A 3% commission realtor refers to an agent representing a buyer or a seller who charges 3% of the final sale price of a home. This rate is in line with the industry average, though it's a tad higher than the typical 2.83% for a seller's agent and 2.66% for a buyer's agent.[1]
However, a 3% commission real estate agent doesn't encompass the total commission in a home sale. On average, the seller's real estate commission rates nationwide stand around 5.49%, as the seller usually pays both the listing agent and the buyer's agent fee.
Exploring the traditional 3% commission model also reveals opportunities for reduction, potentially cutting the rate in half – and leading to huge savings in your home sale or purchase. It's even possible to get a 3% total commission rate by working with a top discount real estate broker offering a lower price for full service.
For example, Clever Real Estate pre-negotiates 1.5% listing fees with top local agents from traditional brokerages like Keller Williams and RE/MAX. You'll benefit from top-notch agent expertise at just a 1.5% listing fee, undercutting the national average of 2.83%.
» SAVE: Find top local agents and get a 1.5% listing fee!
How 3% realtor commission works
In a standard real estate sale across the country, sellers typically pay 5.49% of their home’s final sale price in realtor commissions, according to Clever's survey of 630 partner real estate agents across the United States. This percentage does not include closing costs, which can add another 2-3% for sellers.
Another Clever study found that most sellers (71%) who used an agent spent 5% or more on commission.[1]
This percentage might seem steep at first glance, but it's important to remember that it includes the fees for both the listing agent and the buyer's agent – a common practice in the real estate industry.
Here’s how it breaks down:
- The listing agent, who assists the homeowner in pricing, marketing, and selling their property, generally receives between 2.5% to 3% of the sale price, averaging around 2.83%.
- On the other side, the buyer's agent, responsible for bringing a qualified buyer to the table, also gets a similar commission, typically ranging from 2.5% to 3%, with the national average sitting at 2.66%.
- On a $400,000 sale and at a 3% rate, the buyer's and seller's agents would earn $12,000 in realtor commissions. Real estate agents typically get paid at closing.
Before signing a listing agreement with an agent, the seller decides the commission percentage they'll offer the buyer's agent.
Also, remember that while the standard rate for each real estate agent is usually between 2.5-3%, these fees aren't fixed. You can negotiate realtor fees, which also often vary depending on location, the brokerage firm involved, and the extent of services provided.
So, when dealing with realtor fees, remember there's room for negotiation and variations based on several factors.
Why do real estate agents charge 3%?
Two key factors drove the traditional 3% commission model:
1. Relieve up-front costs for home sellers. Real estate transactions include selling costs like home staging, professional photography, and advertising. These expenses can add up quickly, creating a financial burden before the home even hits the market.
The 3% commission model helps sellers by deferring marketing and selling expenses until the home is sold. Agents cover these costs initially and are reimbursed through the commission at the sale's closing.
2. Provide agents with a reward for the risk they take. Agents take considerable risk, investing their time and resources into marketing and selling a property without a guaranteed paycheck. This risk includes the time spent and the costs incurred for marketing and advertising the property.
This model lets sellers pay their agent after the house sells. And the 3% commission is enough to incentivize realtors to invest in marketing the seller's home despite not having a guarantee of getting paid.
Say goodbye to the 3% commission
While average commission rates have varied over time, advancements in technology and innovation have streamlined the home selling process. Consequently, the traditional 3% listing fee is becoming less practical for many sellers.
Clever Real Estate addresses this by offering a more cost-effective solution. We've pre-negotiated 1.5% listing fees with agents from renowned brokerages such as Keller Williams and RE/MAX. Opting for an agent through Clever means you receive the same expertise, service, and support from a top realtor, but at only half the usual commission rate.
Why do sellers pay the buyer's agent fee?
Home sellers usually pay the buyer's agent fee for a couple of reasons:
- It decreases the out-of-pocket costs for the buyer. If buyers had to pay for their agent, many more people wouldn't be able to afford a home. Sellers covering the cost allows for a larger pool of potential buyers.
- It incentivizes buyer's agents to show your property. Buyer's agents are more likely to point their clients to your listing if you offer a competitive buyer's agent commission. The agents know they'll get paid well if one of their clients purchases your property.
📊 Survey Snapshot
A Clever study of 1,000 participants found that 51% of Americans underestimate realtor commission costs, with only 11% accurately understanding that agents typically earn around 6% of the final sale price.
Just over half of all sellers feel they shouldn't bear the cost of the buyer’s agent. Meanwhile, 62% of Americans incorrectly believe buyers cover their own agent’s fees, which may contribute to 65% wrongly assuming buyers save money by foregoing an agent.
Do I really need to pay a buyer's agent fee?
You have no legal obligation to pay a buyer's agent commission. But most listing agents recommend that you offer close to the local average (usually 2–3%). If you want buyer's agents to show your house to their clients, you need to make it worth their while.
By offering a competitive buyer's agent commission, you'll likely have a larger pool of potential buyers. This can help you get multiple offers, sell for the price you want, and sell quickly. And if you've agreed to pay the agent's commission in writing, you likely can't refuse to pay a buyer's agent fee.
🏡 Real Estate Commission Changes Coming Soon!
Recent legal actions are set to shake up real estate commission practices. Historically, sellers have paid the commissions for both listing and buyer's agents. A lawsuit against NAR in November 2023 challenged this, suggesting changes that could shift some financial responsibilities.
NAR has now settled, agreeing to pay $418 million over four years, without admitting any wrongdoing.[2] This settlement aims to keep cooperative compensation flexible for buyers and sellers.
While the full impact of the settlement is yet to be determined, experts believe that the change will encourage buyers and their agents to negotiate fees directly based on the services they need, and shift away from sellers dictating the buyer's agent's compensation.
The terms of the settlement are scheduled to take effect in mid-July 2024. But, the settlement hasn’t been officially approved yet, and it could be delayed or changed by objections. Stay tuned for updates on how this could impact your next home sale or purchase.
How to avoid paying 3% commission
Most home sellers can bypass the traditional 3% listing commission by partnering with a low-commission real estate broker. The leading firms in this space offer listing fees as low as 1.5%, while still delivering the full range of services you'd expect from conventional realtors.
To cut down on the usual 3% real estate commission without sacrificing quality and service, it's worth exploring the top low-commission companies. Choosing the right one is key to aligning with your goals and ensuring the best value in your real estate transaction.
Top low commission companies
Listing Fee
Editor's Take
Overview
Locations
Clever Real Estate is the best option for most sellers looking for an agent. The company matches you with multiple full-service agents from local brokerages, including top brands like Keller Williams and RE/MAX. It offers a low 1.5% listing fee no matter which agent you choose.
Pros
- Get matched with top-producing local agents in minutes.
- Guaranteed 1.5% listing fee (half the usual rate).
- Free agent matching service with no obligation to commit to any realtor.
- Large agent network offers great selection compared to similar services.
Cons
- No guarantee you’ll get matched with a specific agent or brokerage.
- Add-ons like professional home staging and drone photography may cost extra.
Listing Fee
Editor's Take
Overview
Locations
Redfin is a reputable discount real estate brokerage that offers significant savings, particularly if you buy and sell with the brokerage. But watch out for high minimum fees, which vary by market and can be high in some areas. Redfin's agents also work with a lot of clients, and they don’t always have time to provide as much hands-on service as you may need.
Pros
- Redfin's low listing fee of 1.5% offers excellent savings.
- Clients who buy and sell with Redfin can save even more.
- You can easily manage your listing online or via Redfin’s app.
Cons
- Agents provide limited one-on-one service.
- Customer reviews have recently become more negative.
Listing Fee
Editor's Take
Overview
Locations
Ideal Agent is a solid option if you’re looking for a top agent. The company vets its realtors thoroughly, so you’ll likely get a quality agent.
However, you might not get to choose who you work with, since Ideal Agent usually has only one or two realtors in a given area. Even if you get a top-performing agent, there’s no guarantee that they’ll be the right fit for your sale.
Ideal Agent’s listing fee of 2% is a bit lower than the traditional rate. But if you want to save money, other brokerages offer even lower fees while still maintaining high-quality agents and service.
Pros
- It's easy to get matched with a real estate agent.
- The 2% listing fee is lower than the traditional rate.
- Customer service gets excellent reviews.
Cons
- You likely won't get to choose which agent you work with.
- There are no savings for buyers and limited savings for sellers.
- There's limited ability to manage your listing online.
Listing Fee
Editor's take
Overview
Locations
Houwzer is a great option for savings, but only if you’re comfortable receiving less hands-on support than you’d get from a traditional real estate agent.
The company's 1% listing fee could save you thousands compared to the 3% that traditional realtors charge.
But Houwzer — like the better-known Redfin — uses a team-based approach. You get paired with a real estate agent, but other Houwzer team members handle a lot of your transaction. That means less hands-on support from your agent and more opportunities for miscommunication.
Pros
- The 1% listing fee provides significant savings.
- The service includes 25 HD photos and virtual tours.
- Buyers can save by bundling mortgage and title.
Cons
- You get less one-on-one support from your realtor.
- The team-based service creates opportunities for miscommunication.
Listing Fee
Editor's Take
Overview
Locations
Prevu may be a good choice if you’re looking to save money and you’re comfortable doing some of the legwork yourself. However, if you want a more hands-on agent, especially during the initial stages, an alternative brokerage may be a better fit. While Prevu real estate agents are good, they tend to be more involved during the latter stages of real estate transactions while you do more of the upfront work.
Pros
- Prevu offers savings for both home sellers and eligible buyers.
- You’ll receive the same range of services as a full-service traditional realtor.
- Customer support is generally very good.
Cons
- Prevu agents provide less one-on-one support early on.
- Prevu charges minimum fees and the buyer rebate amount varies.
- Your agent's commission structure may affect service quality.
FAQ about real estate commission
What is a 3% commission realtor?
A 3% commission realtor is a real estate agent who charges listing fees that align with the industry average. Traditionally, a standard listing fee was 3% or more of the home's sale price. These days, many agents charge a bit less — typically in the range of 2.5–3%. On average, real estate commission rates nationwide for the seller stand at 5.49%.
Is a 3% commission a lot?
A 3% commission has long been the industry standard. However, technology and innovation have made home selling more efficient, and 3% may no longer be a fair real estate commission. Most home sellers can find better value with a top, low-commission realtor who offers full service.
What percentage do most realtors charge?
In the U.S., traditional realtors charge 4.45–6.34% in total real estate commission. This commission is split between the listing agent and buyer's agent. These rates can vary depending on your location. Learn more about real estate commissions rates by state.
Do all realtors make 3%?
In the U.S., traditional realtors charge between 4-6% in total real estate commission. This commission is split between the listing agent (who takes an average of 2.83% and the buyer's agent (who takes an average of 2.66%). These rates can vary depending on your location and other factors.
What is the lowest commission a realtor will take?
The lowest commission full-service realtors accept is usually 1.5% of a home's final sale price. This discount is significant compared to the average real estate commission of 2.5–3% a traditional agent charges. The best way to pay less in realtor commissions is to work with a low-commission real estate brokerage. Top companies offer listing fees as low as 1.5% and match you with the best local agents.
Can I get a 3% total real estate commission?
For most sellers, paying a 3% total commission is impossible as it includes paying two agents. However, you can get close to this rate by listing your home with a low commission agent who charges a 1.5% listing fee and offers a 1.5-2% buyer's agent fee.
The best discount brokers have found ways to lower their listing fees with few (or no) customer service trade-offs, which makes them a great option for most people. However, whether offering a below-average buyer's agent fee makes sense depends on commission rate trends in your market and buyer demand in your local area.
