Is a 1% Commission Real Estate Agent Right for Your Home Sale?
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Richard Haddad Managing EditorClose
Richard Haddad Managing EditorRichard Haddad is the managing editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
Editor’s note: On March 15, 2024, the National Association of Realtors (NAR) announced a landmark lawsuit settlement that will change the way real estate agent commissions are handled in the future. These changes will “decouple” seller and buyer agent compensation. Industry experts predict that this decoupling will likely lower agent fees and give buyers the ability to negotiate commission amounts directly. Learn more.
When you’re preparing to sell your home, every dollar counts. It’s natural to have questions about how to maximize your proceeds. One option you might have come across is the “1 percent commission real estate agent” or the “1% listing fee” company.
It sounds enticing, but will it really save you money? What kind of services can you expect at this rate, and how does it all work?
In this guide, we’ll navigate the landscape of 1% commission rates and help you decide if it’s right for you. We’ll also look at ways you can walk away from your home sale with the most proceeds.
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How does a 1% real estate commission work?
Low-commission agents, or 1% commission fee companies, are increasingly catching the attention of home sellers. These agents or brokerages offer to list and sell your home for a significantly reduced commission rate of just 1%. At first glance, this rate appears to be a substantial discount from the standard 5% to 6% commission normally charged by real estate agents.
However, it’s important to note that this reduced rate primarily affects only the listing agent’s typical 3% commission. In the end, it works out to be a roughly 2% discount because it only applies to half of the transaction. Sellers are also responsible for the buyer’s agent commission, which is usually around 3%.
You’ll pay more than 1% commission
Carl Medford, a full-commission, top-performing California agent with more than 23 years of experience, says that the “1 percent commission real estate” label can be misleading.
“It gives the seller the impression that they can get their house sold for 1%, which is simply not true. Those companies that are advertising 1% commissions are only telling half the story.”
When you account for the buyer’s agent fee, Medford says most sellers using a 1% service will likely end up paying up to 4% in commissions.
You may receive ‘discount’ service
While saving on commission can seem like a direct path to increased profits from your home sale, the reality might be more nuanced. The 1% rate, while potentially saving you thousands on the transaction, could also have implications for the overall success and profitability of your sale.
Reduced commission rates can sometimes mean limited services or less experienced agents, factors that might influence the final sale price and, consequently, your net earnings. Understanding these trade-offs is key to evaluating whether a 1% commission agent is the right choice for your home sale.
What is the average real estate commission rate?
The current national average real estate agent commission rate is 5.8%, based on transaction data compiled by HomeLight from thousands of home sales throughout the country each year. But commission rates vary by region.
Here’s a look at some commission rates across a few major U.S. cities:
- Portland, Oregon: 5.35%
- Phoenix, Arizona: 5.45%
- San Francisco, California: 5.46%
- Los Angeles, California: 4.58%
- New York, New York: 5.50%
- Miami, Florida: 5.52%
- Chicago, Illinois: 5.54%
- Atlanta, Georgia: 5.72
- Houston, Texas: 5.81%
- Des Moines, Iowa: 6.60
- Birmingham, Alabama: 6.62
As noted above, the data shows that in a typical real estate transaction, the seller usually pays somewhere between 5% and 6% in commission. However, the listing agent doesn’t keep the entire fee. The buyer’s agent typically takes a 50% share (give or take) of the total commission fee.
“The majority of credible discount brokers are going to right up front with you,” Medford explains. “They’ll say, ‘Hey, we’ll sell your house for 3% or 3.5%; or they’ll say, ‘We have a set fee structure, we’ll put your house on the market for $1,500, and then you’re responsible for paying the buyer agent,” but they’re upfront about it.”
In addition, both the buyer’s agent and the listing agent will usually pay a portion of their commission to their companies for brokerage and desk fees.
How much can you save with a 1% real estate commission?
With a 1% commission on the listing agent side, the savings can still be significant, depending on your home’s value.
For example, on a $300,000 home, a traditional 6% commission would amount to $18,000, split between the two agents at about $9,000 apiece.
In contrast, a 1% commission for the listing agent would be $3,000, with the buyer’s agent’s commission potentially remaining at the standard rate, often around 2.5% to 3%, which is $7,500 to $9,000 in this case. Therefore, your total commission could range from $10,500 to $12,000, saving you between $6,000 to $7,500.
In the chart below, we show you the total commissions you’ll pay with a discounted 1% listing fee and a 2.9% buyer’s fee. The actual amount you’ll pay a buyer’s agent depends on what’s typical for your area and the rate you agree to pay. (As we discuss later, you can negotiate a buyer’s commission that is lower than the average rate, but there are possible drawbacks.)
| Sale Price | 1% Commission for listing agent | 2.9% commission for buyer’s agent* | Total commission paid (3.9%) | Standard 6% Commission | Potential commission savings |
| $175,000 | $1,750 | $5,075 | $6,825 | $10,500 | $3,675 |
| $225,000 | $2,250 | $6,525 | $8,775 | $13,500 | $4,725 |
| $300,000 | $3,000 | $8,700 | $11,700 | $18,000 | $6,300 |
| $400,000 | $4,000 | $11,600 | $15,600 | $24,000 | $8,400 |
| $525,000 | $5,250 | $15,225 | $20,475 | $31,500 | $11,025 |
| $700,000 | $7,000 | $20,300 | $27,300 | $42,000 | $14,700 |
| $1,000,000 | $10,000 | $29,000 | $39,000 | $60,000 | $21,000 |
*Commission rates are estimates and are not a guarantee for your home sale.
As you consider these potential savings, it’s crucial to remember that they might come with trade-offs in terms of service quality and agent experience. Weighing these potential savings against the value brought by a full-commission agent can help you make an informed decision about which option best suits your needs and sale goals.
“We ask the question, ‘So, are you interested in saving money, or are you interested in making more money?’” Medford says. “We can come in and save you money, absolutely. But I would far prefer — rather than saving you $10,000 — to come in and make you $100,000. Which option would you want?”
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Why would an agent offer a 1% commission?
An agent might be willing to offer a 1% commission for several strategic reasons:
Fewer homes listed
Offering a 1% commission can give a real estate agent an edge in a competitive market where inventory is low, and other agents are clamoring for limited listings. This can happen during seasonal fluctuations in the market, like fall and winter, or when the entire housing market is experiencing a downturn. During these periods, agents may sign on with a discount commission company or be more open to negotiating their commission rates to secure your business.
In a thriving seller’s market
When homes are flying off the market, an agent may not need to invest as much time or marketing resources into selling your home. In such a fast-paced environment, a reduced commission can still be worthwhile for the agent, especially if they are handling multiple transactions in quick succession.
Gaining experience and building a portfolio
Newer or part-time agents often offer lower commission rates to attract more clients. This approach allows them to gain valuable experience and increase their transaction numbers, which is vital for growing their business and reputation in a competitive market.
Your home is highly marketable
If your property is in a sought-after location, priced attractively for its market, or boasts popular features and upgrades, it may be considered an easy sell. Agents might view such properties as less of a risk and be more inclined to take a lower commission, anticipating a swift and successful sale.
High-value properties
For luxury homes or properties with significant upgrades, even a 1% commission can translate into a substantial amount due to the higher sale price. Agents may find these high-value transactions worthwhile, even at a reduced rate.
Watch for this questionable agent red flag
Medford cautions that there are some discount agents who will advertise a 1% commission just to get you to call them. Then, when you meet with them, they tell you it’s really up to 4% because you have to pay the buyer’s agent.
“I think it’s deceptive because they’re painting a picture for consumers — but it’s not the entire picture,” he says. “When they finally get in front of a seller, their going to say, ‘Okay, our commission to sell your house is 1%. However, you’re going to have to pay up to 3% to a buyer’s agent.’ It’s a classic bait and switch.”
What services will you get with a 1% rate?
When considering a 1% real estate commission, it’s important to assess what services you’ll receive compared to a full-commission agent. While the prospect of a reduced commission is appealing, be creatin you research how this might impact the level of service provided.
Understanding the service trade-offs
At a 1% rate, the services offered by the agent or discount brokerage might differ from those provided by a full-commission agent. This could include aspects like marketing efforts, staging, photography, and the overall handling of the sale process. For instance, a home listed with a 6% commission might benefit from extensive marketing strategies like 3D tours, professional staging, and a strong online presence. These enhanced services can potentially lead to a higher sale price, outweighing the savings from a lower commission.
Evaluating your needs and expectations
If your requirements are minimal, such as simply wanting a listing on the Multiple Listing Service (MLS)and basic representation, a 1% commission agent might meet your needs. However, if you’re looking for comprehensive service, including in-depth market analysis, robust marketing, and regular communication, it’s worth considering whether the reduced commission aligns with these expectations.
Comparing services
Before making a decision, it’s advisable to interview multiple agents and compare their services. Look at what a 1% commission agent offers versus a full-commission agent. This comparison will help you understand if the cost savings of a lower commission are worth the potential trade-offs in service and expertise.
Remember, the goal is to achieve the best possible outcome for your home sale. Balancing cost savings with the level of service required to effectively sell your home is key to making an informed decision.
Large companies don’t always provide large services
Medford says it’s ironic that even some large, established companies will use the 1% commission facade to draw in potential customers. “They will advertise the 1% listing, but if you started talking to them, they say, ‘Well, the 1% is just to put it on the MLS’ and, ‘Oh, by the way, we have to pay the buyer’ and, ‘Oh by the way, if you want high-quality pictures… if you want staging … if you want other things…’ now you’re talking 2% or more.”
What are the risks of using a 1% commission agent?
When opting for a 1% commission agent, it’s important to consider potential risks associated with lower fees. The adage “you get what you pay for” can sometimes ring true in real estate, where quality, cost, and speed are crucial. Choosing a lower commission might mean compromising on one or more of these aspects. Here are the main risks to consider:
Compromised negotiation power
An agent offering a 1% commission might not have the same level of experience or confidence in negotiations as a full-commission agent. This lack of experience could result in weaker bargaining with buyers or their agents, potentially leading to a lower sale price. The savings from the lower commission could be offset if the agent is unable to negotiate effectively for the best possible sale price.
Reduced dedication and service
Agents working for lower commissions may need to handle more clients simultaneously to compensate for reduced earnings. This could mean less personalized attention, slower response times, and potentially a lower level of service. If you’re looking for an agent who offers dedicated, comprehensive service, including detailed market analysis, full availability for consultations, and robust marketing strategies, a 1% commission agent might not meet these expectations.
Possibility of underselling your home
Data suggests that top-performing agents often sell homes for a significantly higher price than average agents. These agents bring expertise in local market trends, effective marketing strategies, and insights into buyer preferences, all of which can contribute to a higher selling price. By opting for a 1% commission agent, there’s a risk of not fully capitalizing on your home’s potential value. For example, a top agent’s expertise could increase a home’s sale price substantially, offsetting the cost of their higher commission with the added value they bring to the sale.
In summary, while a 1% commission agent offers an attractive upfront saving, it’s crucial to balance this with the potential impact on the sale’s overall quality, speed, and profitability. Understanding these trade-offs will help you make a more informed decision about which type of agent is right for your home sale.
How does a 1% agent compare to a full-commission agent?
“So what’s the difference between experienced agents and inexperienced agents, or what’s the difference between a full commission and a discount commission?” Medford asks rhetorically. “It’s not just about putting the property on the market.”
Expert and thorough marketing plans
Medford explains that top-performing agents and their offices typically have highly refined local strategies to get the most money for a client’s property. Many will have real estate teams that take on different tasks.
“Let me give you an example using a property we recently listed in Fremont. We have a full-time property prep individual who goes in and assesses the condition of the property and coordinates repairs with the sellers. We also have a designer who then acts as a project manager to enhance the property. We went in and fully staged the home. Essentially, [sellers] are getting a concierge-level service so they get the most return on the dollar. That’s built into our normal commission.”
Network of local resources
While not all full-commission agents will provide staging services, most will have partnerships with local professionals to help coordinate repairs, provide curb appeal tips, and produce high-quality marketing materials. Medford says this often includes expert photos, drone images, videos, and more. “So you’re getting a first-class service, and that’s expected in our California region because of the price point — we average home prices over $1 million.”
More money for your home
According to HomeLight sales transaction date, the top 5% of agents sell homes for up to 10% more than average agents.
How does a 1% commission compare to a flat-fee service?
Comparing a 1% commission to a flat-fee service requires understanding the differences in services and support you’ll receive with each option.
Flat-fee service: Pay once, do more yourself
A flat-fee service involves paying a one-time fee for basic listing services, such as placement on the MLS. This fee can start at around $99 and varies based on the company and package you choose, with options for additional photos or enhanced listing visibility. However, this approach typically places most of the responsibility on you, the seller. You’ll be in charge of prepping and staging the home, pricing it correctly, marketing it effectively, responding to inquiries, scheduling showings, negotiating with potential buyers, and handling all the necessary paperwork and disclosures. It’s a hands-on approach, ideal for those comfortable with the for-sale-by-owner (FSBO) route.
1% commission: More support, but with limitations
With a 1% commission agent, you’re getting more support than a flat-fee service, but potentially less than what a full-commission agent would offer. While you won’t be as involved in the minutiae as with FSBO, the level of marketing, negotiation skills, and overall support might not be as comprehensive as with a higher commission rate. However, you still benefit from the agent’s market knowledge, network, and basic selling services, which can be a significant advantage over going it alone.
Considerations for your choice
If you’re juggling other commitments or are not well-versed in the home-selling process, managing everything yourself with a flat-fee service might be overwhelming. Additionally, National Association of Realtors (NAR) data suggests that FSBO homes typically sell for much less than those sold by agents. While a flat-fee service can save you money upfront, the final sale price — and the effort involved — might not match what you’d achieve with the help of a professional agent, even one charging a reduced 1% commission.
While a 1% commission offers more support than a flat-fee service, it doesn’t provide the full spectrum of services a higher commission agent might. Weighing the pros and cons of each in terms of support, time investment, and potential sale outcomes is crucial to making the right decision for your home sale.
8 ways home sellers can save more, or make more
Beyond considering a 1% commission agent or a flat-fee service, there are several strategies to reduce expenses or earn more proceeds during the home-selling process. Let’s look at some ways you can get the most out of your home.
1. Effective home staging
Investing in professional staging or doing it yourself can significantly enhance your home’s appeal. Staging highlights the best features of your property, potentially leading to a quicker sale and a higher selling price. Even simple changes like decluttering, repainting in neutral colors, and minor repairs can make a big difference.
A recent HomeLight survey of more than 1,000 top agents across the country found that unoccupied, well-staged homes can sell for up to 13% more. For example, an unstaged home might sell for $480,000, but if you moved out and more effectively prepared and staged the home, it could sell for an additional $62,400.
2. Smart pricing strategy
Setting the right price from the start is key. Overpricing can lead to a longer time on the market, ultimately reducing the final sale price. Conversely, underpricing might result in a quick sale but at the cost of potential profits. A top agent can provide you with a thorough comparative market analysis (CMA) to help you set a realistic and profitable listing price.
3. Efficient marketing
Apply cost-effective marketing strategies. High-quality photos, virtual tours, and leveraging social media platforms can be done at a relatively low cost. These tools can effectively reach a broad audience without the need for expensive advertising campaigns. Top agents typically have proven strategies designed for your local market.
4. DIY repairs and improvements
Making minor repairs and improvements yourself can save on labor costs. Focus on high-impact areas like the kitchen, bathroom, and curb appeal, which are key selling points for buyers. Seasoned agents can also tell you what not to fix.
5. Choosing the right selling time
Timing your home sale can also impact your profits. Selling during a seller’s market, when demand is high and inventory is low, can lead to higher sale prices and a quicker selling process. The same holds true for local selling seasons. Check HomeLight’s Best Time To Sell Calculator to see what months typically bring in the highest sale prices.
6. Negotiating agent fees
While not always possible, it’s worth discussing the commission rate with your agent. Some agents are willing to negotiate their fees, especially if they stand to gain multiple transactions from you or if you’re selling a high-value property.
7. Energy-efficient upgrades
Investing in energy-efficient upgrades can be a selling point and might qualify you for tax credits or rebates. These features can attract environmentally-conscious buyers and add value to your home.
8. Use a ‘Buy Before You Sell’ program
The housing market has seen a rise in companies offering innovative Buy Before You Sell programs. These companies simplify the process of buying a new home before selling your current one. By selling your home vacant and potentially staged, top agents estimate you can sell your home for as much as 13% more. In addition, a Buy Before You Sell program allows you to only have to move once, saving you money on expenses like moving and temporary housing.
Here’s how HomeLight Buy Before You Sell works:
Contact HomeLight or ask your agent how HomeLight Buy Before You Sell can help you earn more, and buy and sell with more confidence.
Each of these strategies requires careful consideration and planning, but they can collectively contribute to significant savings and a more profitable home sale.
Earn higher proceeds with a top agent
While the immediate savings of a 1% commission agent are tempting, the true value of your home sale might lie in choosing a full-commission, top-performing agent. The expertise and comprehensive service provided by these professionals typically translate into a more successful and profitable sale.
As Medford says, you may save $5,000 on the listing agent fee but lose tens of thousands of dollars on the sale price.
Header Image Source: (Eric Brehm/ Unsplash)
