A real estate transaction can be very expensive, and one of the biggest expenses to the homeowner is the real estate agent commission fee. It’s important to understand how commission fees work, if they can be negotiated, what the commission fee covers, and the average real estate agent commission fee in your area. Having a thorough understanding of the average real estate agent commission can help in the negotiation of the fee to lower the costs associated with the sale.
How do real estate commissions work?
During a real estate transaction, the commission fee is one of the main areas of concern for homeowners and buyers when trying to understand the complete cost of a real estate sale or purchase. In most instances, the seller will pay for the full cost of the commission fee to the buying and selling brokers as outlined in the listing agreement. Variables that can impact the real estate commission fee can be the state that you live in and who the seller selects to represent them on the sale.
What does the commission fee cover?
The agent in the transaction uses a portion of the real estate commission fee to market the home, pay for expenses incurred during the real estate transaction, staging, and oversee the closing of the transaction. While negotiating a lower commission fee can be desirable, it’s important to understand how the real estate commission fee will work for you and that all aspects of the transaction will be handled by the agent.
What is the Average Real Estate Agent Commission Fee?
The average Real Estate Commission fee will vary by state and market. However, the average commission in the U.S can range from 5% to 6% of the purchase price of the sale. The listing and selling broker involved in the real estate transaction will split the commission and receive 2.5% -3% each. As an example, if a home sells for $250,000 at a 6% commission, each broker will split the $15,000 and receive $7,500 each.
The cost of a real estate commission fee at 6% can be seen in the example below:
| Home Sale Price | 6% Real Estate Commission |
| $250,000 | $15,000 |
| $500,000 | $30,000 |
| $750,000 | $45,000 |
| $1,000,000 | $60,000 |
Typically, the broker will have a contract with their real estate agents that will have their negotiated commission split. In the example above, once the sale of a real estate transaction closes escrow, the broker will split the 3% with their real estate agent. The average split between the broker can range from 1% to 2.5% percent of the $7,500 received going to the real estate agent.
Can the commission be negotiated?
The commission fee can be negotiated at a lower rate. There are no laws that prohibit the negotiation of the fee. However, keep in mind that the fee covers the cost associated with the sale of a home. Depending on the broker, a lower fee can negatively affect how an agent can market your home. In addition, when working with a real estate agent that is an independent contractor for a broker, there might only be a small amount of flexibility that the agent can negotiate the commission fee lower.
Another component to keep in mind is the average real estate agent commission rate within a given state. The agent’s rate could already be very competitive in comparison to other brokers. In a Dual agency, the agent might have additional flexibility to lower the commission rate further because the agent represents both the seller and the buyer in the real estate transaction.
Final Thought
Working with a brokerage that has more flexibility in their fee and can present a hassle-free approach can save the seller a lot of time and money. When selling or buying, focusing on your real estate goals will allow more focus on the reason for entering into the transaction in the beginning game. Contact a local agent from Topfind Realty to find out how we provide our clients with a hassle-free real estate experience.
