Realtors typically charge a commission of 3% to 6% on a home’s sale price. While the exact rate is negotiable, the commission is one of the biggest expenses sellers face when selling a home.
For example, if you sell a $500,000 home and agree to a 5% commission, you’ll pay $25,000 in Realtor fees. That’s a significant amount of money that could otherwise stay in your pocket.
Fortunately, you don’t have to pay a traditional listing agent’s commission to sell your home. Companies like Houzeo let you list your home on the MLS for a one-time flat fee starting at just $399. This helps you save thousands while still getting maximum exposure to buyers.
Key Takeaways
- The average Realtor commission is 3% to 6% of the home’s sale price, but commission rates are always negotiable.
- Realtor commissions are split between brokerages and agents, with each brokerage sharing its portion based on the agent’s commission agreement.
- A Realtor’s take-home pay is much lower than the commission earned, as it depends on the commission split and business expenses like marketing, licensing, MLS dues, taxes, and insurance.
How Much Does a Realtor Make?
There isn’t a single answer to how much a Realtor makes. Their earnings can differ based on their experience, market activity, and the number of successful transactions they close.
Average Realtor Commission Percentage
Most Realtors charge a commission based on a percentage of the home’s final sale price. While the national average is around 3% to 6%, there is no standard commission rate. Every brokerage sets its own fees, and sellers are free to negotiate before signing a listing agreement.
Several factors influence the commission you pay, including your home’s value, local market conditions, and the level of service you need.
Here’s how different real estate commission rates translate to different home prices:
| Home Sale Price | 5% Commission | 6% Commission |
|---|---|---|
| $300,000 | $15,000 | $18,000 |
| $400,000 | $20,000 | $24,000 |
| $500,000 | $25,000 | $30,000 |
| $750,000 | $37,500 | $45,000 |
Even a small difference in commission can save you thousands of dollars. For example, reducing your listing commission by just 1% on a $500,000 home saves $5,000.
Compare Commissions: Realtor commissions are negotiable. Before hiring an agent, compare multiple commission structures and the services included.
How Is Commission Split Between Agents and Brokers?
The total commission does not go directly to a single Realtor. Traditionally, the commission is divided between the listing brokerage and the buyer’s brokerage. Each brokerage then shares its portion with the individual agent based on their commission agreement.
For example, if a home sells for $400,000 with a 5% commission, the total commission is $20,000.
A typical breakdown may look like this:
| Recipient | Amount |
|---|---|
| Total Commission | $20,000 |
| Listing Brokerage | $10,000 |
| Buyer's Brokerage | $10,000 |
| Agent's Share (80/20 Split) | $8,000 |
| Brokerage's Share | $2,000 |
The exact split varies by brokerage, experience level, and compensation agreement.
Who Pays the Realtor Commission?
Who pays the Realtor commission depends on the agreement between the buyer and seller. Traditionally, sellers paid both the listing agent’s and the buyer’s agent’s commissions from the proceeds of the home sale.
Since the 2024 NAR practice changes, buyers sign written agreements with their agents that explain how their agent will be compensated. Sellers can still choose to help cover the buyer agent’s compensation through a negotiated seller concession, but it is no longer automatic.
Before listing your home, discuss your commission options with your agent so you know exactly what costs you may be responsible for at closing.
The NAR settlement resolved antitrust lawsuits alleging that MLS commission rules limited competition and kept commission costs higher for home sellers. As part of the settlement, NAR agreed to change its rules while denying any wrongdoing.
What Does a Realtor’s Commission Cover?
A Realtor’s commission covers more than just listing your home. It pays for the expertise, marketing, negotiation, and transaction support needed to help you achieve the best possible outcome.
Depending on the agent and brokerage, the commission may include:
- Pricing Your Home: Conducting a comparative market analysis (CMA) to recommend a competitive listing price.
- Marketing Your Property: Professional photography, virtual tours, social media advertising, yard signs, and listing promotions.
- MLS Listing: Listing your home on the Multiple Listing Service (MLS), which syndicates it to popular real estate websites.
- Showing Management: Scheduling showings, hosting open houses, and communicating with potential buyers.
- Offer Negotiation: Reviewing offers, negotiating price and contingencies, and helping you choose the strongest one.
- Paperwork and Compliance: Preparing contracts, managing disclosures, and ensuring the transaction complies with state and local laws.
- Closing Support: Coordinating with lenders, title companies, inspectors, and attorneys until the sale is complete.
If you’re considering paying a full commission, ask your agent for a detailed breakdown of the services. Comparing what’s offered can help you decide whether a traditional Realtor, a discount broker, or a Flat Fee MLS service provides the best value for your situation.
How Does Real Estate Commission Work?
A Realtor’s commission is usually paid after the home sale closes. Sellers agree to their listing agent’s compensation through the listing agreement, while buyers agree to their agent’s compensation in a separate buyer representation agreement.
At closing, the closing or escrow agent distributes the agreed compensation. Depending on the purchase agreement, the seller may also contribute toward the buyer’s agent’s compensation.
If the home doesn’t sell, the listing agent generally doesn’t earn a commission. However, the seller may still owe certain upfront marketing costs if required by the listing agreement.
How Much Commission Do Realtors Make per Year?
A Realtor’s income varies widely based on experience, location, local home prices, and the number of transactions they close each year.
According to the U.S. Bureau of Labor Statistics, the median annual wage for real estate sales agents is about $56,960. However, earnings can range from less than $40,000 for newer agents to well over $100,000 for experienced agents in high-value markets.
What Factors Affect Realtor Commission?
There is no fixed Realtor commission rate. The amount you pay depends on several factors, such as:
1. Local Market Conditions and Competition
Commission rates often reflect how competitive the local market is. In areas with many agents competing for listings, sellers typically have more negotiating power than in markets with fewer active realtors.
2. Home Value
Many agents use a tiered commission structure, where the percentage decreases as the home’s sale price increases. This helps keep commissions proportional on higher-value properties.
3. Services Included
Not all commission packages include the same level of marketing. Some agents pay for professional photography, 3D tours, targeted online ads, and staging consultations, while others charge extra for these services.
4. Agent Experience
Experienced realtors often justify higher commissions with neighborhood expertise, a larger buyer network, and stronger negotiation skills. However, a higher commission doesn’t always guarantee better results. So, always review an agent’s recent sales before hiring.
Can You Negotiate Agent Commission?
Yes, Realtor commission is negotiable. However, whether an agent agrees to lower their commission depends on factors such as the local market, your home’s value, the services offered, and the agent’s experience.
Keep in mind that the lowest commission isn’t always the best deal. Instead, compare the services included and the value each agent provides. You may also be able to negotiate a lower commission if you use the same agent to buy and sell a home.
You can also save by exploring alternative selling options. For example, selling to an unrepresented buyer or using a Flat Fee MLS company like Houzeo can help skip the listing agent commission altogether.
How to Save Money on Realtor Commission?
Realtor commission is one of the highest costs of selling a home. Fortunately, there are several ways to reduce your selling expenses without limiting your home’s exposure to buyers.
1. Work With a Discount Real Estate Broker
Discount real estate brokers provide many of the same services as traditional agents but charge a lower listing commission, often around 1% to 1.5%. They’re a good option if you want professional support while saving on commission.
2. Sell Without Paying Full Commission
Since Realtor commissions are negotiable, you can compare multiple agents and negotiate a lower listing fee before signing a contract. You can also discuss buyer agent compensation as part of your overall selling strategy.
3. Use a Flat Fee MLS Service
A Flat Fee MLS service lets you list your home on the MLS for a flat fee instead of paying a percentage-based listing commission. If you want maximum exposure while keeping more of your equity, a flat fee service can be a cost-effective option.
4. Compare Cash Buyer Offers
If speed is more important than maximizing your sale price, consider comparing offers from multiple cash buyers. Since you don’t need a listing agent, you can often avoid paying a listing commission, though cash offers are typically below market value.
Is Paying Realtor Commission Worth It?
Yes, paying Realtor commission can be worth it if you are a first time buyer. A good agent can help you price your home, market it effectively, negotiate offers, and avoid costly mistakes.
However, if you’re a confident seller, consider alternatives like a Flat Fee MLS service. For example, Houzeo lets you list your home on the MLS for a one-time fee, helping you maximize exposure while keeping more of your equity.
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