Most real estate agents get paid through commissions. Commissions are typically calculated as a percentage of a property’s sale price, though some brokerages will charge a flat fee. The average real estate agent commission rate nationwide is 5.8% of the home sale price, according to HomeLight’s real estate transaction data of thousands of home sales each year. The commission is generally paid by the home seller, and the seller’s agent will then split the commission with the buyer’s agent.
Generally, you can expect to pay between 5%-6% in agent commissions when selling a home in 2023, with some variation based on location. On a property worth the median home sale price of $454,900 as of Q3 2022, that amounts to $22,745 – $27,294 in commission costs.
Here’s a breakdown how much you would pay in real estate commissions based on what a home sells for:
|Home price||5.8% real estate agent commission|
Still curious about commission? Here are the answers to common questions about real estate agent commissions:
Who pays real estate commission fees?
Typically the seller in a transaction will pay commission fees in full. As top real estate agent Rachel Moussa of Flower Mound, Texas, explains, in most places, “the standard is for sellers to pay both the listing agent and the buyer’s agent’s commission. The listing agent puts on the MLS what percentage the seller has agreed to pay cooperating brokers.”
When is the commission owed?
The real estate commission will automatically be deducted from the sale proceeds at the time of closing. Until then, you won’t owe any money to the real estate agent.
Does the agent get to keep the full commission?
Although the seller pays the entire commission, the listing agent, who is representing the seller in a transaction, doesn’t keep it all. Part of their commission will go toward marketing your property with professional photography, open houses, offline marketing, and more.
The commission is also typically split 50/50 with the buyer’s agent to compensate them for bringing a buyer to the sale and coordinating the buy-side of the transaction. So, around 2.5% to 3% goes to the listing agent, and the other 2.5%-3% goes to the buyer’s agent.
Both the listing agent and the buyer’s agent will then share a percentage of their commission with their sponsoring broker.
These split rates can vary; however, it’s common for the listing agent to give their broker anywhere from 30%-50% of their commission, depending on the agent’s level of experience, their market size, and brokerage agreement.
How is the commission divided between agents?
The commission that’s paid by the seller will be split among each agent and the brokerages through which they hang their real estate license. Let’s say you sell your home for $220,000 with a 6% commission rate. You pay a commission of $12,000 and each agent has a 70/30 split agreement with their brokerage. Here’s how that might look:
- Listing agent: $4,200 (70% of their $6,000 commission share)
- Listing broker: $1,800 (30% of their $6,000 commission share)
- Buyer’s agent: $4,200 (70% of their $6,000 commission share)
- Buyer’s broker: $1,800 (30% of their $6,000 commission share)
Are commission rates negotiable?
You can negotiate real estate agent commission rates, but don’t be surprised if your agent holds firm on how much they charge. A Consumer Federation of America report found that only 27 percent of agents are willing to negotiate commission.
One reason agents often don’t lower their rate is that it may reduce their ability to negotiate a higher sale price for the seller. An agent’s services often include photography and a pricing analysis, so a lower commission could also translate into a smaller marketing budget for your property, an inaccurate list price, fewer home promotions, and a lower likelihood of selling.
Exceptions can occur if you’ve already found a buyer. Let’s say you’re selling your house to a friend, or have decided to sell to a family member, in that case, the agent would likely be willing to play the role of transaction coordinator and independent go-between for a reduced commission rate.
Overall, commissions are negotiable but do your research first. When asking an agent to lower their pay, you’re limiting the pool of agents willing to work with you. And the downsides to working with a low-commission agent can be steep. Without a top agent in your corner, you could dramatically undersell your home, have a rough selling experience, or fail to sell the home at all.
What is included in a real estate agent’s commission?
A full service real estate agent will provide a high level of offerings that go toward giving you a great selling experience and boosting exposure to your home.
An agent’s services fall into a few main categories:
Guidance on pre-sale improvements
Agents have seen a lot of houses. They will have an eye for the small but impactful improvements you could make to help it sell for more. The best agents will go above and beyond to help their clients get the job done.
“We had one seller — they had stuff everywhere, it was super dirty, the furniture wasn’t working the way they had it. But the house was over a million dollars. We went through the whole process of making a list of things that they needed to do,” shares top-selling agent Sandra Rathe of her experience selling the home of a client in South Florida.
An agent will put together a comparative market analysis in the form of a thick packet featuring charts, facts, figures, and photographs of houses. The analysis will show you what your home is worth based on comparable sales in the neighborhood, market trends, and local price per square foot. This key tool helps you set a realistic price that can attract offers right off the bat in a fraction of the time it would take a non-professional to determine.
As part of their commission, at a minimum agents should offer expert home prep and staging, professional photography, marketing flyers and pamphlets, direct mail, automatic postings of your listing on major home search sites, local advertisements, exclusive previews for other brokers, and open house coordination. Advanced agents may also offer development of a virtual tour.
“Our team actually meets the photographer out at the house to make sure that all the right angles are taken,” shares Moussa.
Offer management and negotiations
When you receive one or multiple offers, an agent will help you determine the strength of the offer and work with you to proceed on responding to buyers. They’ll advise on whether to accept, reject, or make a counteroffer, while putting together offer spreadsheets to identify the best offer in bidding war situations.
If a buyer requests repairs after the inspection, an agent will help you push back where appropriate and advise on when to concede. Should the appraised value be lower than the contract price, an agent can help you determine whether to ask the buyer to make up the difference or if you should lower your price.
Market knowledge and neighborhood expertise
Great real estate agents know what local buyers seek in homes and which of your home’s attributes to highlight. An agent will skillfully incorporate key features into your home’s listing description and immediately be able to recognize what makes your house or the surrounding area special.
Moussa summarizes an agent’s services and the ultimate goal:
“The agent puts everything into the MLS, asks detailed questions about the home, writes the property description, and then markets it. We do Facebook Ads, door hangers, whatever we need to do to get it out so that every possible buyer’s agent can see the home. The listing agent’s responsibility is to bring as many offers as they can to the seller.”
What is a fair real estate commission?
A commission rate between 5%-6% is standard for most markets to hire a full service real estate agent. This rate should mean you have an agent who is dedicated to selling your home for the best possible price, who is available and communicative, and who is willing to shepherd the transaction from start to finish. If an agent isn’t willing to offer all or the majority of services listed above, you should interview more candidates.
What if the house doesn’t sell?
Real estate agents only get paid commissions if and when your home sells successfully. Most real estate contracts include an exclusive right to sell, which gives the real estate agent the sole rights to market the property, list the property on MLS, and receive the commission if the sale closes in a determined time frame. If your house remains on the market beyond the time period outlined in the listing agreement, you are not obligated to pay your agent.
However, keep in mind that your listing agreement may contain a protection clause, also known as a “brokerage protection clause,” “safety clause,” “extension clause,” or “tail provision.” The protection clause states that if a buyer who the listing agent introduced to the property purchases the property after the listing agreement expires, the seller still must pay the agent a commission.
How can you avoid paying Realtor® fees?
For Sale By Owner
Without a real estate agent, you’re responsible for preparing your home for sale, marketing, negotiating, and navigating legal and financial documents. When selling a house on your own, you’ll need to hire an attorney, at a minimum, to make sure the paperwork is right.
This indicates that while the FSBO route is rare, making up just 10% of sellers, it’s even more rare to forgo a real estate agent’s help when you don’t already have a buyer lined up and ready to go. In addition, according to the National Association of Realtors®, the median FSBO house sold for $260,000 last year, compared to a median of $318,000 for agent-assisted sales. That’s an 18% loss in value for a 6% commission saved.
Sell to a cash buyer
Cash buyers — including iBuyers, investors, and house buying companies — are individuals or entities that purchase your home outright, without the need for lender financing. These buyers typically make off-market purchases and can provide speed and convenience to sellers. If you’re interested in a cash sale, you can receive a competitive cash offer through HomeLight’s Simple Sale platform, with no hidden fees or agent commission. Just be aware that the price offered by any cash buyer may not match what you could receive on the open market with the help of a top agent.
Now you know how real estate agent commissions work
Sellers pay real estate commissions in exchange for an agent’s expertise and services throughout the sale process. If you’re worried about the cost of the commission, consider that targeted upgrades, stellar marketing, and savvy negotiations can help you maximize your sale price. With an agent to guide you, you also avoid the stress of navigating this complex process without professional oversight.
The key is finding a quality agent who provides the highest amount of value for their commission fee. In fact, our transaction data shows that the top 5% of agents in the U.S. sell homes for as much as 10% more than the average agent.
We’d recommend going through an online agent matching service like HomeLight that can surface top agents with experience tailored to your needs. Whenever you’re ready to get started, HomeLight would be happy to put your commission worries to rest by introducing you to several agents in your area who are well worth it.
Header Image Source: (ME Image / Shutterstock)
- "Median Sales Price of Houses Sold for the United States," FRED® Economic Data (October 2022)
- "2022 Profile of Home Buyers and Sellers," National Association of Realtors® (November 2022)
- "Highlights From the Profile of Home Buyers and Sellers," National Association of Realtors (November 2021)
- "What is an iBuyer: What to Know About Instant Buyers," Maximum Exposure Real Estate (November 2021)