How does a 1% real estate commission work?

Low-commission agents, or 1% commission fee companies, are increasingly catching the attention of home sellers. These agents or brokerages offer to list and sell your home for a significantly reduced commission rate of just 1%. At first glance, this rate appears to be a substantial discount from the standard 5% to 6% commission normally charged by real estate agents.

However, it’s important to note that this reduced rate primarily affects only the listing agent’s typical 3% commission. In the end, it works out to be a roughly 2% discount because it only applies to half of the transaction. Sellers are also responsible for the buyer’s agent commission, which is usually around 3%.

You’ll pay more than 1% commission

Carl Medford, a full-commission, top-performing California agent with more than 23 years of experience, says that the “1 percent commission real estate” label can be misleading.

“It gives the seller the impression that they can get their house sold for 1%, which is simply not true. Those companies that are advertising 1% commissions are only telling half the story.”

When you account for the buyer’s agent fee, Medford says most sellers using a 1% service will likely end up paying up to 4% in commissions.

You may receive ‘discount’ service

While saving on commission can seem like a direct path to increased profits from your home sale, the reality might be more nuanced. The 1% rate, while potentially saving you thousands on the transaction, could also have implications for the overall success and profitability of your sale.

Reduced commission rates can sometimes mean limited services or less experienced agents, factors that might influence the final sale price and, consequently, your net earnings. Understanding these trade-offs is key to evaluating whether a 1% commission agent is the right choice for your home sale.