What’s The Average Percentage Of Commission For Real Estate Agents?

What’s The Average Percentage Of Commission For Real Estate Agents?

December 21, 2022

Produced by:
Elizabeth Welgemoed

Elizabeth is a Senior Content Marketing Manager with over 10 years of experience in the field. Having authored or edited 1,000+ online articles, she is a prolific content producer with a focus on the real estate vertical.

If you’re selling a house, your best chances of selling are with a real estate agent. While it’s possible to sell a home by owner, it’s a lot more work and you may not get as high of a price for the home.

Real estate agents work hard to help you sell your home, get what it’s worth, and to market it to the right audience, which is important, especially if you’re selling an investment property.

Many people think real estate commissions are out of control, though. What’s the average percentage that realtors earn and how does it work?

Keep reading to learn more about the average rel estate agent commission.

What’s The Average Real Estate Commission Percentage?

The average real estate commission nationwide is 6% of the sales price. This can vary by location, type of home, and services offered, though. If you asked just about any real estate agent, though, they’d say 6%. 

If you want lower fees, you may be able to negotiate it, but like anything else, you get what you pay for. You’ll get fewer services and it may take you longer to sell your home since you won’t be a top priority for the agent.

If you prefer to work with some a la carte, make sure you’re ready with a list of the services you’ll handle yourself so you know what type of agent to hire and what services you’ll need him/her to perform. 

How Do Real Estate Agent Fees Work?

Here’s the good news. 

No one pays real estate agent fees out of pocket. For the buyer, the real estate agent services are ‘free.’ The seller is responsible for paying the fees, but again, not out of his/her own pocket. The fees are worked into the sales price and paid out of the proceeds at the closing.

The seller’s agent sets the commission with the seller and they both sign a contract. The seller’s agent also has an agreement for the potential buyer’s agents. The agreement states how the seller’s agent will split the real estate commission.

A common split is 50/50, but not all agents do that, some have different splits based on the amount of work they do. 

When Is The Real Estate Commission Paid?

Like we said above, the real estate commission is paid at the closing. The escrow agent pays the listing brokerage the full amount. Let’s say the home sold for $300,000 and the real estate commission was 6%. The escrow agent would pay the listing brokerage $18,000 at the closing. 

The listing brokerage then splits up the payment according to the agreement. The brokerage pays the seller’s agent (listing agent), and the buyer’s brokerage. The buyer’s brokerage then pays the buyer’s agent.

There are many pieces of the pie to the total commission. So when you see 6%, you may think it’s high when you do the math based on your sales price, but there are four hands in the pot when splitting up the commissions.

What Do Real Estate Agents Do For Their Commission?

Real estate agents do a lot of work behind the scenes. We only see the work they do to show buyers the home, but there’s a lot more that goes on.

Listing agents do most of the work. They help you get the home ready to sell. In their initial walk-through, they’ll tell you any areas of concern or things they think should be fixed/changed. They may make home staging suggestions or even ask you to paint certain rooms if they aren’t a neutral color.

After the initial consultation, the listing agent works hard to list and market your home. Once you sign a contract, the agent takes professional pictures of your home and gets as much information about it as possible to create the listing.

The real estate agent sends the listing out to as many networks as possible to get buyer’s agents to bring their buyers to the home. 

Once you find a buyer, the agents work together to communicate the offers, any contingencies, and field any questions.

Once a contract is signed, both agents continue to work behind the scenes to make sure all aspects go off without a hitch. If there are any issues, you communicate through your respective agent.

Can You Negotiate Real Estate Commission?

Some agents may negotiate the real estate commission, but they may also knock off some of their services. If you want top-of-the-line services, it’s best to pay the commission the agent charges.

Always confirm the real estate agent commission before you proceed with the sale, don’t just assume it’s 6%. While that’s the average, the commission can be higher or lower depending on where you live and what the agents in the area charge.

If you’re selling a home in a niche area, such as a luxury home, the agent may charge even more. It depends on the services they provide and the need for their services in the area.

Do Real Estate Commissions Help You?

Even though it feels like a lot of money, real estate commissions help you sell your home faster and possibly for more money. You’ll build the commission into the cost, but you’ll get a lot in return for it.

As a buyer, the real estate commission helps you find a home faster and have someone on your side as you go through the negotiation process. While the money doesn’t come out of your pocket directly, you pay it at the sales price of the home.

Bottom Line

Real estate agent commission gives you access to the quality services real estate agents offer. While you can buy or sell a home without one, it’s often harder, takes longer, and you may not make as much money on the home. If you’re buying or selling an investment property, you want to maximize your profits.

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