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For Your Clients: What Is a REALTOR® Commission?

Home Agents
By Bill Gassett
October 17, 2022
Reading Time: 4 mins read
For Your Clients: What Is a REALTOR® Commission?

You might know that when a real estate agent is involved in the sale of a home, they are paid by commission. But how much is Realtors commission and is it the best option for you when you are selling your home? Lots of folks want to know the average Realtor commission.

We will look at the things you need to know about Realtor commission before you hire a real estate agent.

How much is a REALTOR® commission?

Most of the time, REALTORS® are not paid an hourly rate, instead relying on commissions when the home is sold. This means that they could be going without income for weeks or even months until the sale closes.

The commission for REALTOR® involvement in your house sale can vary, but typically it is around 5% of the purchase price of the home. If you sell your home for $300,000, a 5% commission would be $15,000.

But this money doesn’t go directly to the selling agent, instead being split between the brokerages of the buyer’s agent and the seller’s agent. In this case, it also doesn’t mean that the selling agent will get $7,500, as their broker will take a percentage of the commission.

The amount of money the agent will receive depends on many different factors, including their experience and the agreement they have with their broker. REALTOR® incomes can vary based on several factors.

Who pays real estate commission?

Paying the real estate commission is normally the responsibility of the homeseller. Even when the buyer has a real estate agent, the seller will have to pay their commission along with the REALTOR® fees of the listing agent who was working on their behalf.

Can a REALTOR® work for both the buyer and the seller?

An agent who is working on behalf of both the buyer and the seller in a home transaction is a dual agent and will get double the commission.

There are obvious problems with this dual agency arrangement, however. The REALTOR® has to work in the best interests of their client, and how can they do that when they are working for both sides of the transaction?

This conflict of interest is the reason why dual agency is outlawed in some states, and why it isn’t a good idea to use one even if it is legal where you live.

What do REALTORS® commission pay for?

While it is possible to sell your home without a real estate agent, you might be surprised at all the things an agent does to help find a buyer. Working with a REALTOR® provides many benefits. A REALTOR® will help you set the right price for your home, add it to the multiple listing service, advertise it on social media, negotiate with buyers, and make sure your home successfully gets to closing.

Though saving REALTOR® fees might be attractive, there could be a steep learning curve to ensure your sale progresses smoothly. Using a professional real estate agent should also help you sell your home for more and make the process a whole lot less stressful.

Average sold prices seem to prove this point, with homes being sold by an agent fetching far more than “for sale by owner” properties. A survey found a difference of nearly $60,000 in the sold prices of homes with and without a REALTOR’S® help. This is one of the reasons why the majority of sellers choose to hire a real estate agent.

REALTORS® have many responsibilities whether working for a buyer or seller.

Can you negotiate the REALTOR’S® commission?

While they aren’t any laws that set the real estate agent’s commission, there could be standard commission rates that are normally used. You do have the option to ask for a reduction from your REALTOR® if you wish, though it might mean your home isn’t marketed as well.

If you are paying less, perhaps your home won’t be advertised as much. This could mean your property isn’t sold as quickly or for as much as it otherwise could.

You could reduce your real estate commission by using a flat-fee service. Though this will only offer some of the services a normal REALTOR® would, it is a viable option for some people. If you sign a transactional agreement with a listing agent, they could help deal with negotiations, and create a contract, but you won’t have the full services available from the agent.

A home is normally most people’s largest financial commitment and investment, so using a real estate agent who will help you get the best price when you sell seems like an obvious choice. And the real estate agents that perform better aren’t likely to be the cheapest ones or as likely to offer discounts.

Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years. Bill is the owner and founder of Maximum Real Estate Exposure. For the past decade, he has been one of the top RE/MAX REALTORS® in New England.

Tags: Bill Gassettconsumer real estate informationHomebuyersHomesellersReal Estate Commission
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Bill Gassett

Bill Gassett is the owner and founder of Maximum Real Estate Exposure.

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