Every time a realtor helps a client buy or sell a home, there’s a commission charge. In fact, realtors only make money if a home changes hands. If a realtor lists a home for sale, but it never sells and the seller takes it off the market, the real estate agent walks away empty handed.
So how much is the illustrious commission? Keep reading to find out what using a realtor may cost you.
What’s the Going Rate for a Realtor’s Commission?
Today, realtors get an average of 5 percent to 6 percent of the home’s sales price. A $250,000 home could cost $12,500 to $15,000 in commission. This is just the realtor’s portion of the sale. Buyers still pay standard closing costs, which cost between 3 percent and 5 percent of the loan amount. Sellers often have closing costs too.
The realtor’s commission probably seems excessive. Who would pay $12,000 just to sell a home? Think about it, though. Real estate agents don’t make a dime until the home sells. The transaction must close first. This could take months from the initial contact. It could also include many hours of work, day and night. Realtors earn their income.
Are Realtor’s Commissions Negotiable?
You can negotiate your realtor’s commissions. The law doesn’t mandate how much a realtor makes. The 5 percent to 6 percent is an average, but it varies based on your location. Many realtors want that 5 percent, but if you sell during a downturn, you may find negotiating a little easier.
If you can’t find realtors that will negotiate, you may consider downgrading your services. Real estate agents handle your home’s marketing. But, if you can’t afford 5 percent, ask the realtor for lessor services, including:
- Set the asking price
- Manage communication with the buyer
- Write/complete the contract
- Close the sale
Many realtors charge a flat fee if they don’t market your home. This gives your budget more wiggle room, leaving you more cash when the transaction closes.
Who Pays the Realtor’s Commission?
Have you noticed we haven’t talked about the buyer much yet? That’s because sellers pay the realtor’s commission. Fortunately, the money comes from the proceeds of the sale. If a buyer agrees to $250,000, the real estate agent would receive $12,000 – $15,000 of that money at the closing.
If the buyer has a real estate agent too, the seller’s agent pays the buyer’s agent. Before you sign a contract, the realtors will have their own agreement. This agreement dictates how the realtors split the commission. It’s usually a 50/50 split, but some selling agents keep a larger percentage for themselves.
The buyer essentially walks out of the process without paying the realtors anything. However, sellers typically have a higher asking price for the home to cover the agent’s fees. This means you pay the realtor fees in the long run.
What Does the Realtor’s Commission Include?
Each real estate agent offers his or her own services, but in general, you can expect the realtor to:
- Help you price the home accordingly
- Market the home in MLS, social media, and in-person
- Show the home
- Handle negotiations and questions
- Managing the closing process
What Happens in a Dual Agency Transaction?
Some states don’t allow dual agency. They say that it presents a conflict of interest. Some states do allow it though. A dual agency occurs when the real estate agent represents the buyer and seller. It’s not a common scenario, but sometimes a buyer may be interested in one of the realtor’s own listed properties. The dual agency realtor doesn’t split the commission. Instead, he keeps the entire commission himself.
A realtor’s commission seems costly, but for the services it provides, it’s well worth it. Before you hire a real estate agent, discuss the commission. Ask if the realtor will negotiate. Also, shop around and ask several agents about their commissions. Choose the agent that offers the best commissions and service possible.