Content of the material
- What do realtor fees cover?
- Are realtor fees negotiable?
- How Much Do Real Estate Agents Make?
- What is a fair commission for a real estate agent?
- Realtor Fees FAQ: Everything You Need To Know
- How Do Realtor Commissions Work?
- How Much Does A Realtor Cost On Average?
- How Much Does A Realtor Charge In Fees?
- How Do You Calculate Realtor Fees?
- Are Realtor Fees Included In Closing Costs?
- Are Realtor Fees Included In A Mortgage?
- Are Realtor Fees Negotiable?
- What is Dual Agency?
- Who Pays The Rental Agent’s Commission?
- What Is A Commission Split?
- What If The Seller Refuses To Pay?
- How Do You Save Money On Realtor Fees?
- Are Realtors overpaid?
- Average real estate commissions by state
- The bottom line
- Learn more:
What do realtor fees cover?
Usually, real estate brokers charge a percentage of the profit from a home sale.
This commission covers services rendered, such as:
- Helping the buyer locate a home by using the MLS
- Scheduling times with the seller for walkthroughs
- Processing all the paperwork
The total commission — 5-6% of the sale price, on average — is split between the buyer and seller’s agents. It is common for agents to split commission evenly, so each would get 2.5-3%.
Buyer’s agents are more motivated to show homes to their clients if they can earn commission from the deal. As a result, you can think of realtor fees as a marketing expense for the seller.
» MORE: What is realtor commission?
Are realtor fees negotiable?
Realtor fees are always technically negotiable — but many agents aren’t willing to budge on their rate. As the Consumer Federation of America reports, roughly 73% of listing agents won’t negotiate on their fees.
That said, there are some situations where a realtor may have some room to negotiate. If you’re selling a more expensive home (think above $500,000), a realtor may be willing to lower their fees — because they’ll still receive a high dollar amount overall.
Realtors may also be more flexible on their fees if your home is in excellent condition and is likely to sell fast, if it’s a hot seller’s market, or if you’re planning to buy and sell a home with the same agent.
How Much Do Real Estate Agents Make?
In 2022, Indeed.com listed the annual pay for real estate agents in the $85,597 to $112,309 range, depending on years of experience. The median annual salary was $48,770 in 2021, according to the most recent data available from the U.S. Bureau of Labor Statistics. For brokers, the mean annual salary was $86,490.
Of course, real estate agents and brokers can make much more than that. The highest 10% of agents earned more than $102,170 in 2021, while the top 10% of brokers made $176,080.
What is a fair commission for a real estate agent?
Commissions vary by market conditions and geographic regions, so there isn't a lot of government data on the issue. The government's last thorough report on commission rates (back in 2009) shows an average broker commission of 5% or 6%, but each brokerage will decide how much of that to share with agents. The government keeps better data on overall real estate agent pay, and in 2021, the median real estate sales agent salary was roughly $62,010.
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.
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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?
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.
Are Realtors overpaid?
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|
The bottom line
Realtor fees can cost quite a bit, it’s true. Going it alone is possible, but the services an experienced agent provides are valuable, especially in a hot and fast-paced market. And it’s tough to DIY when you’re already juggling other everyday responsibilities. In addition, since Realtors don’t get paid until your home sells, they’re highly motivated to make sure your property brings in the best possible price it can.
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