The average Realtor®’s cut of the sale is 6% of the home sale price. The commission is split between the listing agent and the buyer’s agent to compensate them for their services. It’s customary for the seller to pay the commission, deducting money from the sale price.
For all the details on agent commission, we interviewed Jeff Reynolds, a real estate agent in La Plata County, Colorado, with more than seven years of experience. We’ll explain what commission covers and in what circumstances sellers pay less than 6%.
Breaking down the Realtor®’s cut of the sale
As mentioned previously, the 6% commission is split between the listing agent and the buyer’s agent. Take a look at how this percentage translates into dollars per the following home sale prices:
|Home sale price||Total agent commission (6%)||Commission per agent (3%)|
On average, the listing agent keeps around 75% of their commission
The listing agent doesn’t simply pocket their 3% commission. The agent splits their commission with their broker based on a previously agreed-on ratio. These split rates can vary; however, it’s common for the listing agent to give their broker anywhere from 30% to 50% of their commission (for a 50/50 or 70/30 split), depending on the market size and brokerage.
The agent also spends a significant portion of their commission on marketing services like professional photography, staging, and advertising materials to attract buyers to the property. Once the agent covers these obligations, they typically pocket around 75% of the commission (before taxes, of course).
Commission is negotiable — but a major discount is a red flag
Like most things in real estate, you can negotiate commission with Realtors®. Sellers may ask their real estate agent for a lower commission rate or for a buyer to cover some of the commission costs. Agents may also offer lower rates as a means of attracting more clients. That said, the top-performing agents are less likely to lower their commissions, as they know their worth and don’t want to devalue the importance of the services they provide.
“There are many agents that provide a discount to our services. But the fact is we put a lot of effort into the sale of any given property and certainly put a lot of effort into the business in general,” Reynolds comments.
While you’re only spending 10 to 12 hours face-to-face with your agent, they’re working tirelessly behind-the-scenes marketing your property, analyzing the market, communicating with buyers, and navigating paperwork to keep your home sale on track.
Low commission agents offer fewer services for a discount
Some real estate agents market themselves as “low commission agents,” offering minimum services for a flat fee or a commission as low as 1% to 1.5% of the sale. These services typically include, but are not always limited to:
- Listing your property on the MLS
- Posting a “For Sale” sign
- Setting up a lockbox for showings
- Assisting with paperwork
Some low commission real estate agents strive to serve as a dual agent for the home sale, representing both the seller and the buyer to increase their commission. Dual agency is controversial — eight states have made this practice illegal (Alaska, Colorado, Florida, Kansas, Maryland, Texas, Vermont, and Wyoming).
Opponents of dual agency don’t believe an agent can represent both the seller and the buyer without compromising the best interests of one or both parties. However, others argue that dual agency doesn’t inherently compromise consumers’ interests and may even add efficiency to the transaction.
Top real estate agents win sellers more money
While it may be tempting to hire a low commission agent or to sell “For Sale By Owner” (FSBO), studies reveal that sellers who opt for these alternatives typically sell their homes for less money than those who work with a top agent.
For instance, The National Association of Realtors reports that FSBO homes sold for a median price of
$217,900 in 2020, whereas agent-assisted sales sold for a median price of $242,300. Another independent study by Black Knight found that FSBO homes sell for 5.5% less, and in some cases nearly 6% less than agent-assisted sales.
So at the end of the day, the money sellers attempt to save on agent commission is often negated by the amount they lose on the sale price. Furthermore, our research indicates that the top 5% of real estate agents earn their clients 10% more on the sale of their home — meaning their commission covers their services and nets their sellers a higher profit.
Don’t be intimidated by the Realtor®’s cut of the sale
When you consider the amount of value a top real estate agent brings to the home sale process, the 6% commission is an easier pill to swallow. Not only do you stand to make more money on your sale, but you’ll also save yourself headaches and stress.
To find top real estate agents near you, share your property details with HomeLight. We’ll crunch real estate agent performance data like average list to sale price ratio, days on market, and client reviews to match you with the top three real estate agents for your home sale.