You work hard for every paycheck, so given how much your real estate agent makes off your home sale, you expect that the money will be well worth it. You want to make sure you’re making the right decision to hire an agent versus selling your home yourself.
According to a Realtor® field guide, 87% of buyers purchased their home through a real estate agent or broker. On the seller’s side, only about 7% of home sales in 2020 were listed as For Sale By Owner (FSBO).
The typical FSBO home sold for $260,000 compared to $318,000 for agent-assisted home sales in 2020, according to data from the National Association of Realtors.
So, how much extra money are you actually making when you use an agent, and how much money are you actually paying your agent while your house sits on the market? Let’s dive a little deeper.
How much real estate agents make off an average home sale, in short
On average, 6% of the sale price will go towards the commission. This figure typically gets split 50-50 between your agent and the buyer’s agent.
Note that this isn’t uniformly the case: In Charlotte, North Carolina, for instance, the listing agent often receives .05 to 1% more than the buyer’s agent, according to a report by the Consumer Federation of America. And in Savannah, Georgia, the listing agent typically gets 3.6% compared to the buyer’s agent’s 2.4%.
On top of this split, your agent also has to split their half with their broker. Let’s say your home value is consistent with the nationwide average of $354,300 at the end of 2021, according to the investment research platform Ycharts. A standard agent commission would be 6%, so the commission comes to $21,258. Of that figure, half would go towards your agent, and the other half would go to the buyer’s agent, so at this point, your agent is down to $10,629.
However, that’s still not your real estate agent’s take-home pay. Your agent will owe some of that to his or her broker. The percentage they owe the broker varies based on the experience of the agent and can range from less than half to two thirds. Assuming a moderate amount of experience, they’re probably looking at another 50-50 split, bringing the agent’s take-home pay to $5,314.50.
Government figures for 2020 estimate the mean annual real estate agent salary at $62,990.
Many factors play a role when it comes into an agent’s total annual take. These include the strength of the real estate market, the geographic location, and the agent’s experience level. And while some agents sell a large volume of homes each year, the typical agent does not. “I let people know that the average Realtor® only sells four to eight houses a year,” explains Derek Whitner, a top-selling agent in the Atlanta area.
I try to make sure my sellers are aware of the value we add from negotiating the details, getting through due diligence, making sure that the title company is doing their job and that we’re closing on time. We are getting our seller from point A to point B. We’re getting them to the finish line and getting the most money in their pocket in the shortest amount of time.
- Derek Whitner Real Estate AgentCloseDerek Whitner Real Estate Agent at Bhgre Metrobrokers
- Years of Experience 8
- Transactions 269
- Average Price Point $304k
- Single Family Homes 228
The difference in how much you make without an agent and with a real estate agent
Will Gaskins, a top real estate agent in Washington, DC and Northern Virginia, says the most important part about being an agent is “being able to protect people’s interests because those interests are normally not well met.”
If you sold your home without an agent, statistically you would receive 84.3% of the price of the average home. Using the Ycharts average home price data as an example:
$354,300 x .843 = $298,674.9
On the other hand, if you sell with an agent, your total after the commission is taken out is 94% of the sale price:
$354,300 x .94 = $330,042
That’s a pretty big difference.
The average time it takes to sell a home varies by state, but is typically just 61 days nationwide in early 2022. So that figure of approximately $5,000 typically pays for a couple months of work.
And that work brings a lot of value to the seller — even beyond simply dollars and cents. “What a lot of people don’t understand is the complexity of the real estate transaction,” Whitner says. “There are so many different parties that have their hands in the basket — you’ve got your closing attorney, you’ve got inspectors, you’ve got your buyer, you’ve got your seller, you’ve got the title company, and you’ve got a lender involved in some cases. So you’ve got to juggle all of the parties involved with the transaction and make sure everyone gets what they need.” When you sell your home with an agent, they handle that juggling for you.
Your commission is paying for the expertise and logistical coordination that will likely end up boosting your bottom line. “I try to make sure my sellers are aware of the value we add from negotiating the details, getting through due diligence, making sure that the title company is doing their job and that we’re closing on time. We are getting our seller from point A to point B,” Whitner says. “We’re getting them to the finish line and getting the most money in their pocket in the shortest amount of time.”
Naturally, you can expect to sell your home faster for the highest commission when you work with a top-performing agent in your area with a proven track record of driving results. HomeLight’s agent matching platform can help you find a top-performing agent in your area.
Because property values differ dramatically in different parts of the county, agent income from sales can differ a great deal as well. In Atlanta, where the average home costs $369,384, a seller’s agent can expect to bring home about $5,541 after paying the buyer agent’s commission and broker fees, according to HomeLight data. In the pricey city of Los Angeles, where the average home costs $810,372, a seller’s agent can expect to bring home about $12,156.
Frequently Asked Questions
Can you negotiate the commission fee with your agent?
Yes, you may attempt to negotiate the rate with your agent. ”Everything is negotiable and you can negotiate the fee,” Whitner says, noting that some agents do it frequently as part of a discount business model.
However, the lowest fee doesn’t always equate to the most value. Agents need a viable budget to market your home and fetch the highest possible price.
Do I owe money to my agent if my house doesn’t sell?
No. “The good thing for the buyer is the agent doesn’t get paid until you get paid,” Whitner says.
There are some exceptions to this, though, so make sure you’re clear on your contract. For instance, if you back out of a sale at the last minute, you may still owe commission.
Can the same agent represent both the buyer and the seller?
When a real estate agent represents both the buyer and the seller, this is known as dual agency. In some states, it’s completely illegal. Elsewhere, it is legal only if fully disclosed to both buyer and seller.
So, should you hire a real estate agent?
For Gaskins, explaining his worth to his clients is simple. He looks at his role as not only results-driven but one of empathy. “We are here to solve people’s problems,” Gaskins said. “We’re here to solve problems people don’t know how to solve for themselves. Every deal has hiccups and everyone on your team should be focused on how to make these problems go away.”