How Do Realtor Fees Work? Unpacking Real Estate Commissions

How realtor fees work | Who pays realtor fees? | Commission changes | Bottom line

When buying or selling a house, most people rely on a realtor to help them navigate the process — but how the realtor gets paid can be a source of confusion. How do realtor fees work?

Realtors are usually paid on commission, which means they receive a percentage of the home’s sales price when the transaction closes. Occasionally, a realtor will charge a flat fee instead of sales commission. Realtor fees vary depending on:

• How much the home costs
• The services the realtor provides
• Local market conditions

A typical realtor fee is 2.5-3% of the home’s final sales price, and the seller usually pays the real estate commission. However, a legal settlement involving the National Association of Realtors has made realtor fees and who pays them more open to negotiation.

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How realtor fees work

The percentage a real estate agent makes on a home sale ranges from 5-6% of the home’s sale price nationwide. Buyer's and seller's agents each receive an average of 2.5-3% of the sales price. For a house that sells for $400,000, a 6% agent commission would be $24,000, with each agent earning about $12,000.

However, commission rates can vary and are always negotiable. Depending on the services provided and whether either agent charges more than the average 2.5-3% commission, you could spend more (or less) on real estate agent fees.

There are also ways to cut costs yourself. Some quality realtors charge less than 2.5%, including 1% commission realtors, who provide equivalent services for a discount. Paying 1% commission on a $400,000 house could save you $8,000.

It's always possible to negotiate lower realtor fees, or to use a service (such as Clever Real Estate) that negotiates a lower fee for you.

How realtor fees are split

The real estate agent’s commission is usually split equally between the buyer’s and listing agents.

With a 6% commission, each agent would typically receive 3% in commission, but this can vary. Some agents charge more than 3%, but low-commission realtors charge significantly less.

Agents handle tasks for both buyers and sellers to earn the realtor fee. A listing agent helps the seller price the home, market and promote it to prospective buyers, and arrange home showings. The agent also helps seller evaluate offers and guides them through the closing process.

A buyer’s agent can help buyers determine which neighborhoods or areas would be a good fit for them, find them homes to view, write competitive offers, and navigate closing after an offer is accepted. Both listing agents and buyer’s agents help with negotiations around price, contingencies, timing, and more.

Realtor fees are falling

Although 2.5-3% is the real estate industry standard for agent commissions, there is evidence that commission rates are creeping down, which is good news for buyers and sellers.

• Anywhere Real Estate, the parent company of such brokerage franchises as Century 21, Coldwell Banker, and more, reported an average seller-side commission rate of 2.42% in its quarterly financial results ending in June 2024^[1]
• A survey by Clever Real Estate found that the average real estate commission rate was 2.74% for listing agents and 2.58% for buyer’s agents.
• Redfin found that the typical buyer’s agent earns a 2.55% commission, which has dropped since the NAR settlement was announced in March ^[1]

While relatively small, these adjustments are still significant for sellers and buyers. They indicate that negotiating real estate agent fees can lead to lower fees, and that there's some wiggle room with commission when transparency is prioritized in the transaction process.

How flat fees work

Instead of charging buyer’s agent commission or listing agent commission, some realtors offer a flat fee.

“Flat fees can be attractive to sellers who are uncertain about the final sale price or who want to avoid paying a potentially high commission,” said Kenneth Yim, managing partner at Owncondo. Like real estate commissions, flat fees can vary widely depending on the services offered, brokerage policies, and other variables.

“On the lower end, you might find basic MLS listing services for around $500-1,000,” Yim explained. “These often include just the listing itself with minimal additional support.”

Mid-range fees of $2,000-3,500 might include extras like photography and virtual tours, while $4,000-5,000 covers full-service packages similar to traditional agents, according to Yin.

Buyer’s agents also offer flat fees, which might include helping buyers write offers, but not assisting with the home search or booking appointments to see the house.

If buyers or sellers are unsure about what exactly they might need from their agent or whether the flat fee covers those needs, they should compare services and costs between all of their flat-fee and commission-based options before choosing an agent.

Who pays realtor fees?

The seller usually pays the agent’s commission at closing; realtor fees are not included in closing costs. After the seller receives the buyer’s payment for the home, they pay each agent their commission.

Here's an example on a $400,000 home sale:

Total commission (6%): $24,000

Each agent receives: $12,000

Net to seller: $376,000

In some cases, sellers may negotiate lower commission rates with their agent or pass certain fees onto buyers, although this depends on the market and the contract.

Realtor commission changes 2024

In March 2024, the National Association of Realtors (NAR) settled Sitzer v. NAR, a lawsuit that alleged that NAR and brokerage franchisors fostered an environment that stifled competition and violated antitrust laws ^[1]. Another lawsuit, Moehrl v. NAR, made similar allegations and is still pending ^[1].

The core issue of the lawsuits revolves around two central practices with NAR and its members.

• Listing buyer’s agent commission on the multiple listing service (MLS), which in many markets is only available to NAR members
• Requiring listing brokers to compensate buyer brokers after the seller paid commission at closing

Changes to realtor fees

As of August 2024, NAR and its members have removed the MLS field that hosted buyer’s agent commissions, and commissions have become a more central part of the negotiation process.

Home buyers must sign an agreement with a buyer’s agent before they can start searching for homes with that agent, and the agreement should include the buyer’s agent commission.

Who pays buyer agent fees?

For the most part, sellers continue to pay the buyer’s agent commission out of the home sale proceeds, but this has also become negotiable.

Sellers can now negotiate the buyer’s agent commission when they decide whether to accept an offer, and they can also decline to pay it. If a seller doesn’t want to pay the buyer’s agent commission, then the buyer will need to pay this realtor fee themselves.

Market impact on realtor fees

Realtor fees and commission rates are now somewhat contingent on the market. Sellers in hot seller markets with plenty of buyers might not want to pay commission, or they might want to negotiate lower rates for the buyer’s agent. In these cases, buyers could be responsible for covering the realtor fee, which could continue to drive down commission rates.

By contrast, buyers in markets with plenty of homes for sale and fewer buyers may have more negotiating power around agent commission. Both buyers and sellers must find an experienced local realtor to help them navigate these negotiations.

The bottom line

Realtor fees are typically paid by commission, which ranges between 2.5% and 3% for each agent. The seller usually pays the commission at closing. However, this commission rate seems to be dipping after the NAR settlement.

Remember, realtor fees aren’t fixed and can always be negotiated by both the buyer and the seller.

An easier way to save on these fees is to work with Clever Real Estate, which charges half the normal listing agent fee. The advantage to working with a platform like Clever’s is that they negotiate all of the commissions in advance before recommending an agent; all you have to do is decide which realtor is the best fit for you.

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