What Is The Average Real Estate Agent Commission? – Forbes Advisor

A real estate agent commission is a percentage of a property’s sale price paid to the agent as compensation for their services. What you’ll pay for a real estate agent will vary based on location, market conditions and negotiation between the parties.

What Is Commission for a Real Estate Agent?

Most real estate agents charge a fee—or commission—for their services. Traditionally, this commission is around 5% to 6% of the property’s selling price in the United States and is split between the buyer’s agent and seller’s agent.

Services that real estate agents provide to demand this fee include marketing the property, negotiating the sale price and handling administrative tasks related to the transaction.

Related: How Do Realtors And Real Estate Agents Get Paid?

How Do Real Estate Agent Commissions Work?

Sellers are responsible for paying real estate agent commissions, and they’re generally paid at closing. When a property sells, the seller’s agent and the buyer’s agent share a percentage of the sale price as their commission. This amount is usually split between the agents equally, but it can vary based on the original agreement.

For example, if a house sells for $500,000 and the total commission agreed upon is 6%, the total commission will be $30,000. If split equally, each agent will receive $15,000. However, if the agents agreed to a different split—such as 60/40—the seller’s agent would receive $18,000 and the buyer’s agent would get $12,000.

Remember, the commission rate is negotiable and can vary significantly. It’s critical for sellers and buyers to understand how commissions work and to feel comfortable with the commission structure before entering into a real estate contract.

How Much Is the Average Real Estate Agent Commission?

The average real estate agent commission rate is around 5% to 6%, split between the seller’s and buyer’s agents. However, this rate can vary depending on several factors, including location, market conditions and individual contracts.

In some instances, agents may be able to negotiate with their clients on the commission paid to them. They may offer a lower commission rate as an incentive to bring on more buyers and sellers. Similarly, sellers may offer a higher commission rate to attract more agents and gain greater visibility for their property.

Negotiating a Lower Commission

Negotiating a lower commission with your real estate agent can often result in significant savings. However, it’s essential to approach the process strategically and consider several key factors. Ultimately, the key is to engage in open and respectful negotiation, highlighting why a reduced commission may be justified in your specific case.

Here’s how you go about negotiating a lower commission:

1. Understand the market. In a seller’s market, where demand for homes exceeds supply, an agent might be more willing to accept a lower commission because the property will likely sell quickly and with less effort than other listings. In a buyer’s market, agents may be less willing to reduce their commission as the sale process could be more time-consuming and challenging.
2. Evaluate the property. An agent may be more open to negotiation if your property has a high market value and will generate a substantial commission, even at a reduced rate. If your property is in excellent condition and likely to sell quickly, the agent might accept a lower commission.
3. Offer volume or repeat business. If you’re an investor or plan to engage in multiple transactions, an agent may be willing to reduce their commission rate in return for the expected volume of business.
4. Consider the agent’s expertise and experience. Experienced agents with a solid track record may be less likely to negotiate their commission as their services are in high demand. Conversely, less experienced agents may be more flexible as they need to establish a client base.

Related: Best Mortgage Lenders With No Origination Fee

Who Pays the Real Estate Agent Commission?

Traditionally, the seller of the property pays the real estate agent commission. The reason behind this is straightforward: the commission is generally factored into the property’s listing price.

Upon the successful closing of a sale, the seller pays the agreed-upon commission to the listing agent, who then shares a portion of it with the buyer’s agent (if one is involved in the transaction).

While this is the usual practice, some buyer’s agents may have contracts that require the buyer to pay the commission. It all depends on the specific agreement reached between agents and their clients. For that reason, it’s crucial for both buyers and sellers to thoroughly review and understand all contractual obligations before signing any agreements.