How do real estate agent fees and commissions work?
In this do-it-yourself digital age, home sellers and buyers alike might wonder if they really need Realtors — or, more precisely, if they need to pay Realtor fees. Just how crucial are these agents to a successful real estate transaction?
Well, a good agent is really pretty useful. For homebuyers, agents have access to information you don’t, and can use their expertise to find the best properties for you and put together a strong offer. Sellers see many benefits, too, especially when figuring out the best asking price and marketing the listing. Here, we’ll take an in-depth look at how real estate agent fees work and what you get for the money.
Changes to the way commissions work went into effect in 2024 as a result of a lawsuit settled by the National Association of Realtors and several major brokerages. The longstanding commission model of sellers footing the bill for both their own agent and their buyer’s, typically totaling 5 to 6 percent of the home’s sale price, is no longer in effect. Now, which party pays for which commission is negotiated upfront, and sellers may or may not agree to pay their buyer’s agent’s fee. Be sure your contract spells out who is paying, and how much, very clearly.
How much are Realtor commissions?
Only a very small portion of Realtors work on salary — working on commission, for a percentage of the home’s final sale price, is much more common. That means the more expensive the home, the more money the agents make.
For years, the typical going rate was 6 percent in total, usually split down the middle between the buyer’s agent and seller’s agent. But it began to fluctuate with the advent of discount brokers and the rise of online, publicly accessible listings.
Of course, real estate commissions can be negotiated, and nowadays the total typically runs somewhere closer to 5 percent. The exact terms of an agent’s commission will vary from sale to sale, and can also depend on the region and which firm they work for. As with most of the other expenses related to real estate transactions, a Realtor’s fee isn’t paid until the sale closes.
Let’s look at an example: A 5 percent total commission on a $250,000 home sale would come to $12,500. But on a $1M sale, a commission at the same rate would come to $50,000. Here’s roughly what the agents would earn based on the price a home sells for:
| Home’s sale price | Seller’s agent commission (2.5%) | Buyer’s agent commission (2.5%) | Total commission (5%) |
|---|---|---|---|
| $250,000 | $6,250 | $6,250 | $12,500 |
| $500,000 | $12,500 | $12,500 | $25,000 |
| $750,000 | $18,750 | $18,750 | $37,500 |
| $1,000,000 | $25,000 | $25,000 | $50,000 |
Dual agency
These numbers might change in the case of dual agency, when a single agent represents both the buyer and seller in a transaction. Buyers working directly with a listing agent may have more room for commission negotiation, because the agent will be earning a fee from both parties. Laws about this vary by state; in some states, dual agency is not permitted.
While agents have a fiduciary duty to their clients, with dual agency, the lines can get blurred. But agents are still required to act in their clients’ best interest: “It’s in our ethics; it’s in our contract,” says Samantha Fish, an agent with Wesely & Associates in Grass Valley, California. “If someone comes into my open house, and they like it but they don’t have an agent, at that point I [might] say, ‘let me get you an agent from my office’ so they feel like they’re being represented 100 percent as well.”
The brokerage’s cut
Real estate brokerages may get a cut of the commission as well. The brokerage RE/MAX, for example, offers a split commission setup by which its agents receive 95 percent of the full commission from the sale, and 5 percent goes back to the company.
What do real estate agent fees cover?
You might wonder, what services does this commission fee buy me? Well, for one thing, agents are licensed professionals who know their local market well and have ace negotiating skills. Both of these benefit their client, whether it’s buyers or sellers. The fee also compensates the agent for their time spent answering questions and helping you through the process.
Another big benefit for both parties: Realtors have access to their area’s MLS, a master database of properties for sale (the acronym stands for “multiple listing service”). This lets buyers see the widest possible range of listings to choose from, and allows a seller’s listing to be seen by the widest possible pool of potential buyers.
For buyers, working with a Realtor can introduce you to properties or even entire neighborhoods that you wouldn’t have found otherwise. And your agent takes the reins on scheduling home tours, preparing and submitting offers, filling out and filing the proper paperwork and more.
For sellers, a Realtor’s fee also covers things like price research and market analysis; marketing, staging and showing your property; coordinating open houses; managing offers and more.
Average real estate commissions by state
Overall, the national average Realtor commission in 2024 was 5.32 percent total, according to data from Clever. The average split was 2.74 percent to the listing agent (representing the seller) and 2.58 percent to the buyer’s agent.
Keep in mind, though, that Realtors may accept a lower commission for high-priced homes to earn a higher amount overall: Their piece of the pie may be smaller, but it’s a richer slice.
Here are the average total real estate commissions by state, according to Clever:
| State | Total average commission rate |
|---|---|
| SOURCE: Clever | |
| Alabama | 5.31% |
| Alaska | 5.04% |
| Arizona | 5.40% |
| Arkansas | 5.30% |
| California | 4.99% |
| Colorado | 5.29% |
| Connecticut | 5.25% |
| Delaware | 5.30% |
| District of Columbia | 4.82% |
| Florida | 5.05% |
| Georgia | 5.62% |
| Hawaii | 5.04% |
| Idaho | 4.68% |
| Illinois | 5.07% |
| Indiana | 5.31% |
| Iowa | 5.51% |
| Kansas | 5.51% |
| Kentucky | 5.30% |
| Louisiana | 5.30% |
| Maine | 5.25% |
| Maryland | 5.30% |
| Massachusetts | 4.47% |
| Michigan | 5.86% |
| Minnesota | 5.77% |
| Mississippi | 5.30% |
| Missouri | 5.73% |
| Montana | 4.68% |
| Nebraska | 5.51% |
| Nevada | 3.51% |
| New Hampshire | 5.25% |
| New Jersey | 5.07% |
| New Mexico | 5.68% |
| New York | 5.36% |
| North Carolina | 5.47% |
| North Dakota | 5.51% |
| Ohio | 5.60% |
| Oklahoma | 5.68% |
| Oregon | 5.00% |
| Pennsylvania | 5.35% |
| Rhode Island | 5.25% |
| South Carolina | 5.36% |
| South Dakota | 5.51% |
| Tennessee | 5.54% |
| Texas | 5.76% |
| Utah | 4.68% |
| Vermont | 5.25% |
| Virginia | 5.19% |
| Washington | 5.18% |
| West Virginia | 5.30% |
| Wisconsin | 5.78% |
| Wyoming | 4.68% |
How to avoid paying Realtor fees
It’s certainly possible to buy a home without a Realtor. But it’s a lot of work, much of it complicated, and the stakes are high. So weigh the pros and cons of going without professional representation carefully.
It’s more common for sellers to go without the help of a real estate agent — this is called “for sale by owner” or FSBO for short. Between July 2023 and June 2024, 6 percent of home sales were sold by owners, according to NAR data. But selling without an agent’s help is also quite a lot of work, and a big time commitment.
Alternatively, sellers could consider working with a low-commission real estate agent, who will likely charge much less than a traditional agent would (usually 1 to 1.5 percent of your home’s sale price). However, since they’re receiving a smaller commission on each property, these agents are typically focused on volume. As a result, you might not receive as much personal attention as you would with a traditional Realtor.
There are also brokerages and agents who work on a flat-fee basis, rather than a percentage of the sale price — meaning they earn the same fee regardless of how much your home sells for.
Selling directly to an iBuyer or a company that buys houses for cash is another way to avoid paying agent commissions. But the offers from these buyers will be less than you’d likely fetch in a traditional sale, and some iBuyers charge service fees that are equivalent to what you’d pay in commission anyway.
Finally, remember that even if you’re not paying Realtor fees, there are still plenty of other closing costs associated with selling a home — and buying one.
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