In the current landscape of DIY digital initiatives, the role of real estate agents and the justification for realtor fees have become hot topics for debate among those navigating the home selling and purchasing process. The central question revolves around the importance of these intermediaries in sealing a successful real estate deal, especially when the term Real Estate Commissions frequently surfaces as a significant aspect of the discussion.
Well, a proficient agent proves to be remarkably beneficial. Collaborating with one makes sense, particularly for home buyers: Agents possess insights beyond your reach, and it demands time and expertise to sift through properties, identify optimal matches, and craft compelling offers. Yet, sellers reap manifold advantages, especially in determining the optimal asking price. Additionally, the home still necessitates staging, listing, and showcasing.
Here, we delve into the intricacies of real estate agent fees. A crucial caveat: A legal dispute concerning realtor commissions and payment mechanisms is currently unfolding. Until its resolution (further elaborated below), we outline the current commission frameworks, ensuring both buyers and sellers comprehend the anticipated norms.
How much are Realtor commissions?
Only a very small fraction of real estate professionals operate on a salary basis—the commission model prevails. Traditionally, the standard rate stood firm at 6 percent, evenly divided between the buyer’s and seller’s representatives. However, this paradigm shifted with the emergence of discount brokers and the proliferation of publicly accessible online listings.
In today’s landscape, real estate commissions are subject to negotiation, typically ranging between 5 and 6 percent of a property’s sale price. The specific terms of a commission arrangement vary from transaction to transaction and may be influenced by geographical factors and the affiliations of the involved firms.
Consider this illustration: According to Redfin data, the median home sale price in Cincinnati in December 2023 stood at $259,500. Applying a 5 percent real estate commission to this figure yields $12,975. Conversely, in San Francisco, where the median soared to $1.17 million, a 5 percent commission amounts to $58,500.
Outlined below is an approximation of what one might expect to pay under a 5 percent total commission structure, contingent on the sale price of the property:
| 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 |
Seller vs. buyer commission
At Sell Quick California, sellers engage in a listing agreement with a Realtor, committing to a commission fee upon closing the transaction. Under an “exclusive right to sell” arrangement, this fee is due even if the seller finds the buyer independently.
Commissions, typically paid by the home seller, fund both Realtors involved in the transaction. In a standard setup, the selling and buying agents split the total commission evenly. For instance, in a 6 percent commission, each agent would receive 3 percent.
However, dual agency shifts this dynamic, where one agent represents both buyer and seller. Regulations on dual agency vary by state, with some states prohibiting it. In such cases, careful attention to home appraisal is crucial to ensure a fair price, as fiduciary duties can become murky.
Samantha Fish, an agent at Wesely & Associates in Grass Valley, California, underscores agents’ obligation to act in their clients’ best interests. While she stresses ethical standards and contractual obligations, she acknowledges the potential for bias when representing both parties.
Buyers working directly with listing agents might find more negotiation leeway, as sellers may lower prices to offset agent fees. Conversely, buyers opting for a separate agent should sign a buyer’s agency agreement. This ensures the agent works exclusively in the buyer’s interest, distinct from the seller’s agent.
In addition to agent commissions, real estate brokerages may claim a portion of the commission. For instance, RE/MAX operates on a 95-5 split, with agents receiving the lion’s share. Brokers, responsible for policy setting and agent oversight, bear legal liability for any agent misconduct.
What do real estate agent fees cover?
Curious about what services are covered by this fee? When you engage with Sell Quick California, one of the key benefits for buyers is access to the Multiple Listing Service (MLS), the primary database used by Realtors to list and view properties for sale.
This fee compensates our agents for their time spent guiding you through the process and addressing your inquiries. They leverage their expertise and network to negotiate, locate properties, and conduct tours of multiple homes.
For sellers, a Realtor’s fee encompasses various expenses, including marketing materials, property staging, coordinating showings and open houses, and communicating with potential buyers’ agents. When offers come in, the listing agent takes charge of negotiations, often presenting counteroffers.
While sellers might question the Realtor fees, it’s important to recognize the extensive effort involved in listing a home, such as:
- Conducting a comparative market analysis for competitive pricing
- Arranging professional photo shoots, sometimes including aerial imagery via drones
- Crafting compelling listing descriptions to attract Realtors and buyers
- Providing staging advice for optimal presentation
- Hosting multiple property showings, often including weekend open houses
- Erecting yard signs for visibility
- Ensuring listings are featured on major property search platforms
- Assisting sellers in reviewing and negotiating offers from buyers
Similar to other expenses tied to real estate transactions, Realtor fees with Sell Quick California are settled only upon the successful closing of the sale.
Average real estate commissions by state
In 2023, the national average Realtor commission stood at 5.49 percent, based on data from Clever. Across the majority of states, this average fell within the range of 5 to 6 percent.
However, it’s worth noting that Realtors might be open to negotiating lower commissions, particularly for high-value properties, aiming for a larger overall payout. “In competitive scenarios, such as prime or trophy listings, Realtors often negotiate the commission upfront,” explains Duffy. “For instance, with a $4 million listing at 6 percent, there’s flexibility to negotiate—whether it’s $100,000, $80,000, or $120,000, it still represents a substantial payday.”
Here’s a breakdown of average real estate commissions by state, according to Clever:
| State | Average Commission Rate |
|---|---|
| Alabama | 5.45% |
| Alaska | 6.00% |
| Arizona | 5.44% |
| Arkansas | 5.99% |
| California | 5.11% |
| Colorado | 5.62% |
| Connecticut | 5.47% |
| Delaware | 4.88% |
| District of Columbia | 5.49% |
| Florida | 5.37% |
| Georgia | 5.81% |
| Hawaii | 4.78% |
| Idaho | 5.50% |
| Illinois | 5.35% |
| Indiana | 5.56% |
| Iowa | 5.67% |
| Kansas | 5.58% |
| Kentucky | 6.00% |
| Louisiana | 5.56% |
| Maine | 5.17% |
| Maryland | 5.34% |
| Massachusetts | 5.45% |
| Michigan | 5.92% |
| Minnesota | 5.82% |
| Mississippi | 6.07% |
| Missouri | 5.58% |
| Montana | 5.50% |
| Nebraska | 5.25% |
| Nevada | 5.80% |
| New Hampshire | 5.25% |
| New Jersey | 5.21% |
| New Mexico | 5.90% |
| New York | 5.39% |
| North Carolina | 5.52% |
| North Dakota | 5.00% |
| Ohio | 5.99% |
| Oklahoma | 5.95% |
| Oregon | 5.03% |
| Pennsylvania | 5.48% |
| Rhode Island | 5.50% |
| South Carolina | 5.62% |
| South Dakota | 5.49% |
| Tennessee | 5.58% |
| Texas | 5.73% |
| Utah | 4.90% |
| Vermont | 5.49% |
| Virginia | 5.45% |
| Washington | 5.25% |
| West Virginia | 6.67% |
| Wisconsin | 5.15% |
| Wyoming | 6.00% |
How to avoid paying Realtor fees
Selling your home without the assistance of a real estate agent, commonly known as “for sale by owner” or FSBO, is entirely feasible. According to data from the National Association of Realtors spanning from July 2022 to June 2023, 7 percent of home sales were conducted by owners without the involvement of an agent. However, navigating this process solo entails a substantial amount of work, and while it does save you the commission of one agent, you’ll still be responsible for your buyer’s agent’s commission.
If you prefer not to go the FSBO route, it’s wise to inquire about the commission rates of agents upfront and compare the terms offered by each professional you engage with. Should you find the fee to be excessive, negotiating for a reduction is an option worth exploring. Additionally, if both sides of the transaction involve agents from the same brokerage, you may have increased leverage in negotiations.
Alternatively, you might consider partnering with a low-commission real estate agent, who typically charges significantly less than traditional agents (usually around 1 to 1.5 percent of your home’s sale price). However, due to their focus on higher transaction volume resulting from the reduced commission per property, you may not receive the same level of personalized attention as you would with a traditional Realtor.
Some brokerages and agents operate on a flat-fee basis, meaning they receive a predetermined amount regardless of your home’s sale price, rather than a percentage.
For those seeking to bypass Realtor fees and expedite the selling process, selling to an iBuyer or a cash house buying company presents an attractive option. Both avenues facilitate swift finalization of your home sale without incurring any agent commissions. However, it’s important to note that the offers from these buyers are typically lower than what you’d attain in a traditional sale, and some may impose service fees equivalent to standard commission rates.
Lastly, it’s essential to recognize that even in scenarios where Realtor fees are absent, there are still various other closing costs associated with selling your home, such as title transfer fees, attorney fees, property taxes, and more.
The lawsuit that could change everything
A legal battle unfolding in the courts has the potential to disrupt the prevailing real estate commission structure. Currently, sellers are typically responsible for covering the commissions of both their own agent and the buyer’s agent, typically amounting to 5 to 6 percent of the home’s sale price.
In October 2023, a federal jury ruled that the National Association of Realtors (NAR) and several major brokerages had colluded to inflate Realtors’ commissions. As a result, these entities were ordered to pay $1.8 billion in damages to the plaintiffs, with the potential for this sum to increase to $5 billion. If upheld, this verdict could signify a significant shift, potentially relieving home sellers of the obligation to compensate the buyer’s agent.
However, the situation is far from resolved. NAR has declared its intention to appeal the ruling, meaning it could be years before the full implications of this decision, if it stands, are realized.