When you sell your home, you may wonder how much real estate commission you’ll pay, how those commissions are split, and how much you’ll profit from the sale. The average total commission on a home sale is 5% to 6% of the total sale price, which is typically paid by the seller. The listing agent and buyer’s agent split that commission and then pay part of their earnings to their broker. In this article, we explain how much real estate commission you’ll pay to sell your home and how the commission is split between the brokers and the agents. To better answer your questions, we spoke with top-performing agents Rick Ruiz, who sells nearly 50% quicker than the average Las Vegas agent; and Robert Dombrowsky, who works with over 85% more single-family homes than the average Fair Lawn, New Jersey agent. Real estate agents are licensed professionals who work for a real estate broker or brokerage firm. When an agent gains enough experience they can branch out on their own as a broker. According to the National Association of Realtors (NAR), 88% of agents work as independent contractors, not employees. Agents are typically paid a commission on their sales, but some are paid a salary plus commission on their sales, and a minority are paid a salary only. The 5% to 6% commission on a home sale is typically split 50/50 between the listing agent and the buyer’s agent, with 2.5% to 3% going to each. But the agent doesn’t receive the full amount. How much an agent is paid depends on the broker they work for. According to Glassdoor, the average salary for real estate agents is $107,156, which may range between $45,000 and $236,000. However, today’s competitive market has increased the number of new agents, which has increased competitiveness between agents. Dombrowsky believes this has caused a widening salary gap between top sellers and average sellers. “The agent who has less experience, who works exclusively as a buyer’s agent, or who is doing the business part-time is going to be making less because they’re not always winning the bidding war,” he explains. As stated earlier, the seller typically pays the agents’ commission. However, the seller doesn’t pay this directly to the agents. The escrow or settlement company that is overseeing the closing distributes payment, including the commission checks to each broker at closing. The listing agent and the buyer’s agent then receive their commission from their broker. Here is what the distribution of a 6% commission might look like on a $350,000 home if both agents receive 50% of their commissions and each brokerage takes half of that:
A real estate broker is a real estate agent who has obtained a state real estate brokerage license and has in-depth knowledge of the real estate business. A brokerage manages the transaction, ensures the agent complies with state and local regulations, and assumes liability for the transaction. The broker’s commission pays for any services or supplies the brokerage provides for its agents. This includes payment for managing the transaction and can include MLS (multiple listing service) input and management, use of proprietary apps, print and online marketing/advertising, lead generation, lockboxes and signage, and access to professional services such as deep cleaning, staging, and photography. Not all agents use the services offered by their brokerage. Some more experienced agents may perform the services themselves and/or hire them out to other professionals. Ruiz explains: “Most brokerages have a team that will provide services. But I’ve always treated my book of business and my day-to-day real estate activities like a business. So, I’m not sitting around waiting on my broker to get my clients ahead, I’m going to be the one spearheading it.” How much commission a brokerage receives depends on its business model. Some brokers receive 50% of their agents’ commissions. Some brokers reduce their commission after a certain dollar amount; others reduce their commission as agents gain experience. Still, others are willing to negotiate the commission split with their agents. Brokers may also receive an added percentage of the sale as a desk fee and/or franchise fee. Here are the (agent/broker) commission splits for some of the top brokers in the nation: According to Glassdoor, the national average salary for real estate brokers is $141,603. Although the terms may be used interchangeably, all Realtors are agents but not all agents are Realtors. A Realtor is a licensed real estate agent who is also a member of the National Association of Realtors (NAR). A Realtor may belong to one or more of NAR’s 1,100 associations or boards on a national, state, or local level. An agent who is also a Realtor adheres to the NAR’s strict code of ethics. When you hire a Realtor, you receive this high level of professionalism at no additional charge, which means you would not pay more commission to a Realtor than you would to a real estate agent. A real estate team is a group of agents that share the workload and commissions of their real estate transactions. The team is mentored or led by a licensed and experienced team leader. “A team is almost a company unto itself. Team leaders may have such a huge following and so much business that they are not able to service all of it, and so they take on members to fill certain roles. You can have huge teams where the team lead provides training, leads, and administrative services,” explains Dombrowsky. The advantage of hiring a real estate team is having access to two or more real estate professionals for your home sale at the same commission rate a single agent may charge. Team members may be licensed or unlicensed agents or specialists with expertise in one or more of the services you require, including detailed listing, staging, photography, marketing, and more. The drawback of hiring a real estate team for your home sale is that you may not be working directly with the agent that you hired. Many homeowners don’t realize that the commission that they pay to the seller’s agent is negotiable. In fact, in today’s competitive market, many agents come to the seller’s home prepared to negotiate and still provide comprehensive services. Additionally, during negotiations with the buyer, you may ask the buyer to pay their agent’s commission. “Today’s consumers are used to lower costs. Advances in technology have added efficiencies and made it easier for agents to provide full value at scale. And competition between agents has also reduced rates. Because the market value for homes today is a lot higher, there’s a lot more room for the agents to charge a discounted commission and still be compensated handsomely,” explains Ruiz. A couple of things to remember when negotiating a lower commission: “At the end of the day, there’s a balance. You have to ask: Do I want that Realtor that’s willing to work for that rock-bottom compensation?” says Ruiz. One way homeowners choose to save money on broker fees is to sell by owner, known as FSBO. A few things to consider when selling your home yourself: According to a 2020 NAR report, FSBO sales account for only about 7% of home sales. You may be able to save a little on your home sale by listing with a discount brokerage. A discount broker provides basic real estate services – including listing, documentation, and transactional services – for a flat fee or a reduced commission (usually around 1.5%). The services they offer may be limited to listing, documentation, and transactional services. Some brokers offer full services, including the services of an in-person agent. Keep this in mind when considering a discount brokerage: The commission that you pay to a top-selling agent is well worth the cost for the expertise and guidance you receive on your home sale. Because homes sold by top agents earn up to 10% more than those sold by average agents and 16% more than those sold FSBO, the amount you’ll pocket at closing will be well worth the investment. If the 5% to 6% average commission seems high, keep these things in mind: If you’re wondering how much you might pay a top real estate agent, we can help. Our commission calculator provides an overview of the current agent commissions in your area so you can get an idea of how much it costs to hire a top real estate agent to sell your home.
How are real estate agents paid?
Who pays the real estate agent’s commission?
How much commission does a real estate broker receive?
Will I pay a higher commission to a Realtor?
Will I pay a higher commission to a real estate team?
How can I save money on real estate commission?
Negotiate a lower commission with your listing agent
Eliminate commission entirely with for sale by owner (FSBO)
Pay a reduced commission to a discount broker
Partner with a top agent who can get you the best possible price on your home sale
