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Selling your house with a Realtor® is like hiring an accountant to do your taxes, or getting a lawyer to draft up your estate plan. You’re, in essence, paying the cost of a professional for their skills and services to accomplish new and unfamiliar tasks, and 90% of home sellers choose to work with a real estate agent as of 2022.
Anytime you hire someone, you deserve full transparency into what they’re going to charge you, and the true value of their services. And the way Realtors® get paid does not always feel like familiar territory. We’re here to explain what commissions are and the value home sellers are realizing by opting to work with a Realtor®.
Note: A Realtor® is not exactly the same thing as a real estate agent. A real estate agent is someone who’s been licensed by the state to help transact real estate. Not all real estate agents are Realtors®, but many are. A Realtor® is a member of the National Association of Realtors® and is almost always also a practicing real estate agent or broker.
What is the cost of selling a house with a Realtor®?
The cost of selling a house with a Realtor® is typically between 5% and 6% of the sales price of the home. The seller typically pays the commission, and the seller’s agent will then split the commission with the buyer’s agent. For example, if your Realtor® charges a 5% commission on your home sale and the house sells for $200,000, the commission would total $10,000.
Like any professional, Realtors® don’t work for free, but the commission is not paid upfront. Their payment comes out of your final sales price, meaning they’re incentivized to help you maximize the selling price of your home.
The exact rate can vary depending on where you live and the scope of your home sale. Top Pennsylvania real estate agent Mariel Gniewoz-Weiss says most people don’t know about the variation in commission costs.
“Most agents are business people and they understand that some projects will take more time than others and that they can adjust accordingly,” she says.
That commission is then split 50/50 between your agent and the buyer’s agent. So, your agent would take $5,000 of the commission, and with that pay any broker fees your agent may have incurred.
What if my house doesn’t sell?
If this were to happen, you wouldn’t have to pay your Realtor®.
“We only get paid when the sale closes,” says Becky Gluff, a top-selling Indianapolis real estate agent. That means while a Realtor® works to prep and market your home and guide you through closing, they won’t see a dime.
What about closing costs?
As a seller, you will have other costs to consider on top of a Realtor® commission, namely, closing costs. Closing costs for sellers include your mortgage pay-off amount, title fees, escrow fees, real estate transfer taxes, reconveyance fees, and more, typically totalling around 3% of the total sales price. But those costs all go to various other parties, none being your Realtor
That’s where an agent comes in, because they know and understand how to navigate these waters. You may get to that final destination, sure, by doing it yourself. But did you take the best route there?
- Mariel Gniewoz-Weiss Real Estate AgentCloseMariel Gniewoz-Weiss Real Estate Agent at Keller Williams Real Estate Currently accepting new clients
- Years of Experience 17
- Transactions 573
- Average Price Point $300k
- Single Family Homes 485
What does the commission pay for?
It’s easy for first-time sellers to be daunted by the 5-6% agent commission when they don’t know what they’re paying for. But ultimately, the value a Realtor® adds to your home sale can make you more money from your sale.
Gniewoz-Weiss says clients often don’t know how much money they’re “leaving on the table” in a transaction without the help of a Realtor®. Without the expertise and knowledge of a Realtor®, sellers may lose out on significant money by falling into some common mistakes.
Here’s where that experience is most likely to help:
Preparing the Home
One of those mistakes is failing to properly prepare their home for sale. Many sellers only have a vague sense of what buyers are expecting and noticing when they’re looking for a home.
“They may not understand, for example, that a heated room will provide more value than just a three season sunroom,” Gniewoz-Weiss explains. “So that agent walking through, who knows and understands how appraisals work, can point those things out and instantly add value.”
Negotiating for You
Realtors® also bring expertise in negotiation to any real estate transaction. Even if you decide to sell your home on your own, you’ll have to negotiate with buyers who are represented by their own experienced agent. This means negotiating with someone whose job it is to close deals — not exactly an even playing field.
“Most people don’t like going and buying a car because of negotiating, and that’s just a $20,000 or $30,000 purchase,” Gniewoz-Weiss points out. “So, how are they going to negotiate for something that is typically seen as their largest investment?”
Protecting the Seller
Additionally, Realtors® can help remove a layer of liability for sellers. Even with the help of a real estate attorney, sellers should be prepared to abide by all the real estate laws in their area through every step of their transaction. Realtors® have experience dealing with the ins and outs of applicable laws and can help their clients in this area as well.
Saving You Time
Realtors® don’t only save you money — they also save you time. And time is money! Most real estate agents work full-time. By going FSBO (or “For Sale By Owner”), you’ll be taking on a lot of new responsibilities on top of your already-busy life, including taking calls on your personal number and emails at your personal account.
For example, Realtors® can help vet your applicants and host open houses for you; going FSBO can mean opening your house to endless strangers.
Pricing Your Home
Lastly, Realtors® know how to price a home accurately, meaning they can get you the best deal on your sale. Gniewoz-Weiss comments that in a seller’s market, many people think selling a home is easier than ever. However, changing economic conditions in 2022, including rising interest rates and inflation, mean the market is rebalancing, according to HomeLight’s Summer 2022 Agent Insights Report.
“That’s where an agent comes in, because they know and understand how to navigate these waters,” she says. “You may get to that final destination, sure, by doing it yourself. But did you take the best route there?”
Cost vs. Value of Selling a House with a Realtor®
Between closing costs and commission fees, selling your house with a Realtor® starts to look expensive. But with all that Realtors® bring to the table, what’s the return on that investment? Working with an agent whose top goal is to maximize your home’s value can be well worth your money. To show you what we mean, we’ll run some math on three different scenarios:
1. You work with an average agent to sell your home
Let’s say you work with an average agent in your market and agree to list your home for $450,000 (as of June 2022, the average list price for a single-family home was $450,000, according to Forbes).
The estimated cost of selling with a Realtor® — not including home prep, concessions, or repairs — would break down like this:
|3% closing costs:
2. You work with a top agent to sell your home
Not all agents are one and the same. Who you choose to work with matters: HomeLight’s data shows that working with agents in the top 5% of their market can sell your home for up to 10% more.
So, let’s say hypothetically you do partner with a top agent vs. an average one. At 10% more, a top agent might be able to sell for $495,000, statistically speaking. The increased price can be credited to your agent’s strategic prep and a pricing strategy that generated multiple offers. Here’s how that math breaks down:
|3% closing costs:
3. You sell FSBO
Let’s say, wanting to avoid a selling agent’s commission altogether, you cut the Realtor® out of the equation. What’s the cost of selling a home then?
According to NAR, the average “For Sale By Owner” property sold for $58,000 less than the median agent-sold home in 2021. In Gluff’s experience, many buyers offer less for FSBO homes, because they believe the seller is already saving money without an agent and is more likely to negotiate.
So if we account for NAR’s $58,000 drop, that takes the median home price of $450,000 down to $392,000.
Note: You’ll still have to pay the buyer’s agent fees, unless you sell to friends or family without an agent.
|3% closing costs:
So, is the cost of selling a house with a Realtor® worth it?
Of the avenues above, the one where you walk away with the most money is the scenario where you work with a top agent. In this example, you take home over $40,000 more than if you worked with even an average agent, and nearly $90,000 more than if you sell your home yourself.
Of course, how much your home actually sells for will depend on factors like your home’s condition and the state of the real estate market, as well as how much you’re willing to put into prep and repairs.
If you’re curious to run similar calculations tailored to your home, we recommend starting with a free value estimate from HomeLight’s Home Value Estimator. From there, plug your information into HomeLight’s Net Proceeds Calculator to account for agent fees and closing costs.
All else being equal, industry data from NAR indicates that Realtors® help your house sell for more. Without an agent, you risk under-selling by a significant amount. Our data at HomeLight indicates that the value added by a top agent will tend to offset the cost of their commission.
“People dedicate their lives to understanding this craft,” Gniewoz-Weiss comments. “It’s impossible to have the same result as a good agent doing it yourself.”
And keep in mind — even though we’re crunching the numbers here, Realtors® bring some things to the table that are just not quantifiable, even if it’s the simple reassurance of someone who has helped scores of clients navigate one of life’s major financial events.
“That’s where people get caught up. They try to assign a percentage or a number to it, and you just never know what you’re going to encounter when you’re trying to sell a property,” Gniewoz-Weiss explains. “So having an agent is like an insurance policy to help you and ensure [the best scenario] if you do encounter anything.”
Header Image Source: (GaudiLab / Shutterstock)
- "2022 Home Buyers and Sellers Generational Trends Report," National Association of Realtors Research Group (March 2022)
- "Top Agent Insights for Summer 2022," HomeLight (June 2022)
- "Housing Market Predictions 2022: When Will Prices Drop?," Forbes (July 2022)
- "2021 Profile of Home Buyers and Sellers," National Association of Realtors (November 2021)