Real estate commission is a fee that most agents earn when a deal goes through. When a home sells, real estate agents charge a flat fee for their services which includes a percentage of the sales price of the property. Once the sale of the house officially closes, the exact percentage of the commission is finalized, and paid. The average real estate commission is between 5 to 6 percent of the home’s final sale price. So, if a home sale closes for $200,000, an average real estate commission would be about $12,000 which is oftentimes divided between the buyer’s agent, and the seller’s agent (2.5 to 3 percent commission each).
The realtor commission rate for a professional agent that helps you buy, sell, or rent a house may have some room for negotiation. However, you will never know just how much money you can save on real estate agent commission until you ask the agent what the fees are for.
What is the Real Estate Agent Commission?
It is no secret that Realtors® make a pretty penny off of selling homes, but you may not know what you are paying for. It is estimated that about 43 percent of homeowners sell on their own because they do not want to pay a Realtor® commission. Real estate commission is often questioned because many people do not realize how much a real estate agent does during the homebuying process.
Here Are Just 5 Things a Real Estate Agent Does to Earn a Commission
- Save You Money. In the long run, home sellers usually end up saving money by using a real estate agent even though they earn a commission. If you are selling your home as an owner, you may not be able to sell the home for more than the price that you would have gotten with the right agent – and the commission included.
- Share. One of the final things you need to know about a real estate commission is that the agent does not keep the entire amount. Generally, a real estate agent is about 6 percent but because it is split down the middle (50/50), the agent is really sharing quite a bit of their profit from the sale. Then, 3 percent of the seller’s commission gets paid to the broker, which can be anywhere between 10 to 50 percent of the home’s closing price. After that, the real estate commission is further broken down as the agent has to pay other expenses to real estate agencies like the NAR and MLS to compensate for the many services they provide, including technology to their websites and listing services.
- Fluctuate. The typical 6 percent commission rate is oftentimes negotiable. In most cases, you can work your way out of an obligatory commission rate as there are no state laws, or regulations in the U.S. Real estate agent commission is completely up to the agent themselves, thus they are always open to the negotiation terms you can offer. Today, commission rates may be closer to 5 percent due to a recent decline, so be sure to ask.
- Work Hard. One of the most common misconceptions about real estate agent commission is that it is undeserved. While 5 to 6 percent of a total home sale can deliver an agent 6 figures in commission, the Realtor® still earns their money with hard work. You see, your real estate agent spends on average between 35 and 100 hours working to sell your property. You may only spend around a dozen on the home sale, so consider how much of the work your real estate agent is really doing for you.
- Get Stiffed. A real estate commission is not earned until the sale is finalized. That means that even if your real estate agent does all of the work to sell your home, they are not entitled to anything until the home sale is finalized, closed, and the money is released. If a home sale is not finalized, then the real estate commission is not paid.
3 Tips For Negotiating a Real Estate Commission
A home sale usually includes the 5 to 6 percent real estate commission, however, if you want to negotiate the amount, there are a few things you need to know. Getting your real estate agent to lower their set commission rate is called a negotiation, and it all starts with the first step: asking for a lower rate. That being said, the worst thing that could happen when you suggest a lower commission is the agent says “No,” and takes offense. Usually, a professional real estate agent will expect that you have a counter offer prepared, and are willing to come to an agreement on the final price of the property.
- Split It. The usual commission for a real estate agent is 6 percent so it is easy to split it right down the middle. The buyer agent and the seller agent both get 3 percent each or 2.5 percent depending on the total commission for selling the property. Your agent can decide on any total commission percentage, and also how the money is split. Ideally, the split is an even 50/50, but this can be negotiated. If the buyer and seller agent are the same person, they get the entire real estate commission.
- Browse. It is important to choose the right real estate agent for you in order to ensure the process is not only enjoyable but also successful. There is nothing more frustrating than an unpleasant experience with your real estate agent, besides of course not closing the deal. Shop around for a while before making a decision on your real estate agent to give yourself enough time to meet with a few of them. The right chemistry between you and your real estate agent can make a BIG difference in your experience.
- Check In. One of the most common questions people have about real estate commission is, “Am I getting my money’s worth?” There are so many things that your real estate agent is responsible for, but you may not know what your agent is doing unless you actually check. Consider that the commission money you spend on a real estate is intended to be paid as compensation for their services. Make sure you are getting what you are paying for by checking on your real estate agent during the home selling process. If you check in with them periodically, you will have a better knowledge of the value of their services during the negotiation process for real estate agent commission percentage.
The average realtor commission rate is between 5 and 6 percent however, every property sale is different. While a real estate agent does not earn their realtor commission rate until the final closing process is complete, the amount of real estate commission can be negotiated during any time of the process. Talk to your real estate agent about the amount of commission percentage you feel comfortable with, and if you need support, or have questions, call the offices of Jeff Barchi.