In the United States, real estate commission generally average a TOTAL of 5%–6% of the home’s sale price. The total commission is typically split between the listing agent and the buyers agent. However, both fees are usually paid by the seller. This article describes how you could potentially save 1-3% in overall commissions paid, depending on how you structure your listing agreement and which brokerage you choose to list with.
First, agent commissions can vary by region and by state. For example, some parts of Florida have 5% commission across the board, while neighboring states in the Southeast rarely see commissions lower than 6%.
Unfortunately, real estate commission is generally the biggest expense you'll face when you sell your home. On average, U.S. home sellers spend $20,900 on realtor fees on average. For example, if the average home is $380,000 and the average national commission is 5.5%, this yields a commission of $20,900.
Luckily, you can always negotiate commissions, which could mean saving thousands of dollars. For example, if you sold a $400,000 house, working with a 1% commission realtor like SimpleShowing, you would save you $8,000 compared to the 3% listing fee many seller's agents charge.
How much is the average real estate commission?
Across the state of Texas and Southeast states (Georgia, Florida, Carolinas, Tennessee), we've observed typical realtor commission rates were in the range of 4.50% to 6.25%.
These rates only represent a range. The median is closer to 5.5%.
Most brokers and agents will claim that commission rates are not negotiable. However, this is NOT true. If you were to visit a car dealership these days, the car salesperson might claim that the price of the vehicle on their lot is not negotiable but that "the sticker price is what you pay". If you've bought a car in the last 10 years, you know that this is not true. Real estate commissions are similar.
Commission rates aren't standardized in any official capacity and you can always negotiate realtor fees with your Realtor, or list with a discount brokerage that offers pre-negotiated low commission rates.
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SimpleShowing operates throughout the Southeast and we also have partners in other states.
Average realtor commission for listing agents
According to our research typical commission rates for listing agents nationwide are in the range of 2.26% to 3.17% (2.720% on average).
For a home sold for $355,852 (which is around the national median home value), this translates to $8,042-$11,281.
We also found that listing commission rates can vary by as much as 40% depending on where you live. Here's how buyer's agent commission rates can vary:
According to Clever Real Estate, buyer's agents typically collect 2.19% to 3.17%, or 2.65% on average. This translates to $7,793-$11,281 in buyer's agent commission costs for a home sold for $355,852.
These figures represent the national average, though we found that buyer's agent commission rates varied by 0.88 percentage points depending on which state you live in — which is a significant cost difference.
Average real estate commission by state
Commission rates can vary dramatically depending on where you live. Clever Real Estate found that average real estate commission rates by state can vary by as much as a full percentage point. For example, in Massachusetts, rates were 4.84%. Live in Ohio? You could pay up to 5.81%. On most home sales, that's a difference of thousands of dollars!
Keep reading to see average commission rates by state. But remember that, although these fees are typical for each state overall, they'll likely vary between cities.
Also, every brokerage sets its own rates, and an agent may quote you a higher or lower listing fee based on your home's estimated sale price and how quickly they expect it to sell.
Find your state below to learn more about average commission rates near you.
* Data compiled by Clever Real Estate. Due to insufficient data, commission rates in these states were inferred from regional averages.
How do realtor fees work?
When you sell a home, there are typically two realtors involved: the buyer's agent and the listing agent. As the name implies, the buyer's agent represents the home buyer, and the listing agent represents the home seller.
The listing and buyer's agents get paid a portion of the home's price at closing, which is called the real estate agent commission — they are also referred to as realtor fees.
Realtor fees are not typically paid upfront — instead, they are factored into the sales price of the home and are only paid out when the home's sale is finalized.
Here's how a realtor commission rate of 5.37% — which we found to be the national average — breaks down in terms of real dollars when you sell your house:
* Commission costs are calculated assuming a commission rate of 5.37%.
How realtor fees are split between the listing and buyer's agent
Real estate commission rates are commonly talked about as a single percentage (e.g. 5%). However, this figure is actually split to cover the cost of both the buyer's agent commission and the listing agent commission.
For example, you pay a total of 5% in real estate commission fees, then each agent would typically get around 2.5%:
- Listing agent commission: 2.5%
- Buyer's agent commission: 2.5%
- Total realtor commission: 5% (2.5% + 2.5%)
Commissions are often split evenly between the buyer's agent and the listing agent. However, this can vary based on what is customary in your area.
We found that depending on what region you live in, commission splits could range from 49.7-50.3% to 52.2-47.8% for the listing and buyer's agent respectively.
Who pays realtor fees?
Home sellers pay real estate fees for both their own agent, and the agent representing the home buyer.
Why would home sellers pay for the buyer's agent? Well, there are a couple of ways to look at it:
Buyer's agent commission is a marketing cost for your home
- Almost all buyers — nearly 90% — work with an agent to help them buy a home.[1]
- These agents are more interested in showing homes to their clients that offer a competitive buyer's agent commission.
The buyer actually is paying for this cost, because it's baked into the sale price
- Buyer's agent commission is factored into the sale price of the home.
- If this commission wasn't offered, the home seller could lower their listing price while netting the same amount.
- So you can argue that the cost is actually passed onto the home buyer.
Why are real estate agent commissions so expensive?
Realtor fees are a huge cost when you sell your home, so it makes sense to wonder why it's so expensive and if it makes sense to pay so much.
However, there are some justifiable reasons that agents charge what they do for their services:
- On average, agents help you sell your home for more money than if you were to sell without the use of an agent
- Agents don't get to keep all of the commission they earn from a home sale — they split it with the buyer's agent and their brokerage
- Realtors take on risk by covering home-marking costs upfront
On the other hand, most agents also spend a lot of money on things that don't offer customers much direct value. Paying for TV ads and billboards helps agents generate new business, but it doesn't help you sell your home faster or for more money.
Instead, companies like Clever help realtors reduce their marketing costs, which allows them to charge lower rates while providing the same level of service.
Never pay the full 6% commission again
The "standard" 6% commission predates the internet, when realtors had to work harder to find clients and potential buyers.
At Clever, we connect top-rated real estate agents with sellers like you at zero upfront cost to the agents — so they’re willing to pass savings along to you.
You'll get full-service support for pre-negotiated listing fees of just 1% or $3,000, saving you thousands!
Real estate agents help you get more for your home
In addition to helping you navigate your real estate transaction, one of the most important things that agents do is ensure that you get the highest possible price for your home.
Studies have shown that homes sold by real estate agents net 5.82% more than comparable homes sold without an agent.[2] With that in mind, it's fair to say that many home sellers come out ahead by working with an agent, even after paying realtor fees.
» MORE: How to find the best real estate agent to fit your needs
Most real estate agents have to share their commission with their broker
Most agents don't get to keep all of their commission when a home sale closes. A portion of their commission is paid to their principal broker— which are real estate professionals that supervise real estate transactions done by agents that aren't qualified to process deals independently.
On average, a broker keeps 10- 12% of the agent commission.
For example, if a listing agent sells a home for $300,000 where the total commission rate is 6%, they may actually walk away with $15,000 not $18,000.
Listing agents take on minimal upfront cost or risk to list your home
Real estate agents take on some risk when they agree to help you list your home, which factors into the cost of realtor fees. However, these fees are not significant, despite what they might claim.
By far, the biggest risk is time investment from the agent. In terms of other costs, such as marketing fees are neglectable compared to the commission they receive. For example, the agent may spend $300 on property photos but earn $20,000 in commission.
Very rarely do agents spend money on "advertising" beyond simply listing the property on the MLS. And MLS syndication fees are covered by the broker, not the agent.
Another potential cost is staging fees. These fees can be substantial, if covered by the agent. However, less than 20% of homeowners stage their property. However, if the agent pays for staging fees and fail to sell your home, they don't collect any commission, aren't compensated for their time, and don't recoup any of the marketing costs they incurred. Most agents will either ask for the homeowner to pay for a portion (or all) of the staging costs.
Factors that influence commission rates
In addition to regional trends, there are a number of factors that influence how much you end up paying in realtor fees when you sell your home.
Most of the factors that affect how much an agent might charge for a given home sale stems from the fact that realtor fees are negotiable. Agents will lower or raise the amount they charge depending on:
- The home
- The client
- The current state of the real estate market
In terms of obtaining a better commission rate as a homeowner/seller, a "repeat client" discount seems to be the most common reason that real estate agents agree to accept lower rates. So, if you buy and sell homes regularly (particularly as an investor), you certainly have a better chance of getting a discount on agent fees. That said, most people only sell a property once every 7 years. Keep reading to hear other ways to save on commissions.
How home value affects average real estate commission rates by state
Another condition that can lead to lower fees is the listing price. Realtors are often more willing to accept lower commission rates for homes that have high values. Particularly when the home value is 2-3x the average price in the region.
A study by Clever Real Estate found that commission rates were generally lower in expensive markets. For example, commission rates across the states with the highest median home values were markedly less than the national average of 5.37%. This may also be influence by greater competition in large, expensive metros.
So why would high home values cause agents to lower their rates? Mainly, it's because the work that agents have to do to sell homes is not significantly different for high and low value homes.
Agent's earn commission based on the home's selling price, so they stand to earn a lot more money selling higher value homes — relative to their effort and time investment — than lower value homes.
Furthermore, even if they have to spend more time or money marketing a high cost home, it may be worth it for that agent.
Consider the following example, where the listing agent earns 57% more per hour selling a $500,000 home than they would selling a $250,000 home, even after factoring in the marketing costs and time commitment:
Realtor fees are by far the most expensive part of selling your home. By lowering the rate you pay by just a small margin, you can save thousands of dollars when you sell.
For real estate agents, having consistent streams of clients is crucial to their livelihood. After all, real estate agents typically only process around 12 real estate transactions per year— meaning that gaining a deal has a large impact on their income.
To agents, there is more value in having reliable repeat business, than there is in maximizing their commission they earn on any single deal. Because of this, agents often lower rates to attract clients that are likely to use them for future transactions.
Can you negotiate Realtor commission fees?
There are no laws or regulations in the U.S. dictating commission rates, so agents may be willing to negotiate lower rates depending on the type of transaction, the required services, and the relationship. Some agents will also lower their commission fees if they are representing both the buyer and the seller in a home sale.
Keep in mind that a lower commission is not necessarily the best option. Part of the agent’s fee covers the marketing budget and other business expenses for the home sale. A smaller budget could mean your agent can’t properly market your home. So while it’s important to consider an agent’s fee, it’s also important to consider the value you will be receiving.
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.
List for 1% with SimpleShowing
We offer low fees and full service in Texas, Florida and Georgia. Visit our site to learn more or to speak to a local agent.
Conclusion
In the evolving landscape of the real estate industry, understanding the nuances of real estate agent fees is vital for both buyers and sellers. The seller's agent typically shoulders a significant portion of the marketing and outreach, ensuring that the property captures the attention of prospective buyers. On the other hand, the buyer's real estate agent plays a pivotal role in ensuring their client finds a property that fits their needs and budget, guiding them through the complexities of property acquisition.
Dual agency, where one agent represents both the buyer and the seller, presents its own set of challenges and considerations when it comes to commission distribution. The balance between ensuring fair compensation for the realtor, while also providing value to both parties in the transaction, underscores the intricacy of this arrangement. It's always recommended that parties involved understand these dynamics fully before proceeding.
To wrap it up, while average realtor fees can vary based on location, property value, and the agents involved, a grasp of these numbers and how they function in the broader context of the sale process ensures informed decision-making. Whether you're a seller seeking the services of a seller's real estate agent or a buyer looking to secure a new home, clarity on commissions is a cornerstone of a smooth real estate transaction.
