Low-commission Realtors and discount agents: What’s the catch?
Key takeaways
- Low-commission Realtors charge less than traditional agents, potentially saving home sellers thousands.
- The typical agent commission is between 2.5 and 3 percent of a home’s sale price, but discount agents can charge as little as 1.5 or even 1 percent.
- However, since these agents have to sell more homes to make the same amount of money as traditional agents, they may provide a lower level of service.
When selling your home, it’s only natural to want to maximize the profit you walk away with. And one way to do that is by minimizing the fees and expenses associated with the sale process — including the commission paid to the agent who lists your property. You may even be considering using a discount or low-commission Realtor who will represent your property for a lower fee than other agents in your area charge.
Before taking this step however, it’s important to consider why low-fee Realtors charge less — and how this decision may impact your overall selling experience.
What is the average Realtor commission?
Traditional wisdom holds that the typical real estate agent’s commission is somewhere between 2.5 and 3 percent of the home’s sale price for each agent involved in the transaction. That means a total of up to 6 percent on the transaction.
However, the total commission associated with a home sale has been on a downward trend in recent years. As of August 2024, the average total commission in the U.S. is 5.32 percent, according to a study conducted by Clever — breaking down to an average of 2.74 percent for the listing agent (representing the seller) and 2.58 percent for the buyer’s agent.
These fees can vary widely from state to state, and also vary from sale to sale and agent to agent. In many instances, clients can negotiate the commission rate they will pay. Even so, these fees will still take a fairly large bite out of your sale proceeds: On a $300,000 sale, the average 2.74 percent listing-agent fee works out to $8,220.
What is considered a ‘low’ commission?
Low-commission Realtors’ fees may be considerably less than what you’d be able to negotiate with a traditional agent — as low as 1 percent, in some cases. Companies offering these types of discounted commissions include Clever, which charges a 1.5 percent “listing fee,” and Redfin, which charges 1.5 percent when you sell a home with them and lowers that to just 1 percent when you both buy and sell with them.
Using a flat-fee agent is another option to save money when selling your home. Flat-fee real estate agents and brokers charge a fixed rate for their services that’s established upfront, rather than a commission that’s linked to the final sale price of your home. When using a flat-fee agreement, the amount your ultimately home sells for does not impact the fee in any way.
How much can a low-commission Realtor save me?
Using a low-commission Realtor to sell your home can potentially save you thousands of dollars. To continue the example of a $300,000 home, where the average 2.74 percent listing-agent fee comes to $8,220, consider a 1.5 percent fee, which comes to just $4,500 — a savings of more than $3,700.
Remember, however, that even if you use a low-fee agent to represent you, you may still be responsible for paying the buyer’s agent’s commission. The details of who pays for what will be negotiated in each individual deal.
Risks of using a low-commission Realtor
While you will pay less when working with a discount agent, there are also some drawbacks to consider:
- Less attention: Remember the expression “you get what you pay for” when you opt to work with a low-commission agent. Because they are making less from each sale, they must close a higher volume of deals than traditional agents to earn the same amount of money. This means you are not likely to get the same level of attention or service as you would otherwise.
- Lower profit: The lack of experience you may encounter with a low-commission agent may impact the price your home ultimately sells for. These agents may not be as savvy when it comes to setting an appropriate asking price or attracting buyers. And if they are not very familiar with your specific local market, you lose a large layer of expertise that may result in a lower sale price than you could have gotten.
- Dual agency: Dual agency, in which a single agent represents both the buyer and the seller in a transaction, is legal in many states. It is not always a problem, but it does come with potential conflict-of-interest risks. And an agent who is only earning a 1 percent commission may be more tempted to represent as many clients as they can to increase their volume.
Alternatives
Looking for other ways to save money when you sell? Here are a few options.
- Negotiate commission: In many cases, traditional real estate agents or brokerages may be willing to discount or reduce their fee — particularly with higher-priced homes.
- Homebuying companies and iBuyers: These companies make speedy cash offers to sellers directly, eliminating real estate agents from the process. However, they need to make a profit, which means that they typically purchase homes for less than their full market value. And iBuyers often charge fees that can add up to the same amount you would have paid in agent commissions.
- FSBO: Some home sellers opt to skip an agent and sell on their own — called a FSBO or “for sale by owner” listing. This route will save you having to pay a listing agent’s commission, it’s true, but what you save in money you may pay in the time and effort needed to put into it.
Next steps
When searching for a real estate agent, it’s always a good idea to do your research thoroughly. This should include interviewing multiple candidates. Ask each one about their commission, as well as their knowledge of your community and their level of experience — both in general and with houses similar to yours. It can also be a good idea to ask friends and family for referrals to agents that they have had a good experience working with.
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