The Cost of Selling a House With a Realtor: We Did the Math

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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 a professional for their skills and services to accomplish a task where otherwise you might be a little (OK, a lot) over your head. It’s what 89% of home sellers choose to do.

Anytime you hire someone, though, you deserve full transparency into what they’re going to charge you and any other fees that could add to your final bill. And the way Realtors® get paid — plus your total expenses incurred when selling a home — does not always feel like familiar territory. Why would it be, when you only sell a house a handful of times in your life?

So, this guide will serve as a great primer for first-time sellers (and a refresher for those repeating the process) on the cost of selling a house with a Realtor®, including:

  • Fees directly related to the agent’s work bringing a buyer to the sale
  • Additional selling costs (i.e., taxes, title and escrow fees)
  • Weighing the cost vs. value of a Realtor®-assisted sale
Cash used to pay a Realtor to help sell a house.
Source: (Karolina Grabowska / Pexels)

Does a Realtor® charge to sell your house?

Realtors® won’t sell your house for free. But they aren’t going to ask you for a credit card upfront to cover their services either. Most Realtors® make money through commissions calculated as a percentage of the property’s sale price rather than an hourly rate or flat fee.

(A quick primer: A Realtor® is not exactly the same thing as a real estate agent, though there is a lot of overlap between those two job titles. A real estate agent is someone who’s been licensed by the state to help transact real estate and is usually also a Realtor®, but not always. A Realtor® is a member of the National Association of Realtors® and is almost always also a practicing real estate agent or broker.)

Like other types of commission-based sales professions, whether a Realtor® collects any money for helping you depends on their ability to finish the job: “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 percentage do most Realtors® charge?

According to our Agent Commission Calculator which analyzes real estate transaction data from thousands of home sales each year, the national average real estate agent commission is 5.8%. Over the past three years, the average real estate commission has averaged 5.47%.

A graph explaining agent commissions.

However, real estate commissions aren’t standardized and can vary from one city to the next. Here’s how average commission breaks down in these major markets:

You should know what’s typical for your area so that you can negotiate on fees if they appear too high. Use our commission calculator to input your city and find out the average rate for your area.

Where does that commission go?

Your listing agent will share their commission with the agent or broker who brings a buyer to the sale, usually at a 50/50 split. The listing agent will also owe a portion of their commission (anywhere from 10%-40%) to their broker. Brokers require a percentage of the split for the backend support they provide. On a $250,000 home, that would break down like so:

$14,500 in total commission (5.8% of $250,000)

-$7,250 shared with the buyer’s agent

-$1,450 given to the broker split (assuming an 80/20 split) 

= $5,800 that the listing agent keeps

What about closing costs?

As a seller, you’ll foot the bill for more than just the agent fees. Aside from agent commissions, closing costs for the seller typically range between 1% and 3% of the sale’s price. Here’s what you can expect to pay in additional closing costs :

  • Title fees: In some areas, it’s customary for sellers to cover a portion of the buyer’s title search or title insurance fees, which go toward checking that the property doesn’t have any liens or judgments attached to it prior to the sale.
  • Real estate transfer taxes: Many states charge transfer taxes, or fees owed for the transfer of real property to the state, county, or city. Transfer taxes can be levied as a flat fee or “an amount specified per every $100, $500, or $1,000 of the transferred property value.”
  • Escrow fees: You and the buyer will likely split fees charged by a third-party escrow company to handle the holding of funds and transfer of documents during closing.
  • Reconveyance fees: When you receive the proceeds of your home sale and pay off your mortgage, you’ll get a reconveyance deed to prove the resolution of the debt. However, this deed comes with fees from the mortgage company.
  • Taxes on the property: Depending on when you sell your property and your local tax schedule, you may have to pay property, school district, metro district taxes, and homeowner association dues from the previous year.

The cost of all these fees will vary based on the price of your home and where you live, but you’ll find an exact breakdown in your seller’s settlement statement.

A scale used to weigh the costs of selling a house with a Realtor.
Source: (Roman Kraft / Unsplash)

Cost vs. value of an agent

Between closing costs and commission fees, selling your house with a Realtor® starts to look expensive. But what you don’t see in that 5.8% Realtor® commission is the added value of working with an agent whose no. 1 goal is to maximize what your home sells for. Here we’ll run some math on four different scenarios:

1. You work with an agent to sell your home.

Let’s say you work with an average agent in your market and agree to list your home for $310,600 (which happens to be the median home price as of late 2020, according to the National Association of Realtors®).

The estimated cost of selling with a Realtor® — not including home prep, concessions, or repairs — would break down like so:

Sale price: $310,600

-$18,015 (5.8% Realtor® commission)

-$9,318 (3% closing costs)

Estimated Proceeds: $283,267

According to national averages and recent sales data, you’d make an estimated $283,267 on a median-priced home working with a Realtor®.

2. You work with a top agent to sell your home.

Not all agents are one and the same. With over 2 million active real estate licensees out there, you’ll find agents with a wide variety of experience levels and specializations. 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. Instead of listing your home for the median average of $310,600, you get it up to $341,660 (a 10% increase). The increased price can be credited to strategic prep and a pricing strategy that generated multiple offers under the guidance of your top agent. Here’s how that math breaks down:

Sale price: $341,660

– $19,816 (5.8% Realtor® commission)

-$10,249 (3% estimated closing costs)

Estimated Proceeds: $311,595

3. You sell FSBO.

To make sure we explore every angle, let’s say 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 sells for 11% less than agent assisted sales. In Gluff’s experience, many buyers see FSBO and think since the seller is already making more without an agent, they have more wiggle room on price.

So if we account for NAR’s average 11% drop, that takes the median home price of $310,600 down to $276,434.

Sale price: $276,434

-$8,016 (3% to cover buyer’s agent commission)

Note: You’ll still have to pay the buyer’s agent fees, unless you sell to friends or family without an agent.

-$8,016 (3% estimated closing costs)

Estimated Proceeds: $260,402

4. You skip the listing process and sell directly for cash.

If you’re looking to avoid Realtor® fees, you could explore the possibility of selling to a cash buyer directly. This allows you to skip the listing process, but it does mean sacrificing on your home’s market value.

Let’s say again for argument’s sake that you’re selling that $310,600 home. Based on data averages from HomeLight’s Simple Sale platform, our nationwide network of cash buyers, you can expect to sell your home for between 90%-95% of its market value to a direct real estate buyer (though it could be more or less).

We’ll assume you sell at 90% of market value, bringing your sale price down to $279,540. 

– $0 (0% Realtor® commission)

– $2,795.40 (estimated fees to cover taxes and transaction costs ~1%)

Estimated Proceeds: $276,744.60 

Selling your home for cash also comes with a few added benefits, including no home prep, staging or showings; a flexible closing; and fewer contingencies that put the deal at risk.

So, which route is most cost-effective?

Of all the avenues for selling we just went through from a cost perspective, the one where you walk away with the most money is the top-agent assisted sale. In this example, you take home over $28,000 more than if you worked with an average agent.

Now, keep in mind that we calculated that example based on our transaction data showing that the top 5% of real estate agents sell for as much as 10% more. 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.

This example is meant to be illustrative of a general trend: 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 more expertise your agent brings to the table, the more likely they will be to fetch you a higher sale price, offsetting what you spend on commission.

If you’re curious to run similar calculations tailored to your home, we recommend starting with a free value estimate from our Home Value Estimator. From there, plug your information into our Net Proceeds Calculator to account for agent fees and closing costs.

A Realtor discussing the cost of selling a house with clients.
Source: (fizkes / Shutterstock)

What you get by hiring a Realtor®

Besides maximizing your home’s value, an agent will earn their commission in a number of ways:

  • Advise you on strategic updates and repairs with the highest ROI.
  • Connect with contractors to make pre-listing repairs.
  • Put together a comparative market analysis.
  • Reduce your days on market with a competitive pricing strategy.
  • Manage administrative tasks such as buyer inquiries and showing requests.
  • Tap into their agent and broker network for potential buyers.
  • Market the property over social media and manage your MLS property details.
  • Assist you in preparing documents when appropriate, including any required disclosures.
  • Negotiate offers and counter offers with your best interest at heart.
  • Respond to buyer repair requests with the goal of protecting your price and pocketbook.
  • Navigate multiple offer scenarios and help you select the best offer.
  • Offer emotional support and wisdom throughout a taxing process.

We’re not saying an ambitious seller can’t do it all, but going it alone means taking on all of the above responsibilities and more. When you hire an agent, especially a great one, you unload these tasks onto them and free up your own schedule and headspace. As you weigh the costs of selling with a Realtor®, put a dollar value on your own time, too. Then multiply that by anywhere from 20-200 hours. If the choice is clear, start your agent search at HomeLight to find an agent worth their commission.

Header Image Source: (GaudiLab / Shutterstock)