The exact commission realtors charge depends on the agent and the deal you negotiate. But the typical realtor commission is 5-6% of the sales price. This is split between the buyer’s agent and the listing agents – so each will pocket somewhere around 3%. Here is a closer look at how much the average realtor makes with each deal.
What if One Party Has No Agent?
While it’s typical for both the buyer and the seller to have their own agent, there are no laws that require you to have representation. So, it’s possible that one party may feel confident in negotiating and handling the closing on their own and would rather save a bit of money.
In this scenario, the commission is usually cut in half, and the agent representing the single party would still receive their customary 3%. So, it doesn’t make much difference to the realtor whether or not the other party has an agent because they should be paid the same.
There is also the scenario of dual agency – where one agent represents both the buyer and the seller. The agent will likely want to collect the full commission because they are doing twice the amount of work. But, it’s not unusual for the seller to negotiate the commission down to 4 or 5% with a dual agent. This situation is rare, but it does occur – so if you find yourself sharing an agent with the other party, make sure the expectations about representation and commission are agreed upon upfront.
Realtor Commission Examples
The commission a realtor earns on a deal is a percentage of the final sales price. This means the amount of money each broker will pocket varies radically from deal to deal, depending on the market and the type of homes they are selling.
For instance, a broker selling luxury properties in Manhattan will earn far more than an agent selling single-family homes in New Jersey. Here is a look at a few examples of the average realtor commissions at a few different price points.
|Final Sales Price
|Full Broker Commission (6%)
|Commission per Agent (3%)
What is the Standard Commission Percentage?
The standard agent commission is 6%, with 3% each to the buyers and seller’s agents. But this will vary depending on the market and the broker’s negotiating skills.
In areas with expensive real estate like New York or San Francisco, it’s not uncommon for brokers to charge closer to 5% because they are already making so much more than the average deal. Plus, there is a large pool of agents to compete with.
On the flip side, in areas where the cost of a home is lower, and there is less competition, agents may charge a bit more for their knowledge of the local market. Plus, they have to be sure they will make enough to justify their hard work.
Who Pays the Agent?
The agent’s commission is taken out of the final sum paid by the buyer at closing. So, even though the commission was negotiated with the seller, it’s technically paid by the buyer, as they’re providing the money for the deal. So, it depends on how you look at the situation.
No one pays the fee out of pocket, the way you would pay a contractor or landscaper. But the seller should factor the cost of the broker fees into their listing price to be sure they make enough to finance their next purchase or pay off any debts.
Do Realtors Keep the Full Commission?
It depends on the realtor. Most agents must split the commission with the brokerage they work for. The broker typically agrees to provide the agent with access to listings and resources such as an office and computers in exchange for a percentage of each commission.
The typical split is 50/50 – meaning the brokerage takes half, and the individual agent pockets the other half. But this can be more or less depending on the market and the agent’s experience level. For example, newer agents who require more oversight may take home less than 50%, whereas high producers with more bargaining power may take home more. Some brokerages even charge agents a flat fee per month but allow them to keep the majority of the commission.
Realtors who own their own brokerage can pocket the full commission. But they also have to pay for overhead costs – including marketing, office space, and resources for the agents underneath them (if they have any). So, it’s unusual for realtors to pocket 100% of the commission as profit. But the amount they take home depends on the fee structure of the brokerage and the agent’s level of experience.
How Can You Lower Realtor Commission?
Broker commissions are not set in stone, so there is always room to negotiate if you are strapped for cash. One way to lower the commission is to represent yourself. This may backfire and lead to a lower sales price. But if you feel confident in your abilities to find or market a property, it could save you from paying the full 6% commission.
There is also something called a limited-service agent who will provide select assistance in exchange for a lower fee. For example, they may agree to a 1% fee just to oversee the closing but not the marketing or negotiation phase. The exact services offered by these types of agents vary, but this can be a good way to save money.
Plus, you can always find ways to negotiate with an agent, but you’ll have to have some sort of leverage. Most brokers you call out of the blue will have a set percentage that they work for. They may budge a bit if you are persuasive, or they may just choose to move on to other clients willing to pay the full fee.
If you have a friend who is in real estate, you may be able to leverage your personal relationship to secure a better commission. Or, if you know someone you trust, who is just getting started in the real estate industry, you may convince them to offer a lower commission in exchange for the experience. Both could backfire and cost you a friendship or money down the line. But as long as you are upfront about your expectations and are willing to be patient, it could work out for all parties involved.