How Much Money Do Real Estate Brokers Charge Agents?

What Do Real Estate Agents Charge For Commission?

There is nothing anywhere that says a commission nOne of the most asked questions in real estate is, “how much is the real estate commission”? You should know from the get-go that commission on real estate is entirely negotiable.

There is nothing anywhere that says a commission needs to be a certain amount of money. Real Estate agent fees are variable.

What one real estate company charges for a real estate commission might be completely different than another firm down the street.

In some real estate franchises like , the real estate agent may be wholly empowered to decide what they will charge for a commission.

The brokerage firm will determine what the real estate agents charge in most real estate franchises.

When the situation arises where a commission is asked to be reduced, the agent will usually need to ask for permission from the owner or broker.

Experienced and reputable real estate agents make the home buying and selling process much more comfortable, efficient, and productive for clients.

Of course, Realtors® need to be paid for their services, typically paying them a commission from the home sale. Some people feel like real estate agents are paid too much, while others think that Realtors® do not make enough for their hard work.

A small percentage of consumers choose to sell for sale by owner without a Realtor in the hopes they will save money by not paying a real estate commission.

The Realtor fees that real estate agents charge depends on your area, the current real estate market, and the type of home you are selling.

While it is impossible to list the typical real estate commission in your area, we can give a general overview of how commissions work in a real estate transaction.

Let’s dive into how much real estate commission you will likely be paying when selling a house.

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Sometimes Real Estate Commissions Get Discounted

One of the more popular questions from sellers to real estate agents is whether there will be a discount if the listing agent procures the buyer themselves.

Real estate agents are often willing to offer reduced commission rates if they have both the buying and selling sides of the transaction.

Another instance where Realtors are typically willing to discount the commission is when they work with clients buying and selling a home through them. You just need to ask! If an agent thinks clearly, they will agree with your request.

Good agents will often comply with this request instead of keeping the entire commission. Commission on real estate should not be set in stone. Agents that think this way are shortsighted. Giving back part of the commission is usually a good business move.

What do real estate brokers offer agents?

Real estate brokerages charge different amounts based on the training and services they offer. Here are a few of the services that some brokerages provide:

  • Office space
  • Administrative staff
  • Floor duty
  • Lead generation
  • Mentor programs
  • Marketing materials
  • Signs
  • Office meetings and networking
  • Training classes
  • Advertising

Some offices and brokers will offer all of these services, other offices will have a few, and some will offer nothing. Many of these services are vitally important to being a successful real estate agent. Most agents fail in their first year because they have no idea how to sell houses. Real estate classes do not teach you how to sell, they teach you how to avoid breaking the law and be ethical. Once you take real estate classes and pass the exam, most are very unprepared for how to actually find clients and sell houses. The agents who I see do the best in the industry, get intensive training, work in successful offices, and are in the office a lot.

If you are interested in getting your real estate license, I recommend Real Estate Express. The newest agent on our team just passed his exam on the first try using them. We have had multiple agents use Real Estate Express and successfully get through their education quickly.

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.

What if the house doesn’t sell?

Real estate agents only get paid if and when your home sells successfully. Most real estate contracts are “exclusive right to sell” which provides the real estate agent the sole rights to market the property, list the property on MLS, and receive the commission if the sale closes in a determined time frame. If your house remains on the market beyond the time period outlined in the listing agreement, you are not obligated to pay your agent.

Keep in mind, though, that your listing agreement may contain a protection clause, also known as a “brokerage protection clause, “safety clause,” “extension clause,” or “tail provision.” The protection clause states that if a buyer who the listing agent introduced to the property purchases the property after the listing agreement expires, the seller still must pay the agent a commission.

Are realtor fees negotiable?

Realtor fees are always technically negotiable — but many agents aren’t willing to budge on their rate. As the Consumer Federation of America reports, roughly 73% of listing agents won’t negotiate on their fees.

That said, there are some situations where a realtor may have some room to negotiate. If you’re selling a more expensive home (think above $500,000), a realtor may be willing to lower their fees — because they’ll still receive a high dollar amount overall.

Realtors may also be more flexible on their fees if your home is in excellent condition and is likely to sell fast, if it’s a hot seller’s market, or if you’re planning to buy and sell a home with the same agent. 

» MORE: How to negotiate your real estate commission

Are Realtors overpaid?

The median income for Realtors was $51,220 in 2020, according to the U.S. Bureau of Labor Statistics. Median income represents the middle of the scale: Half of all Realtors made more, half made less.

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
SOURCE: Clever
Alabama 5.61%
Alaska 5.25%
Arizona 5.36%
Arkansas 5.91%
California 4.92%
Colorado 5.50%
Connecticut 5.41%
Delaware 5.75%
Florida 5.38%
Georgia 5.87%
Hawaii 5.25%
Idaho 5.55%
Illinois 5.21%
Indiana 5.87%
Iowa 5.90%
Kansas 6.00%
Kentucky 5.73%
Louisiana 5.19%
Maine 5.45%
Maryland 5.08%
Massachusetts 4.97%
Michigan 5.98%
Minnesota 5.68%
Mississippi 5.54%
Missouri 5.92%
Montana 5.50%
Nebraska 5.29%
Nevada 5.00%
New Hampshire 4.83%
New Jersey 5.18%
New Mexico 6.21%
New York 5.11%
North Carolina 5.45%
North Dakota 6.00%
Ohio 5.84%
Oklahoma 5.89%
Oregon 5.19%
Pennsylvania 5.60%
Rhode Island 5.15%
South Carolina 5.83%
South Dakota 5.00%
Tennessee 5.56%
Texas 5.78%
Utah 5.17%
Vermont 6.00%
Virginia 5.15%
Washington 5.17%
West Virginia 5.54%
Wisconsin 5.93%
Wyoming 5.48%

How to Save on Real Estate Agent Fees: Dual Agency

In practical terms, is there anything you can do now to lower the real estate agent fee? If you’re a homebuyer, probably not; even though the buyer is the one actually paying the fee, the fact that they don’t do so directly means that they don’t have a hand in the negotiations, at least not officially.

On the other hand, sellers can try to lower the fee, and one possible method is something called dual agency: when the same agent represents both the buyer and seller in a transaction. In this case, the entire agent fee would go to the one agent (also known as the transaction broker), and this can be one way that a seller could negotiate a lower fee – say, from 6% to 4%.

That said, dual agency is not without controversy. Many argue that the practice offers serious ethical issues and conflicts of interest, as it seems logically impossible for one agent to represent the interests of both the buyer (who wants the house to sell for as little as possible) and the seller (who wants the house to sell for as much as possible). Given that the dual agent will make more money for a higher-selling home, it’s quite possible that the buyer will be getting short shrift.

As a result, dual agency has been outlawed in eight states, including Florida, Colorado, Texas, and Vermont. In those states where dual agency is legal, like New York, agents are required by law to disclose that they’ll be representing both sides to their clients.

Related links

ARTICLE SOURCES[1] National Association of Realtors. "Quick Real Estate Statistics." [2] Collateral Analytics. "Saving Real Estate Commissions At Any Price." [3] Zillow. "United States Home Values." 

Conclusion

Becoming a real estate agent is not rocket science, but many people fail because they have no idea how to get clients and sell houses. Choosing the right broker is one of the biggest decisions any agent will make. Remember that superior training beats a higher commission split every time.

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How Much Are Real Estate Agent Fees?

The average real estate agent commission ranges anywhere between 5% and 6%. Keep in mind, though, that these fees are negotiable. If you're using a top-tier broker or agent, it may be worth it to pay the full commission as they will probably work as hard as they can to get you the best deal possible.

Alternatives to using a real estate agent or Realtor

Many sellers think real estate agents’ commissions as too high and try to avoid them.There are three main ways of selling a home without such high costs:

  • For sale by owner — At its most basic, this might involve putting up a yard sign, printing and distributing some flyers, and telling everyone you know your home’s for sale. It’s cheap and sometimes works, especially in hot real estate markets. But the risk of undervaluing or overvaluing your home is high
  • Flat-fee MLS listing by owner — The MLS is the Multiple Listing Service. It’s the online resource that real estate agents use to let other agents and buyers know that a home is available. Owners can add their listings (which may appear on Realtor.com and Zillow, too) by paying a flat fee — or a smaller flat fee with a success charge on sale
  • Trimmed-down services — Some agents offer lower commissions for a more basic service. You might get a menu — from MLS alone through increasingly complete levels of service — from which you choose what you want and how much you’re willing to pay

Are these better ways to sell? That will depend on many factors, including:

  • How strong your local property market is
  • How good you are at appraising your own home’s value
  • How much effort you’re prepared to put into finding a buyer
  • How confident you are in your ability to shepherd your sale through to closing

If you’re sure you can handle all those as well as an agent, feel free to sell without enlisting one.

But for many people, working with a real estate agent, broker, or Realtor gives them peace of mind they’re getting the best price on their home from the most qualified buyer.

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.”

How Do Real Estate Agents Get Paid?

It’s standard practice for the seller to cover the commission for both the seller’s agent and buyer’s agent. So, if you’re buying a home, you may get all the benefits of using an agent for free! The commission is paid at the end of the deal as part of the closing costs and comes out of the sales proceeds.

It’s standard practice for the seller to cover the commission for both the seller’s agent and buyer’s agent. So, if you’re buying a home, you may get all the benefits of using an agent for free!

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.

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How Much is a Real Estate Commission, and How Can I Calculate It?

The real estate agent fee is always determined as a percentage of the final sale price of a home. This percentage isn’t governed by legal requirements – rather, by market conditions and negotiations – and while they can range from 1% to 10%, the national average is 5.8%. In New York state, the standard real estate agent fee is 6%, though this too can vary on a case-by-case basis. 

Calculating real estate commission in a particular sale is simple, once you know three things: the final sales price of a home, the number of agents involved in the transaction, and the percentage they charge for their involvement.

If a home sells for $400,000 and the real estate commission rate for your sale is 6%, the commission comes to $24,000. Divide that by the number of agents involved in the sale; if there are two, each will take away $12,000.If you’d rather avoid back-of-the-envelope math altogether, there are also a number of online calculators available to make the process even easier.

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.

How Much Does it Cost to Sell a House? We break down the true cost of selling a home, including common costs like realtor commission, seller closing costs, and optional pre-sale expenses.

What Companies Offer the Lowest Real Estate Commission Fees?: Working with a low commission realtor is one of the best ways to save money when you sell your home. Here’s an in-depth review of the best low cost realtors!

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