Pros and Cons of Low Commission Real Estate Agents: Are They Right for You?
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Dena Landon Contributing AuthorClose
Dena Landon Contributing AuthorDena Landon is a writer with over 10 years of experience and has had bylines appear in The Washington Post, Salon, Good Housekeeping and more. A homeowner and real estate investor herself, Dena's bought and sold four homes, worked in property management for other investors, and has written over 200 articles on real estate.
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Kelsey Morrison EditorClose
Kelsey Morrison EditorKelsey Morrison is an editor for HomeLight's Resource Centers. She brings six years of editorial experience covering real estate, home design, cooking, crafting, and pet care. With a background as a commerce editor at World of Good Brands (eHow.com and Cuteness.com) and an associate editor at Livabl, Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec.
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 it’s time to sell your home, it’s only natural to think of your bottom line. A home, after all, is most people’s largest financial asset. Maybe you remodeled the kitchen and want to get that money back in the sale, or you’re planning on funding part of your retirement with your sale proceeds. Most home sellers want to make a profit when they sell and to maximize that profit (and lower home selling costs) you might have considered contacting low commission real estate agents to help with your sale.
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Low commission real estate agents offer to sell your home for a commission a few percentage points lower than what’s typical (normally around 5.8% of the home price, with half going to the buyer’s agent and half to the listing agent). They claim that because they’re paid less, you make more on the sale. But will that savings on commission cost you in other ways, potentially in a much lower sale price?
Ahead, we’ll break down the pros and cons of low commission real estate agents to help you determine if hiring one is right for your home sale and financial future.
What’s the average real estate commission?
The average commission rate stands at 5.8% nationwide and has hovered around 6% for decades. Agents tend to stay around the average for their area — if they ask for more, fewer clients will list with them. However, some real estate agents choose to go lower.
That 5.8% figure isn’t exactly what each agent brings in. The commission, which is a percentage of the home sale price, is ultimately split between the buyer’s agent and the seller’s agent.
What are low commission real estate agents?
A low commission agent, as the name implies, charges a lower commission than a traditional agent. For example, if the standard in your area is 3%, they might charge 2%. Keep in mind that despite the listing agent lowering their commission, the buyer’s agent will still want to get paid their full fee.
That’s because the agent who represents your home doesn’t dictate the buyer’s agent’s commission. The commission structure in the United States is set up so that a listing agent typically splits their 5.8% commission with the buyer’s agent 50/50.
Are low commission real estate agents reputable?
Low commission agents still have to complete licensure requirements and training, making them just as reputable as other agents. If they’re also a Realtor® — meaning they are a member of the National Association of Realtors — they must comply with the association’s ethical standards. Some markets have more discount commission agents than others.
Zach Walkerlieb is an agent who sells homes 56% faster than average agents in Las Vegas, Nevada. In times when housing supply is low and demand is high, he says that low commission agents can become more common.
“It’s actually advantageous for the seller, depending on the price range and condition of the home, to be aware of what commission can be offered,” he says. “If you’re offering it to the public and you can get away with offering 2.5% instead of 3%, it can save thousands of dollars.”
In a more balanced market in which each home gets fewer offers, who you work with could end up making a big difference in maximizing your home sale. In other words, the value added by working with a top agent can more than cover the savings of the lower commission.
How much can I save with a low cost real estate agent?
Wondering how much a low cost agent can save you? This chart compares a traditional agent’s commission of 6% to a low commission of 4% for a variety of price points.
| Home Sale Price | Traditional Realtor Commission Cost | Low Realtor Commission Cost | Savings |
| $150,000 | $9,000 | $6,000 | $3,000 |
| $200,000 | $12,000 | $8,000 | $4,000 |
| $250,000 | $15,000 | $10,000 | $5,000 |
| $300,000 | $18,000 | $12,000 | $6,000 |
| $350,000 | $21,000 | $14,000 | $7,000 |
| $400,000 | $24,000 | $16,000 | $8,000 |
| $450.000 | $27,000 | $18,000 | $9,000 |
| $500,000 | $30,000 | $20,000 | $10,000 |
| $1,000,000 | $60,000 | $40,000 | $20,000 |
| $1,500,000 | $90,000 | $60,000 | $30,000 |
| $2,000,000 | $120,000 | $80,000 | $40,000 |
What are the risks of using a low commission real estate agent?
You can tell from the chart above that you’ll save money if you’re paying a lower commission. But you could also lose money at other points of the home sale, and have an overall frustrating experience. Here are some of the downsides to using a low commission agent.
Risking a frustrating or ineffective home selling experience
Low commission agents typically make their living on volume — when they’re making less on a home sale, they need to sell more. Often, this means that they have less time to devote to each sale. They might not be available to answer your questions or do much beyond listing and showing the house.
“Low commission to me really means ‘no service,’” says Chiquita Pittman, a top-selling agent in New Brunswick, New Jersey. “As full commission agents, we have a network of inspectors, attorneys, contractors — we can help when there’s a problem. We have the solutions, and that goes a long way in navigating and managing the transaction.”
Walkerlieb’s team includes an operations manager who handles the file for you, coordinates all the repairs, and deals with escrow. For home sellers, he says that “it’s a stress-free transaction because we pride ourselves on being one of the teams that would earn that commission.” If you’re working with a low commission agent, you may not have a full and experienced team backing you up.
Running into dual agency
With low commission agents, you have to watch out for a situation where the real estate agent represents both the seller and buyer, called dual agency. It’s illegal in eight states because of the risk that an agent won’t represent each side of the transaction fairly.
How can this work against you? If you list your $300,000 property with an agent who charges a 1.5% commission, you’d pay $4,500 when the home sells. But if they also represent the buyer, they’ll receive the 2.5%-3% buyer’s commission and earn up to $13,500 in potential commission.
On the surface, this might actually look good. After all, wouldn’t the agent try to get your home’s sale price higher to maximize their commission? But when you think of all the negotiations in a home sale — from needed repairs to closing dates — it’s clear that there are times when an agent might not look out for your best interests just to get the deal done.
Your home may sell for less money
Another risk of working with a discount agent is that your house might sell for less than you could have received with a top agent’s expertise. Strategic improvements, pricing it in the sweet spot, and leveraging a well-connected agent’s network can all drive a home’s sale price higher. Agents also help with negotiations during the sales process — particularly after the home inspection if the buyer requests repairs.
In real estate, “You have to be able to negotiate and give guidance to keep the deal moving forward,” says Pittman. “Every deal today is paper thin, and if you don’t have the skill set to make sure everybody’s happy and create that win-win situation, you’re not going to get top dollar, and you’re going to leave money on the table.”
Making less money on your home sale with a low-rated agent compared to a top agent is not just theoretical, it’s supported by real estate transaction data. Read on to learn more.
Fewer buyers may see your home
When you offer buyer’s agents lower commissions, there’s the risk that they may not show their clients your house. In Walkerlieb’s area, he’s seen that once commission drops below 2.5%, there’s a significant drop-off in showings. Since it will be the same amount of work for the buyer’s agent as a home with a higher commission, they might not want to accept a pay cut.
“Even though it may be unethical for them to not show a home that has a low commission offered, there are agents out there who make the decision whether or not to promote the home to their clients,” based on commission, he says.
Your sale could fall through
Because low commission agents are typically trying to do a large number of transactions, they might not care if one falls through. After paperwork has been signed for your house, they’re already moving on to the next sale. But there’s a lot that happens after the purchase agreement.
In one instance, Walkerlieb’s buyer had an offer accepted on a home being sold by a low commission agent. “We couldn’t reach the agent for negotiations of repair at all,” he says. “We had submitted the requests and reached back out multiple times, due diligence was ending, and we had to cancel the deal because we couldn’t even reach them.” He thinks the deal would have been easily saved if the agent had communicated.
What other home sale options are available?
For sale by owner
Hands-on sellers who have the time and resources available can list for sale by owner (FSBO). When you choose this path, you’re doing the work of an agent — from prepping your home, setting the list price, taking photos, listing your home online, hosting showings, and negotiating with buyers. In 2023, only 7% of home sales were for sale by owner, according to the National Association of Realtors.
Sell to a We Buy Houses company for cash
We Buy Houses companies make all-cash offers on homes. Since they flip houses for profit, they commonly submit offers below market value. But if you’re looking for a quick sale, they can often close in under a month.
While they don’t charge a commission, some companies charge fees on top of offering less for your home. We Buy Houses companies specialize in working with sellers who have distressed properties in poor condition, or who are about to go into foreclosure.
Sell to an iBuyer company or other cash offer platform
An iBuyer, or “instant buyer,” uses automated valuation models (AVM) and web platforms to determine your home’s value. These property tech companies offer a simplified sale process for sellers whose homes are typically in sellable condition.
HomeLight’s Simple Sale platform is another option sellers can leverage to sell their homes quickly and with less hassle. Just plug in your address and answer a few questions about your home to get a cash offer, fast.
Traditional, proven real estate agent who charges a typical commission
A traditional agent lists your home, markets it, and negotiates on your behalf to get it sold. They provide a full range of services for their commission. They do so much, you might not even know what’s included in their commission.
What can I expect from a traditional real estate agent?
Traditional real estate agents handle every aspect of your home sale — from prepping and marketing to negotiating on your behalf. Here’s what you can expect when you work with a top agent:
- Works closely with the seller, is responsive
- Experience in home selling situations like yours
- Offers advice to save time, money, and remove frustration
- Prints and distributes brochures and flyers
- Schedules professional photography
- Arranges for a lockbox on property
- Lists your home on the multiple listing service (MLS)
- Markets your home in the most effective online spaces and to their network
- Places a for-sale sign on your property
- Handles all open houses and showings
- Schedules all required inspections
- Has connections with local contractors and professional services
- Works with the buyer’s agent
- Negotiates repairs and concessions
- Is familiar with all transaction documents
- Addresses any surprises on the road to closing
- Handles the closing
So many things pop up in every single real estate transaction that’s new — especially if you’ve only done one or two sales — a low commission agent is not going to be experienced enough to navigate the transaction properly.
Zach WalkerLieb Real Estate AgentClose
Zach WalkerLieb Real Estate Agent at Keller Williams MP15.0Currently accepting new clients
- Years of Experience 13
- Transactions 455
- Average Price Point $513k
- Single Family Homes 425
How can I check to see if a low commission agent is reputable?
Before signing the listing contract, do your research to ensure you’ll be working with an agent who’s qualified and the right fit for your selling situation.
Ask to review the listing agreement in detail
Reputable agents will be upfront about their commission and contracts. Even if they’re taking a lower commission, they’ll be transparent.
Ask your would-be agent about their track record
When they’re already offering less service, you want an agent who can get the job done. Lack of experience is a warning sign. “So many things pop up in every single real estate transaction that are new — especially if you’ve only done one or two sales,” says Walkerlieb. “A low commission agent is not going to be experienced enough to navigate the transaction properly.”
Search the internet to check out their online presence and reviews
While even the most reputable offices will have the occasional grumpy commenter, if there are multiple complaints, heed the warning signs and look elsewhere. Also, check any reviews on the Better Business Bureau website, and verify whether or not they’re a member.
Can you easily find them on the web? Reputable agents have professional websites and an active online presence.
Ask for a list detailing the exact services you will receive
Since you’re paying less, it’s important to be clear on what you’ll receive for the commission. If they don’t have a list, look again at their contract.
Value your investment through the end
For many Americans, their home is their biggest investment. Getting top dollar can significantly impact your financial future, which is why it’s important to look at the big picture.
While many low commission agents and services can be a legitimate and viable option, there can be truth in the adage that “you get what you pay for.” You may pay more for their services, but your net could be higher. When you’re working with a really good agent, the difference is in the list-to-sales price ratio.
“A lot of the strong, good agents may charge a 6% commission but at the end of the day they’re going to sell your home and make you more than that initial 1-2% savings in commission might be,” Walkerlieb points out.
HomeLight data reveals that the top 5% of U.S. agents sell homes for up to 4.8% more than the average agents. When you’re ready to sell, just enter your home’s address, and we’ll connect you with top-performing agents in your neighborhood. While you might pay higher commissions when working with them, it increases your chances of a smooth and profitable home sale.
Low commission real estate agent FAQ
Low commission real estate agents are agents who offer their services at a lower commission rate than the traditional 5%-6% of the home’s sale price. They may provide full service or limited services depending on their business model.
Low commission agents typically make money by handling a higher volume of transactions or by offering à la carte services. They may also work for brokerages that have lower overhead costs or adopt technology-driven approaches to reduce expenses.
Real estate agents are free to pick the commission they’ll take — so, in theory, they could go as low as 1% or below. However, most stick within industry-accepted norms.
The effectiveness of a low commission agent depends on their experience, market knowledge, and the services they offer. Some low commission agents provide full service and can be just as effective as traditional agents, while others may offer limited services, which could impact their success rate.
The services offered by low commission agents vary widely. Some offer full service, including marketing, negotiation, and transaction management, while others may only provide listing services. It’s essential to understand the services included before choosing a low commission agent.
Some potential drawbacks of using a low commission agent include limited services, less personalized attention, and potentially lower final sale prices due to less aggressive negotiation. However, some sellers find that the cost savings outweigh the potential downsides.
Header Image Source: (Point3D Commercial Imaging Ltd. / Unsplash)
- "Average commission rate for real estate agents in the United States between 1992 and 2023," Statista (June 2023)
- "2024 Code of Ethics & Standards of Practice," National Association of Realtors (December 2023)
- "Highlights From the Profile of Home Buyers and Sellers," National Association of Realtors (November 2023)
