Real estate agents earn a pretty big commission check on a $1 million or $10 million home. For instance, with an average real estate agent commission rate of 5.49% – as reported by Clever Real Estate's recent data – both real estate agents could earn $54,900 for selling a $1 million home, and an impressive $549,000 for a $10 million property.
Assuming the listing or seller's agent earns an average commission of 2.83%, they would earn $28,300 on a $1 million home and a whopping $283,000 on a $10 million sale.
But, are the high real estate agent commissions justified? Properties valued at or over a million dollars often attract fewer buyers, leading to longer sale times, sometimes twice as long as average homes. In the case of luxury homes, finding a buyer might take six months or more.
This is where the expertise of an agent becomes invaluable. Agents skilled in marketing luxury properties have a network of potential buyers, the necessary marketing acumen, and experience to achieve the desired results.
Also remember that you can negotiate lower realtor fees, and fees and can vary depending on the market. For properties worth $1 million or $10 million, negotiating a lower rate is often more flexible due to the large commission agents stand to earn even at a reduced rate.
💰Find your perfect agent, save big when you sell your $1 million home!
How much does a realtor make on a million dollar house?
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💲 Sale price
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💵 Total commission*
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|---|---|
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$1 million
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$54,900
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$1.5 million
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$82,350
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$2 million
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$109,800
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$5 million
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$274,500
|
|
$10 million
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$549,000
|
In a typical home sale nationwide, the total commission averages 2.83% of the sale price, usually split almost equally between the seller's and buyer's agents. For a $1 million home, this means a combined commission of $54,900 for both agents.
But, it's worth noting that listing agents often receive a higher portion, averaging around 2.83%, compared to the 2.66% typically earned by buyer's agents. In this scenario, the listing agent would earn $28,300, while the buyer's agent would receive $26,600.
In the below example, if your house costs $2,000,000, and you pay a 6% commission rate, you'll pay $120,000 in real estate agent fees.
The sale proceeds cover the buyer's agent's fee, as they're responsible for bringing a buyer to the listing. This commission serves as their motivation to showcase the house to potential buyers.
Yet, this practice is currently a topic of considerable discussion due to ongoing lawsuits against the National Association of Realtors (NAR) about commission structures.
When you engage a listing agent, you'll establish their commission rate through a listing agreement. This legal contract between you and your agent also includes the decision on the commission offered to the buyer's agent.
🏡 Real Estate Commission Changes Coming Soon!
Historically, sellers have paid the commissions for both listing and buyer's agents. A lawsuit in November 2023 challenged this, suggesting changes that could shift some financial responsibilities.
In March 2024, NAR agreed to settle its lawsuit and pay $418 million over four years, without admitting any wrongdoing. 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 eventually lead to lower buyer’s agent commissions and give buyers the ability to negotiate those commissions based on the services they need.
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.
» NAR Reaches Agreement to Resolve Nationwide Claims Brought by Home Sellers
What is the commission on a $10 million dollar home?
The commission for selling a $10 million home is higher for the total dollar amount despite potentially lower commission rates.
For instance, a 2% commission rate on a $10 million sale would result in $200,000 for each agent. This amount is more than what an agent would earn from a 3% commission on a $1 million home sale, which would be $30,000 – a difference of $170,000.
Factors influencing commission rates for high-value properties like a $10 million home include the agent's experience and their network of prospective buyers, the current state of the real estate market in the home's location, the property's appeal and the likelihood of a sale, and any unique features of the home.
It's also important to remember that commission rates are negotiable. An experienced agent may be willing to negotiate lower rates for higher-value properties, leading to more favorable terms for sellers of such luxury homes.
Save up to $15K in commission by listing with a Clever partner agent for just 1.5%.
Selling a $1 million home: Maximizing your success
For a swift and profitable sale of your million-dollar home, enlisting the services of a real estate agent is crucial. The luxury real estate market is challenging due to the limited pool of qualified buyers and the high expectations accompanying such significant investments.
In most regions, it's essential to partner with an experienced real estate agent with a track record of successfully selling homes in the $1M+ range. They have the expertise to market your property and have the necessary local connections to attract the right buyers.
📊 Market snapshot: Understanding the Luxury Market Dynamics
Source: Robb Report |
» MORE: Find the best low commission realtors for luxury homes.
How top agents sell a $10 million homes
When selling a home in the $1-10 million range, it's not as simple as listing it on the Multiple Listing Service (MLS) and waiting. Top real estate agents bring their years of expertise and marketing acumen, crafting strategies tailored to attract a niche group of potential buyers.
Your agent's commission isn't just for their time; it's an investment in their deep understanding of the market and their ability to draw attention to your listing. They're your ally in garnering interest and navigating negotiations to secure the best possible deal.
Here's a glimpse into the strategies employed by agents to sell luxury homes:
Luxury marketing tools
In luxury home marketing, advanced visuals are essential. Top-notch photography, drone imagery, and 3D tours are popular, offering a comprehensive and captivating view of properties.
These techniques highlight the home's best features and provide an immersive experience for potential buyers, including out-of-town buyers who cannot view the property in person right away.
The strategy extends to visual storytelling, where striking images and videos get paired with engaging, informative copy. It can create a narrative connecting buyers emotionally and intellectually to the property.
Additionally, a targeted media strategy focusing on high-net-worth individuals is crucial. Tailoring this strategy to reach various demographics can help marketing resonate with the right audience, paving the way for a successful sale.
👀 What about open houses?
Luxury homes often forgo traditional open houses due to the risk of attracting more casual lookers than serious buyers. Instead, private showings are more common, aligning with sellers' preferences and the property's exclusivity.
Understanding buyer's requirements
Understanding the luxury buyer is a critical aspect of high-end real estate marketing. This process involves targeted marketing strategies that focus on a high-end clientele.
Recognizing and accommodating luxury home buyers' unique needs and preferences is paramount. These buyers often have specific requirements and expectations that differ from the average homebuyer, and addressing these can influence the success of a sale.
Confidentiality is also vital in these transactions. Protecting sensitive information, often through non-disclosure agreements, ensures that buyers' and sellers' privacy and interests are safeguarded. This approach builds trust and enhances the buying experience for high-net-worth individuals.
Pricing the million dollar home right
This is a critical step in the selling process. This becomes even more crucial in the luxury real estate market due to the limited pool of potential buyers.
About 70% of recent home sellers sought a professional evaluation of their home's value before selling, a practice that is recommended for luxury properties. Tools like a comparative market analysis (CMA) or pre-listing appraisals help set accurate prices.
When setting the price for a million-dollar home, it's important to consider a few main things: where the house is, how big it is, what condition it's in, and if it has any special features. This helps ensure the price isn't too high, which can stop the home from selling quickly.
It's also key to match the price with the seller's wants - a fast sale or the most money possible. Getting the price right helps find the best buyers and ensures the sale goes well.
How to save on a $1 million (or $10 million) sale
Negotiate a lower real estate agent commission
Saving on a high-value home sale, whether $1 million or $10 million, can be achieved by negotiating a lower realtor commission. Given the high sale price, you hold more leverage in these negotiations.
Studies say that only 22% of recent home sellers negotiate reduced fees.[1] But these figures encompass all home sellers, not only those in the luxury market. So, your chances might be better in the high-end segment.
Several factors influence your negotiating power. The value and appeal of your home are significant, as well as the current state of your local market, including inventory levels. Additionally, the time of year can play a role.
Understanding these elements can help you negotiate a lower commission, leading to large savings in a high-value home sale.
» How to negotiate realtor commission
Use a discount brokerage
A few discount brokerages sell million-dollar homes, which can be a savvy move when selling a luxury property. These brokers hire licensed real estate agents who offer the same services as traditional brokers but at a lower commission rate. This approach can yield significant savings, especially in high-value real estate transactions.
These agents typically accept a pre-negotiated rate of around 1.5%, compared to the usual 2-3% listing commission. Despite the lower rate, agents can still earn a large commission due to the higher sales price of luxury properties.
Choosing a discount brokerage doesn't mean you'll receive discounted or limited service, either. You'll have access to agents who specialize in or have considerable experience with luxury homes. This ensures you receive expert guidance tailored to the high-end market.
If you're ready to sell your million-dollar home, sell with Clever Real Estate for a 1.5% listing fee! And, if you buy your next home through Clever, you could qualify to get cash back after closing.
Clever is 100% free for home sellers, and there's no obligation to commit to an agent if you aren't satisfied with your matches.
Sign up with Clever and get matched with experienced local agents who can help you sell your million dollar home and save tens of thousands on commission fees.
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FAQs
How much commission does each realtor make on a $1 million sale?
On a $1 million dollar home sale, a real estate agents' commission can vary, but with a rate of around 5.49% (the national average), a realtor could earn approximately $54,900. This amount is usually split between the seller's and buyer's agents, and is typically paid by the seller.
How much commission could a realtor earn on a $10 million sale?
For a $10 million property, the commission is higher. Even with lower commission rates for luxury properties, a 2% rate, for example, would result in $200,000 for each agent involved.
What percentage do most realtors take in a real estate transaction?
The average commission rate is around 5.49%, and often ranges from 5-6%. But this can vary depending on the home's value and the market. In luxury real estate, there's often more room to negotiate lower rates. This is often due to the high value of the property and the large commission it generates.