with likely the most significant asset in your life. So choosing the best representation makes sense.”
Who pays realtor fees?
The home seller pays realtor fees for both their listing agent and the buyer’s agent out of their final proceeds.
Though buyers pay closing costs when purchasing a home (including things like escrow fees and mortgage points), these do not include real estate agent commissions.
» MORE: Who pays realtor fees?
Why does the seller pay the buyer’s agent?
You can consider the buyer’s agent commission as a marketing expense when selling a home. It’s sort of a bounty — the seller offers a financial reward to the realtor who brings them a qualified buyer with a solid offer.
Since the buyer pays for the house and realtor fees are deducted from the seller’s proceeds, the buyer does pay realtor fees in an indirect way. Technically, realtor fees and other closing costs are just baked into the seller’s asking price.
When and how do you pay realtor fees?
During the home sale closing process, the title company takes the realtor fees out of the seller’s proceeds and distributes them to the agents’ brokerages. The brokerages take their cut and then pay the agents.
This process happens seamlessly during closing. You won’t have to worry about mailing a check or handing cash over to the agents — the title company handles everything.
For Sale By Owner
For sale by owner (FSBO) listings are one way to reduce the overall commission paid in a real estate transaction. Though, the seller will be responsible for the listing agents responsibilities. This includes photographing and marketing the property to potential buyers. Sellers will also need to negotiate with buyer’s agents and navigate the closing process alone.
If you have experience in the real estate industry, this may seem like a simple enough task. However, a lot goes into marketing a property and you could sacrifice the best price by attempting to handle the job alone. It is also important to know that the transaction will still have a buyer’s commission, so FSBO properties will not avoid these costs entirely. That being said, some owners find this to be the best method. Consider your options and learn more about FSBO properties before attempting to list a property yourself.
What do these fees cover?
While many of today’s buyers often prefer to house hunt on their own, others decide to work with an agent to find a home. For those who choose to work with a traditional buying agent, they’ll find that their agents spend most of their time pulling home listings, driving to tour homes and doing pricing analysis to help them make strong offers.
Once the buyer’s offer is accepted and enters escrow, the agent will spend their time helping coordinate inspections and appraisals, negotiating repairs costs, handling all of the closing paperwork and some light accounting (the agent is responsible for maintaining the financial account used to pay inspectors and appraisers).
How commissions have changed over the years
Since the early 1990s, Realtor commissions have seen a fairly steady decline. In 2021, the average commission was 5.5 percent — down from more than 6 percent in 1991.
This isn’t to say the total amount Realtors earned decreased, however. In strong selling markets, home prices are high and sellers receive multiple offers. This allows more room for negotiation on the commission, so Realtors may accept a lower commission to earn a higher amount overall.
As the market slows down, Realtor commissions may rise again and become less negotiable. Even so, a seller with a high-priced listing may still be able to negotiate a lower commission more effectively.
What Does a Real Estate Commission Cover?
A real estate commission covers all the work that goes into buying and selling property. Trust us, a great agent does a lot to help you buy or sell a house. A seller’s agent shows you how to stage your home for buyers and—since they know what similar homes in your area are selling for—they help you price it right. They also put your home in front of a ton of buyers using a multiple listing service (MLS), social media and ads. This helps you get your home sold quickly and for top dollar.
Meanwhile, a buyer’s agent studies home listings that match your needs and price range. They help you arrange a home inspectionand oversee any necessary repairs or contract adjustments so you don’t get a bad deal. They do everything they can to help you find and purchase a dream home that’s within your budget.
Beyond those differences, both types of agents give you the confidence that a real estate professional is on your side, and they offer many similar services. For example, both agents:
Meet with you in person to understand your needs and answer any questions you have
Educate you on current market conditions
Give you access to an MLS—which offers more options to buyers and visibility to sellers
Refer other needed pros (mortgage lenders, photographers, inspectors, attorneys)
Schedule home showings
Negotiate the best price for you
Represent you throughout the sale and act in your best interest
Help you through the mountain of paperwork
A good agent tackles these tasks day in and day out. Their experience helps you avoid rookie mistakes. Sure, you can try to handle all these things by yourself. But, when you’re sitting in the hot seat of a real estate transaction, you’ll quickly realize that agents are worth their weight in gold!
FAQs about realtor commission
A fair real estate commission depends on a number of factors, including your home price, how quickly you expect your house to sell, and what services your agent will provide. You can sometimes negotiate a lower listing fee, especially if you're willing to do more of the work yourself. But most sellers find the most overall value with a low cost realtor who offers full service for a discounted rate. Find the best low commission companies here!
Real estate commission costs an average of 5.49% nationwide, but varies by state from 4.54% to 6.32%. Find average commission rates in your state here!
The bottom line on Realtor® fees
Realtor® fees are a part of home sales everywhere, but homebuyers don’t have much reason to worry.
Still, an awareness of these fees and what they cover can highlight the value-add your agent brings to a transaction. It can also help you navigate any non-standard transactions you may encounter.
Since the seller usually pays real estate commissions, you can spend time looking for other ways to save money. Like real estate agent fees, just about everything in a real estate transaction is negotiable.
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