If you’re looking to buy, sell, or rent a house, you’ll need the help of a real estate agent. But how do you pay these professionals and what exactly are they doing for their money? Here, we’ll take you through everything you need to know about real estate commissions, including who pays, how much, and what the money covers.
How much is the real estate commission?
Real estate agents do not get paid hourly or weekly fees. Instead, they earn money only when a real estate deal is completed. The average real estate commission is split between the buyer’s and seller’s agents. For example, if a home sells for $200,000 at a 6% commission, the seller’s agent and buyer’s agent may each receive $6,000. The split can vary from one agent to another, with new agents sometimes earning a smaller percentage than experienced agents.
Who pays the commission?
The home seller pays the full commission for the services of both their own listing agent and the buyer’s agent (if the buyer has one).
What is dual agency?
If an agent represents both the buyer and the seller, the agent becomes a “dual agent” and is paid both commissions. However, this creates a conflict of interest for the agent and is not always allowed in some states.
What does the real estate agent commission cover?
Real estate agents provide a wide range of services, including pricing your home, marketing it, negotiating with home buyers, and overseeing the home sale through closing. They help you fetch top dollar for your house and make the selling process easier and less stressful. A recent survey found that the typical “for sale by owner” home sold for $225,000 compared to $330,000 for agent-assisted home sales, according to the National Association of Realtors®. 86% of home sellers use an agent to sell their house.
Are real estate agent commission fees negotiable?
Commission standards vary from state to state and among brokerages. There are no federal or state laws that set commission rates, so the commission is negotiable. As a home seller, you can ask your agent to reduce their commission, but they are not obligated to do so. A lower commission may mean less advertising for your house as the marketing dollars generally come from the agent’s commission. However, it’s not uncommon to ask for a lower commission. Some agents may offer a transactional agreement for a flat fee or lower commission, but you won’t receive the agent’s full services.
Bottom line
It is important to find an agent that you trust and who will do a great job, as buying and selling a home will likely be the biggest financial transaction of your life.
Additional information about commission fees
The details about a real estate agent’s total commission and any transaction fees should be outlined in the contract that you sign when you hire an agent. This is typically referred to as a listing agreement, which also specifies how long the agent will represent you. Rental agents work differently from purchase agents, and the fee is usually paid by the landlord. However, this can vary by location, so it’s up to the landlord and tenant to decide.
