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Selling a house can be frustrating, especially if you have little knowledge about how the process works. That’s why it’s recommended to work with reputable real estate agents to assist with such an undertaking. Before you begin your search for the best agent to assist you, it’s important to understand how realtor fees and commissions work.


What are Realtor Fees?

Realtor fees, also referred to as commissions, are the percentage of a home’s sale price that real estate agents receive for their work on the sale. This is not a fixed rate, and tends to vary on the agent and the area.


On average, the commission rate is between approximately 5% and 6% of the final sale price. Since both the seller and the buyer usually each have their own real estate representative, these two parties typically split this fee evenly, each receiving approximately 2.5%-3%.


Real estate fees are generally shouldered by the home’s seller. So if you’re buying a home, you won’t have to pay any fees to your agent. The seller pays both the listing agent and the buyer’s agent once the deal is closed and the sale is finalized.


How Do Real Estate Commissions Work?

When selling a home or looking to purchase one, there are typically two real estate agents involved: the listing agent and the agent representing the buyer. In these cases, the real estate commission is divided between the two. Sometimes a single agent can represent both the buyer and seller, in which case that agent receives the full commission.


If an agent works for a brokerage, they will have to further divide their half of the commission to give a percentage to their broker. So if the original commission was 6% of the sale, the agent may only receive around 1.5% of that.


To put it into perspective, imagine a real estate agent closing the deal for a $500,000 house. If they ask for a 5% commission, they would get $25,000. That $25,000 is then divided between the seller’s agent and buyer’s agent, leaving them both with $12,500, or 2.5% of the original commission. If either agent represents a real estate brokerage firm, they would then have to split that $12,500 with their broker (the percentage of that split dependent on the agreement they made with their employer). The only exception to this is if the real estate agent is an independent broker, meaning, they don’t work for a real estate brokerage firm.


How to Negotiate Real Estate Commission with Your Real Estate Agent

A realtor’s commission can be negotiated, but it’s up to the agent if he or she is willing to lower their rate.

If you want to try and land a better deal, here are some things you can do:


  1. 1.    Get to Know the Local Market. Find out how quick houses similar to yours have sold in your neighborhood. If your home is in perfect condition and located in a good neighborhood, chances are your house will sell quickly. You can use that to your advantage and ask your realtor for a lower commission rate.
  2. 2.    Buy and Sell with the Same Realtor. If you’re selling a home and planning to buy a new one, consider using the same agent for both jobs. They may be willing to lower their rate if they know they will be getting twice the business from you. This strategy, however, is only applicable if you’re moving to a new house in the same area.
  3. 3.    Ask for the Commission Rates of Other Agents. Not all real estate brokers will be flexible when it comes to lowering their commission. Shop around. Find out what other agents in your area will charge. This way you can either go with the agent who charges the lowest rate, or use competitive rates as a bargaining chip. You should always consider the agent’s experience and expertise in selling a home similar to yours.  
  4. 4.    Make Your Home Easy to Sell. If a deal seems easier to close, you may have a better chance for getting your agent to lower their rate. Make sure you’ve fixed any damages to the home before putting it on the market. Vacate early if you can so the agent can stage the home and do showings at any time. The less time the agent has to spend trying to sell your home, the better your chances are for negotiating a lesser commission rate.


It is worth noting that part of your agent’s fee covers the marketing budget and other efforts put forth to sell your house. If you negotiate the rate down too much, it could actually impede the agent’s ability to sell your home. When meeting with agents, ask them to detail their marketing plans so you know where and how that money would be spent.


Final Thoughts on the Average Real Estate Commission

Selling a home is never easy, but it can be easier with the help of real estate agents. Learning about the average real estate commission should be one of the first things you do when considering working with an agent. This lets you in on some insights that might be useful as you try to renegotiate for a lower commission rate.