What's a Fair Fee? Realtor Commissions Explained

What Do Real Estate Agents Charge For Commission?

There is nothing anywhere that says a commission nOne of the most asked questions in real estate is, “how much is the real estate commission”? You should know from the get-go that commission on real estate is entirely negotiable.

There is nothing anywhere that says a commission needs to be a certain amount of money. Real Estate agent fees are variable.

What one real estate company charges for a real estate commission might be completely different than another firm down the street.

In some real estate franchises like , the real estate agent may be wholly empowered to decide what they will charge for a commission.

The brokerage firm will determine what the real estate agents charge in most real estate franchises.

When the situation arises where a commission is asked to be reduced, the agent will usually need to ask for permission from the owner or broker.

Experienced and reputable real estate agents make the home buying and selling process much more comfortable, efficient, and productive for clients.

Of course, Realtors® need to be paid for their services, typically paying them a commission from the home sale. Some people feel like real estate agents are paid too much, while others think that Realtors® do not make enough for their hard work.

A small percentage of consumers choose to sell for sale by owner without a Realtor in the hopes they will save money by not paying a real estate commission.

The Realtor fees that real estate agents charge depends on your area, the current real estate market, and the type of home you are selling.

While it is impossible to list the typical real estate commission in your area, we can give a general overview of how commissions work in a real estate transaction.

Let’s dive into how much real estate commission you will likely be paying when selling a house.

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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)

Who Pays the Real Estate Agent Fee?

When it comes to who pays the fee – homebuyer or seller – technically, the seller foots the bill. If a home sells for $400,000 and the real estate agent fee comes to $24,000, that $24,000 comes out of the money that the seller takes to the bank.

Of course, the money that they’re taking to the bank actually comes from the buyer – and sellers generally factor in the agent fees when they price a home. If a buyer is charged $400,000, it often means that the seller considers the actual home price to be $376,000, and the difference goes towards paying the real estate agent fees. This is all bundled up into the final sale price that, ultimately, the buyer is responsible for.

Average Yearly Realtor Commission

Do you know the average Realtor commission? Many people think they know how much real estate agents make in commission for some odd reason. Most people think that real estate agents make money hand over fist.

The national average for real estate agent commission is, in fact, not what you think.

While the top agents make an excellent income, the average agent does not. In fact, the average income is lousy!

According to The National Association of Realtors, in 2020, the average yearly commission was $43,330. Real Estate agent commission was down from the year before, which was $49,700. So the average commission was not very good for making a great living.

Income was generally in line with experience. REALTORS® with sixteen years or more experience had a median gross income of $71,000, while REALTORS® with two years or less experience had a median gross income of $9,300.

It is essential to note that unlike most businesses with an 80/20 rule, whereby 80 percent of the business is done by 20 percent of their members, it is 93/7 in real estate. Yes, you read that correctly – 93 percent of all real estate transactions are done by 7 percent of the agents.

The other thing that should be understood is that real estate commissions are usually split in four ways. The listing firm, the listing agent, the selling firm, and the selling agent typically split the commissions.

Consumers should also understand that there is a difference between a Realtor® and a real estate agent.

How Do Realtors Calculate Commission?

Commission is, very simply, calculated as a percentage of the home sale. 

So for a $600,000 home and a standard 6% commission, that’s sale price x (percentage/100) = Commission fee, or $600,000 (6/100)= $36,000. 

The Realtor fee comes from the home sale price before repairs or deductions to account for repairs, not after. 

FAQs about realtor commission

A fair real estate commission depends on a number of factors, including your home price, how quickly you expect your house to sell, and what services your agent will provide. You can sometimes negotiate a lower listing fee, especially if you're willing to do more of the work yourself. But most sellers find the most overall value with a low cost realtor who offers full service for a discounted rate. Find the best low commission companies here!

Real estate commission costs an average of 5.37% nationwide, but varies by state from 4.45% to 6.34%. Find average commission rates in your state here!

Are Realtors overpaid?

The median income for Realtors was $51,220 in 2020, according to the U.S. Bureau of Labor Statistics. Median income represents the middle of the scale: Half of all Realtors made more, half made less.

Though home sellers may feel that Realtor fees of up to 6 percent are too high, Duffy argues that they’re not high enough. After all, a lot goes into listing a home, such as:

  • Performing a comparative market analysis to establish a competitive price
  • Arranging for photo shoots, sometimes including aerial shots via drone
  • Writing descriptive listing copy to attract interest from other Realtors and potential buyers
  • Providing staging guidance
  • Showing the property multiple times to prospective buyers
  • Hosting open houses on weekends
  • Providing yard signage
  • Making sure listings are populated on all major property search websites
  • Helping the seller review and negotiate buyer offers

When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers. And with the volatility of the current market and record low levels of inventory, Realtors frequently deal with multiple potential buyers to help you get the most out of your property.

Average real estate commissions by state

Overall, the national average Realtor commission in 2021 was 5.5 percent, according to data from Clever. In most states, the commission ranged between 5 and 6 percent. But in states like California and New Hampshire, where expensive properties abound, the commission was typically under 5 percent. Find the average commission in your state in the table below:

State Average commission rate
SOURCE: Clever
Alabama 5.61%
Alaska 5.25%
Arizona 5.36%
Arkansas 5.91%
California 4.92%
Colorado 5.50%
Connecticut 5.41%
Delaware 5.75%
Florida 5.38%
Georgia 5.87%
Hawaii 5.25%
Idaho 5.55%
Illinois 5.21%
Indiana 5.87%
Iowa 5.90%
Kansas 6.00%
Kentucky 5.73%
Louisiana 5.19%
Maine 5.45%
Maryland 5.08%
Massachusetts 4.97%
Michigan 5.98%
Minnesota 5.68%
Mississippi 5.54%
Missouri 5.92%
Montana 5.50%
Nebraska 5.29%
Nevada 5.00%
New Hampshire 4.83%
New Jersey 5.18%
New Mexico 6.21%
New York 5.11%
North Carolina 5.45%
North Dakota 6.00%
Ohio 5.84%
Oklahoma 5.89%
Oregon 5.19%
Pennsylvania 5.60%
Rhode Island 5.15%
South Carolina 5.83%
South Dakota 5.00%
Tennessee 5.56%
Texas 5.78%
Utah 5.17%
Vermont 6.00%
Virginia 5.15%
Washington 5.17%
West Virginia 5.54%
Wisconsin 5.93%
Wyoming 5.48%

How much are typical realtor fees?

Realtor fees are typically 6% of the final sale price of a home. The commission is split evenly, with 3% going to the listing agent and their broker, and 3% going to the buyer’s agent and their broker.

The home seller pays both the buyer’s agent and the listing agent’s commission.

How does this actually shake out? On the sale of a $400,000 home, each agent makes about $12,000.

*On the sale of a $400,000 home.
PercentageDollar amount*
Buyer’s agent commission3%$12,000
Listing agent commission3%$12,000
Total commission paid by seller6%$24,000

» MORE: How does a 3% real estate commission work? 

Real estate commission splits

If a realtor works for a brokerage (RE/MAX or Coldwell Banker, for example), they don’t get to keep their full commission. Typically, agents split their commission 50/50 with their brokerage.

A 50/50 commission split is common, but some brokerages may structure splits differently. Sometimes, splits may favor the agent more depending on their tenure with the brokerage (as in more experienced agents share less with the brokerage). 

Commission splits help cover shared brokerage expenses, like advertising, licenses for technology tools, and office equipment. Because of brokerage commission splits, your agent makes much less than what you’ve paid in realtor fees.

Commission split on a $400,000 home

*Assuming a $400,000 home sale with a 3% commission rate.
Agent’s commission$12,000
50/50 brokerage split$6,000
Agent’s final pay*$6,000

» MORE: What’s a real estate broker?

Realtor fee calculator

Use this realtor fee calculator to estimate how much you’ll pay in real estate  commission when you sell your home.

Simply enter your estimated home sale price along with the percentage you’ll pay to each agent. Remember, sellers are responsible for covering both the listing agent and buyer’s agent fees.

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.

What do these fees cover?

While many of today’s buyers often prefer to house hunt on their own, others decide to work with an agent to find a home. For those who choose to work with a traditional buying agent, they’ll find that their agents spend most of their time pulling home listings, driving to tour homes and doing pricing analysis to help them make strong offers.

Once the buyer’s offer is accepted and enters escrow, the agent will spend their time helping coordinate inspections and appraisals, negotiating repairs costs, handling all of the closing paperwork and some light accounting (the agent is responsible for maintaining the financial account used to pay inspectors and appraisers).

Related links

ARTICLE SOURCES[1] National Association of Realtors. "Quick Real Estate Statistics." [2] Collateral Analytics. "Saving Real Estate Commissions At Any Price." [3] Zillow. "United States Home Values." 

How to Save on Real Estate Agent Fees: Dual Agency

In practical terms, is there anything you can do now to lower the real estate agent fee? If you’re a homebuyer, probably not; even though the buyer is the one actually paying the fee, the fact that they don’t do so directly means that they don’t have a hand in the negotiations, at least not officially.

On the other hand, sellers can try to lower the fee, and one possible method is something called dual agency: when the same agent represents both the buyer and seller in a transaction. In this case, the entire agent fee would go to the one agent (also known as the transaction broker), and this can be one way that a seller could negotiate a lower fee – say, from 6% to 4%.

That said, dual agency is not without controversy. Many argue that the practice offers serious ethical issues and conflicts of interest, as it seems logically impossible for one agent to represent the interests of both the buyer (who wants the house to sell for as little as possible) and the seller (who wants the house to sell for as much as possible). Given that the dual agent will make more money for a higher-selling home, it’s quite possible that the buyer will be getting short shrift.

As a result, dual agency has been outlawed in eight states, including Florida, Colorado, Texas, and Vermont. In those states where dual agency is legal, like New York, agents are required by law to disclose that they’ll be representing both sides to their clients.

Realtor Fees FAQ: Everything You Need To Know

Whether you are a first-time homebuyer or a seasoned real estate investor, it is crucial to know about all the costs of purchasing a property. That’s where Realtor fees come in. Read through the following commonly asked questions and make sure you know what to expect when working with a Realtor.

How Do Realtor Commissions Work?

Realtor commission works the same as a Realtor fee. To be clear, Realtor fees and Realtor commissions are synonymous with each other. A Realtor commission is a percentage of the sales price and will be applied accordingly. However, it is quite common for the buyer’s agent and the seller’s agent to receive about half of the commission each. If the same agent represents both sides of a transaction, there’s a chance they will lower their commission. Every detail about a real estate agent’s commission and any transaction fees should be outlined in the contract you sign when hiring an agent. This is referred to as a listing agreement. It specifies how long the agent will represent you, typically between 90 to 120 days.

Usually, it is the landlord’s responsibility to pay rental agent fees. However, this is not required. In places like New York, tenants will pay the rental agent’s commission from time to time. The commission can also be 10% – 20% higher if a vacant lot is sold. This is because selling land is often more difficult.

How Much Does A Realtor Cost On Average?

On average, real estate agents and Realtors will charge somewhere between five and six percent of the sales price. There is no universal amount for how much an agent will make on a home sale. It is, however, possible to calculate how much a Realtor fee translates to in the average home sale.

According to Zillow, the median price of homes that have sold in the United States rests at $230,000. So if you want to understand how much the average Realtor makes in fees on the average home sales price, take six percent of $230,000, which is $13,800. That means the average Realtor fee is somewhere around $13,800. But remember, the fee is typically divided in two to pay the agents representing each side of the deal.

How Much Does A Realtor Charge In Fees?

As previously mentioned, Realtors typically charge a percentage of the final sale price in fees. However, this Realtor fee amount only equals the commission they will make from a given deal. There are still fees that can be incurred while the property is on the market. Depending on whether you are buying or selling, these can be important to look for. A few examples of Realtor fees, aside from commission, are as follows:

  • Home Inspection: Realtors will typically request a home inspection and appraisal while the property is still on the market. This is to ensure the correct sales price and make sure there are no undiscovered issues with the property. Home inspection fees vary but can range anywhere from $200 to $400, depending on the market.

  • Photography: While not all sellers opt for professional stagings, they should at the very least secure professional photographs for the listing. Many experienced Realtors will already have a professional connection when they take on a listing, and fees can vary accordingly. One thing is for certain: no matter what market your property is in, professional listing photographs will almost always pay for themselves.

  • Staging: Staging is one of the best ways to hook potential buyers, but it does come at a price. Realtors will typically work with professional stagers, ranging from $400 to $500 a room per month. Again, these fees vary depending on the market and property size.

  • Closing Costs: Technically speaking, closing costs are not included as part of Realtor fees. They are required costs at the end of a transaction. Therefore, it is important to keep them in mind. Closing costs cover loan fees, title company fees, insurance, taxes, surveyor costs, recording of the real estate deed, and more. Closing costs will vary with each unique home sale or purchase and range from 2% to 7% of the purchase price.

How Do You Calculate Realtor Fees?

To calculate Realtor fees, you must know three things: the sales price of a home, the number of agents in a respective deal, and the percentage they charge for their representation. Once you have those three numbers, calculating your Realtor fees is as simple as multiplying and dividing a few numbers.

Start by taking the sales price and multiplying it by the percentage the Realtor is charging. For example, if a home sells for $500,000, multiply it by the percentage the agent is charging. If they are charging the average commission I already spoke of, the equation will look like this: ($500,000 x 0.06), which gives you $30,000. Then, take that $30,000 and divide it by the number of agents representing the deal.

Are Realtor Fees Included In Closing Costs?

Realtor fees and commissions are not included in a home’s closing costs. Whereas commissions are strictly for the representing agents, closing costs result from several miscellaneous fees (unrelated to the agents). For the most part, closing costs include, but are not limited to things like:

  • Loan processing: Lenders will charge for processing, credit checks, and other administrative duties when approving a loan. The exact amounts based on the financial institution, and can sometimes even be lumped together in one origination fee.

  • Title company fees: Title fees typically make up the bulk of closing costs. These fees cover the title search, title insurance, and some settlement services.

  • Surveyor costs: In many cases, a surveyor is necessary to check the boundaries and property lines surrounding a home.

  • Deed recording: Many local governments will charge recording fees after the sale of a property in order to update county records. On average, recording fees are around $100.

  • Insurance: Some lenders require homeowners to prepay one year of insurance costs at the time of closing. There may also be fees associated with private mortgage insurance, depending on the details of the loan.

Not unlike the Realtor fees, however, closing costs will depend greatly on the sales price of the home in question. As a result, closing costs also tend to span a bigger spectrum, generally ranging from two to seven percent of the sales price.

[ Save time & money on your next real estate deal! Take a 27-minute online training class to learn how to simplify the closing process & save big. ]

Are Realtor Fees Included In A Mortgage?

You will be happy to know that Realtor fees (or commissions) are not included in the mortgage. If, for nothing else, it’s the seller that’s going to be paying the fees. Remember, more often than not, it’s the seller’s responsibility to compensate the Realtor or real estate agent.

Are Realtor Fees Negotiable?

As with almost everything else in a real estate transaction, it is entirely possible to negotiate Realtor fees. The law states that said fees should be negotiable. Whether or not you can come up with a compromise, however, is another story. Just know this, it is possible to negotiate Realtor fees. Keep in mind, you typically get what you pay for. So while it is possible to negotiate with a Realtor, you may not necessarily want to.

What is Dual Agency?

Dual Agency is when the real estate agent or Realtor represents both the buyer and seller in a given transaction. In this case, the agent would be tasked with balancing the interests of both parties. As you can imagine, a dual agency can be tricky. That’s why several states have even made this practice illegal. In states where dual agency is allowed, agents must tell both buyer and seller that they represent both sides of the transaction.

Many home buyers and investors will often opt against dual agency situations to prioritize their best interests. Some believe a dual agent setup could reduce the overall Realtor fees (they will not be split between two agents). It is entirely up to you to decide whether to work with a dual agent or not when you encounter the option. While this situation is not particularly common, it does happen.

Who Pays The Rental Agent’s Commission?

Depending on the rental agreement, the landlord or tenant will pay the rental agent’s commission. To back up for a moment: a rental agent is similar to a real estate agent, except rather than working with buyers and sellers, they work between landlords and tenants. A rental agent’s commission will typically be between one month’s rent and 15 percent of the annual rent. Depending on the area, these fees will normally be paid for differently. For example, in larger cities, renters are often responsible for rental agent commissions. No matter which side of the transaction you are on, make sure you know who is responsible for the fees before deciding to work with a rental agent.

What Is A Commission Split?

Realtors don’t get to keep their full commission if they work for a brokerage. Usually, they’ll split their commission equally with their broker, but other split structures are possible. For example, an agent might get to keep more of the commission as they gain tenure at their brokerage. These splits help cover overhead costs for running the agency, such as advertising, office expenses, and equipment.

What If The Seller Refuses To Pay?

If a seller refuses to pay Realtor fees, then the responsibility will fall on the buyer; however, this rarely happens without other concessions. Consider possible reasons why a seller would attempt to avoid Realtor fees. Are they listing the property without a real estate agent? Is the sale price under market value? Are any repairs being taken care of before closing? More often than not, if a seller tries to negotiate with the buyer to pay Realtor fees, there will be a reason. Remember that the home buying process is full of negotiations, and while rare, you may encounter situations such as this.

How Do You Save Money On Realtor Fees?

How Do You Save Money On Realtor Fees?

The best way to avoid Realtor fees is to act as the buyer in a transaction. As I already alluded to, the sellers typically pay the fees at the closing table. However, if you can’t avoid the fees, perhaps you can lower them a little. If that sounds like something you would like to try, may I recommend taking the following actions with your Realtor:

  • Discuss everything upfront and transparently: It is always a good idea to know what you can expect when buying something before you spend money on it. For example, it is important to know if you can pick your seat (or if that will cost extra) when buying a plane ticket. The same logic applies to working with a Realtor. Ask what their services are before you start working with them; that way, you know exactly how they can help you.

  • Determine if their fee is negotiable in the first place: As you choose an agent to work with, do not be afraid to ask if their fees are negotiable. Realtors and agents will often let you know right away what to expect when working with them. Remember to pay attention to their demeanor when asking, though, as their answer may provide insight into how it will be to work with them on the property.

  • Offer a competitive rate for the other agent in a deal: It can be difficult to find a balance between saving money on Realtor fees and trying to sell your home quickly. To do so, always make sure the commission you are offering is competitive in your market area. Sellers can run into problems by offering a low commission for the buyer’s agent, which can sometimes result in fewer agents showing your property.

  • Let agents know you are shopping around: There is no rule stating that you have to work with the first agent you find. It is always a good plan to interview multiple prospective agents. Get information on their services, commission, and a general feel of what it is like to work with them. After you have a few options in mind, go with the agent that seems like the best fit for your situation.

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