Have you heard of real estate agents before? Do you know what realtor fees are?
Most people who are either buying or selling a home pay for the services of a licensed and experienced real estate agent to help them with the process. These professionals are able to offer in-depth knowledge about local housing markets, and they have excellent negotiation skills that make the purchasing and selling processes easier.
Nonetheless, in exchange for these valuable services, you’ll have to pay a specific amount of money in the form of real estate fees. Today, we’re going to discuss what realtor fees are, who pays them, and whether you can negotiate a lower rate or not.
What Are Realtor Fees?
Contrary to popular belief, realtor fees are not upfront costs. Instead, a realtor fee is a percentage of the sales price of the house you either decide to buy or choose to sell. So, real estate fees depend entirely on the price of the house.
Although there is no universal percentage that realtors collect from you, the average realtor fee is 6% of the total sale. Depending on the realtor you hire and worth with, the fee you end up paying could cost more or less than the average realtor fee. It’s all relative.
For instance, if you hire a realtor who charges a 6% realtor fee and your home sells for $500,000 in total, then your realtor fee will amount to $30,000. Keep in mind that realtor fees are split between the seller's agent and the buyer's agent.
Who Pays Realtor Fees?
Understanding who pays a real estate agent's commission can be a little tricky. While it is standard practice for the seller to pay the fee, the seller often accounts for the realtor’s commission when setting the home's sale price. As a result, the buyer will ultimately end up paying the fee.
What's Included in the Fees?
Local real estate are experts who have in-depth knowledge of real estate law, contracts, and negotiation. While they are not attorneys, their skill sets are highly valuable.
Additionally, agents don’t only represent cases and handle negotiations. Agents can also:
- Provide insight into the home buying process
- Follow up on offers
- Report property matches
- Schedule showings
- Search the MLS
- Show you homes
Are Real Estate Agent Fees Negotiable?
You can negotiate just about anything when it comes to real estate. However, since sellers must pay the commissions rightfully owed by their agents, many buyers or sellers choose not to work with real estate agents.
On the other hand, real estate agents depend on fair commissions in order to do their jobs. In-depth research has shown that agents who receive less than 3% commission are less motivated to search for homes and show properties. So, it all comes down to compromising.
One advantage of negotiating commissions is that the seller can save more at closing. Thus, your offer would become more attractive. Let's discuss some of the reasons your agent may be willing to reduce commission in these instances:
- They charge more than other real estate agents in your area, hence more competition.
- There are plans to work together on multiple transactions.
Other factors like location, home price, and the average timeframe in which homes are selling may make it easier for sellers and buyers to negotiate their agent’s realtor fees.
Standard Transactions with Realtor Fees
Real estate agent fees are typically paid at closing, no matter if you’re buying or selling a home. The listing agent will add details regarding their realtor fees within the agreement they write up with their clients. In this agreement, the listing agent will also outline how much of the fee will go to the buyer's agent.
Let’s say there’s a property listed for $350,000. In this situation, the agent’s commission fee is set at 6% and that makes the total realtor’s fee a grand total of $21,000 at closing. This fee will later be split between the listing agent and the buyer's agent.
In standard transactions, the real estate fee is split in half. As such, a total of $10,500 will go to the listing broker, and the buyer's broker will also receive $10,500.
So, brokers typically split their portion according to individual agreements discussed with their agents. Some agents take 50% but leading producers are known to take even more, though this value is disclosed ahead of time. It should never be a surprise.
Non-Standard Transactions with Realtor Fees
Certain situations will have a different impact on the way realtor fees are distributed and collected. For example, transactions recognized as FSBO, a dual agency, iBuyers, buyers who represent themselves, or discount brokers will affect realtor fees, especially if realtors aren’t involved at all.
On the topic of transactions that are not standard, let’s take a closer look at these types of non-traditional approaches to buying and selling homes!
A situation in which a real estate agent represents both the seller and the buyer is referred to as dual agency. In a dual agency transaction, the agent must remain neutral.
Moreover, dual agents receive fees from both the seller’s and the buyer's side of the transaction. As a result, sellers may reduce the commission they are willing to offer, which means they are offering a variable-rate commission.
While it's not a recommended practice, dual agency is still permitted in certain parts of the country. However, dual agency transitions are not legal in the following nine states:
Buyers will often turn to discount brokers in an effort to save money. The term discount broker refers to real estate brokers who charge a flat fee or a discounted rate for their services.
While most discount brokers work for small or local companies, larger brokerages full of discount brokers are becoming more and more popular as time goes by. Most discount brokers fall into one of many categories, all of which can be viewed below.
- Flat Fee: agents charge a flat fee for listing and marketing homes.
- Low Percentage: listing agents take a smaller percentage of the total commission.
- No Commission: Sellers do all the work while the agent lists the property on MLS.
- Hybrid Model: Agents receive a combination of a flat rate and a percentage.
- Two-for-One: Agents represent a sale and a purchase but only charge for only the sale.
- Buyer Rebate: Buyers receive a portion of the buyer's agent's commission.
For Sale by Owner (FSBO)
Homeowners who list their homes for sale themselves are typically motivated by the opportunity to obliterate the requirement of paying commission to a real estate agent. So, by pursuing a FSBO sale, homeowners set out to market their property alone and negotiate with potential buyers on their terms. For buyers, FSBO is a great deal all around.
How To Save On Real Estate Commission Fees
Let’s take a look at some of the best ways to save on real estate fees.
The Discount Agent
Finding the right balance between saving money on realtor fees and trying to sell your home quickly can be challenging. If you discover that you’re having a hard time finding that balance, it might be best to reach out to a discount agent. Discount agents can help you find ways to save cash without compromising on the necessities of the homebuying or selling process.
Flat-Fee MLS Listing
The flat fee MLS listing is a minimalistic approach to selling your home. The flat fee MLS process typically results in you listing your home on the MLS real estate portal at an affordably-priced flat fee.
What is a Fair Commission for a Real Estate Agent?
A fair commission for a real estate agent is subject. It all comes down to the price that the real estate agent and either the buyer or the seller agree to. However, if buyers or sellers can find real estate agents who charge less, then real estate agents will realize that not all buyers or sellers recognize the traditional commission rate of 6% as being justifiable. However, as a buyer or a seller, keep in mind that the less you pay, the fewer services you'll receive.
Where To Go From Here
Realtor fees make up a significant portion of the process of buying or selling a home. Since buyers and sellers are typically required to pay commission to real estate agents and these fees can be rather costly, it might be wise to seek out ways to save money by negotiating the real estate fees. Never shy away from starting a conversation about these fees. Like every other aspect of real estate, real estate fees are also negotiable, and the right real estate agent will not have a problem discussing their rates with you.
This page last updated: March 23, 2022