It’s common knowledge that real estate agents make a certain commission percentage from the sale or purchase of a home. In fact, this real estate commission is where agents make most of their money and overall income.
In general, the home seller is responsible for paying this fee and the commission is split between the buyer and listing agents who handle the real estate transaction. However, in some situations this could be up for negotiation.
Interested in learning more about this commission percentage and what it means for sellers? Keep reading for a detailed explanation of how commission fees work, answers to common commission questions, and various ways buyers sellers can save on commission without having to compromise on service.
What is the standard commission percentage?
In return for the hard work real estate agents put in for their client, they get rewarded in a percentage of the home’s commission.
While the total amount of commission they receive after the sale is based on a percentage, the exact percentage varies between regions. Sellers can generally expect to pay between 4.53% to 6.48% of a home’s final sales price. Nationwide this average is about 5%.
In most situations, the full fee is initially given to the listing agent (the agent who worked with the seller). The listing agent will keep half of the proceeds (typically between 2% and 3%), and then give the other half of the proceeds to the buyer’s agent.
Say you sold your home for $300,000 and worked with a listing agent with a 6% commission fee. After the sale of the home, your listing agent would earn $18,000 back in commissions. That profit would then be split with the buyer’s agent leaving each with $9,000 in profits.
However, it should be noted that while the national average for commission percentages sits between 5% and 6%, that is not necessarily the case for all agents. Some may charge higher and others lower. Some brokerages, such as SimpleShowing, offer sellers a low 1% listing fee. Do your research and shop around to find an agent whose commission works for you.
What does this mean for sellers?
So now that you know about commission percentages, you’re probably wondering what this means for the seller. Take the previous example into consideration. If you sell your home for $300,000, you will actually only actually receive $282,000 back after you pay your agent. For sellers hoping to receive the full $300,000 sales price, this might come as a disappointment.
Luckily, as a seller, you have some control over the listing price of the home. With the help of your agent, you should be able to help you easily determine your home’s listing price based on similar home values in the area. One of the best ways to increase the price of your home and receive more back after paying agent commission is to add sought-after features that will increase overall value to the home such as a remodeled kitchen or owner’s suite.
If renovations aren’t within your budget or timeframe for selling, consider discount brokerages who offer lowered commission rates. With SimpleShowing, sellers on average pay a reduced 4% commissions rate rather than the typical 6%. While that might not sound like much, that reduced percentage could be the difference in making the profits you want from selling your home.
Who pays the agents?
Generally, real estate agents are paid by the seller. This money comes out of the proceeds generated from the sale of the home. The full 5-6% commission of the home is combined for simplicity. The listing agent will keep a portion of the profits while the other portion is given to the buyer’s agent.
You might be wondering “why would the seller pay the fee for the buyer agent?” While it may initially seem strange that the seller would pay both, that is not actually the case. The buyer agent’s commission fee is factored into the listed price of the home. That means when the buyer purchases the home, they are actually paying that commission when they close and passing it onto the seller.
Do realtors keep the full commission?
As much as agents would love to receive their full portion of their sale, commission fees don’t usually work that way. Agents rarely work independently, but instead through a brokerage. A brokerage refers to the company they represent and whose branding is on their advertising material. Brokerages provide support for the agent and pays for expenses associated with real estate transactions.
In return for all that they provide, agents are required to give a certain percentage of their commissions back to the brokers. This percentage is often 1%-2% of the final sales price. This percentage could vary depending on how long the agent has been working with the brokerage.
How can you lower the realtor commission?
While realtors certainly deserve compensation for the work they do, there are ways to lower or offset the commission fees. While performing home renovations will increase the listing price and therefore give you more profit, you’ll still be paying the same 5%-6% commission.
In some situations, sellers may be able to negotiate commission percentages. These include local sellers using the same agent to sell their current home and buy a new one, as well as buyers whose agent is also representing the seller in the transaction.
In both situations, there is only one real estate agent involved. Because the agent is both the buyer’s and listing agent, there is no need for them to split the fee between anyone. While this method isn’t always a guarantee, it is worth asking if you are looking to reduce costs with a potential 3%-4% commission rate.
Try a low commission alternative like SimpleShowing
Whether renovations aren’t an option, negotiations can’t be met, or you simply want to save money on the sale or purchase of your home, a low commission real estate agent is your best bet! While you may have to put in some extra work yourself, the money you will save is worth the extra effort in the long run.
With SimpleShowing, sellers save thousands with our 1% listing fee that automatically lowers total commission to just 4%! Not only that, but you will get the same exceptional service and features of a big firm brokerage.
If you’re looking to buy a home, you are in luck too. With our Buyer Refund, buyers can also cut costs and receive half their agents commission at closing. Whether you are buying or selling, just imagine what you could do with that extra cash in your pocket.
Looking to reduce your agent commission fee without compromising on service and support. Contact SimpleShowing today to get in touch with one of our local agents in your area. We will help you get the best home at the best price with our low-commission model.