After a home sale, the real estate agents involved collect a fee called "realtor commission," "real estate commission," or sometimes simply "realtor fees."
Realtor commission is usually calculated as a percentage of the home’s sale price, in the range of 5-6%. We surveyed agents nationwide, and found the average real estate commission cost to be 5.49%, including the seller's agent and buyer's agent fee. However, it may trend upward or downward by region.
The money for realtor commission comes out of the seller's proceeds from the sale. This includes the realtor fees for the seller's agent (often called the "listing agent" because they list the home for sale) and the agent representing the buyer. It does not include closing costs, such as transfer taxes and title insurance.
Below, we explain everything you need to know about realtor commissions, including how they work, their typical cost, and what services real estate agents provide to earn their fee.
JUMP TO SECTION
- How realtor commission works
- How much are realtor fees?
- How do realtors get paid?
- What does real estate commission cover?
- Is realtor commission negotiable?
- Do you have to pay realtor fees if your home doesn't sell?
- How realtor commission works on rentals
How realtor commission works
Realtors typically aren't paid a salary and don't make money upfront when they take on a new client looking to buy or sell a home. Instead, they earn a commission on the home's sale when the deal closes.
Commission rates are talked about as a single percentage — often between 5-6% of your home's sale price. However, that isn't meant to imply that you're only paying one agent; typically, the seller’s agent splits this fee with the buyer’s agent, who brings one of their clients to purchase the home.
Why a commission-based model is good for sellers
A commission-based compensation model has definite advantages for home sellers. Having agents take a percentage of the home's sale price incentivizes them to sell your home for the highest price as quickly as possible in order to maximize their own earnings from the transaction.
Since realtor commission comes from the home sale proceeds, which otherwise would go to the seller, people usually say that the seller pays for both realtor fees.
So why would the seller pay for the buyer's agent? There are a couple of ways of looking at it, but essentially, the buyer's agent commission is a marketing expense to attract buyers. Here's how that works:
- As a seller, if you don’t offer a buyer’s agent commission, buyers who want to work with an agent will have to pay their agent out of pocket.
- That means buyers will have to bring 2-3% of the home’s price in cash to pay their agent on top of their down payment — making your home much less affordable than similar homes nearby that are offering a buyer's agent commission.
- In addition, buyer’s agents who see your home listed for sale will see that you aren’t offering any commission and may be less inclined to show their clients your home.
Realtor commission changes may be coming!
A lawsuit in November 2023 against the National Association of Realtors (NAR) questioned the long-standing practice of sellers paying the commissions for both the seller's and buyer's agents. NAR recently settled the lawsuit, agreeing to pay $418 million over four years, without admitting any wrongdoing.
While immediate changes to realtor commissions are unlikely following the NAR lawsuit and settlement, the case could eventually lead to major changes in commission structures. One possible outcome is that home buyers might have to pay their buyer's agent commission rather than sellers.
We will continue monitoring the situation and updating our content accordingly.
» READ MORE:
How much are realtor fees?
Home sellers should expect to pay 5-6% of their home's sale price in realtor commissions; however, these rates are 100% negotiable.
A home seller and their real estate agent typically agree on a commission rate when they sign a contract to work together. This contract — called the listing agreement — outlines the payment, duration, and other terms of the realtor-seller working relationship.
How do realtors get paid?
Realtors get paid at the end of the real estate transaction when the home sale is finalized. This typically occurs on the home's closing date in a process known as settlement, when a title company officially transfers ownership of the home and distributes proceeds from the sale.
Agents don’t get to keep all of their commission — which is important for you to keep in mind if you’re trying to gauge how much a realtor makes from a home sale. Realtors generally split the commission they earn from a home sale with their broker, who is legally required to oversee the transaction.
The amount of commission agents have to split with their principal broker will vary but is typically 30–50%. For example, if the listing agent commission on a home sale was 3%, and the agent had an agreement to split the commission 50-50 with their brokerage, the agent’s take-home pay from the sale would be 1.5%.
Here's an example of how that works for a home that sells for $200,000:
| Percentage | Dollar amount | |
|---|---|---|
| Total commission | 6.0% | $12,000 |
| Listing broker cut | 1.5% | $3,000 |
| Buyer's agent's broker cut | 1.5% | $3,000 |
| Listing agent take-home pay | 1.5% | $3,000 |
| Buyer's agent take-home pay | 1.5% | $3,000 |
The listing and buyer’s agent each make $3,000, and their brokers collect the same amount. The broker justifies their cut by providing their agents training, marketing support, and certain legal protection.
» MORE: How much commission a realtor earns on a $1 million sale
What does real estate commission cover?
Real estate commission is typically all-inclusive; it covers all aspects of the marketing and sale of your home.
Most agents will do the following to sell your home:
- Perform a Comparative Market Analysis (CMA) to help you properly price your home
- List your home on the Multiple Listing Service (MLS)
- Promote your home on popular real estate sites like Zillow
- Pay for professional photos
- Coordinate showings
- Help you with legal paperwork
- Negotiate on your behalf
Realtors front the time and money needed to market your home; you don't pay them anything until you finalize the sale. That means if your home doesn't sell, your realtor is the one who takes the hit.
If you're a home buyer, the question of what commission covers is less important. As we mentioned, buyers don't typically have to pay real estate commissions; the seller usually pays for your agent's fees out of the proceeds generated by the home sale.
Furthermore, there's less variation in the services provided by buyers' agents as almost all buyer's agents will help their clients:
- Find homes
- Attend showings
- Submit and negotiate offers
- Handle the legal paperwork
While the services outlined above are what agents typically offer, the level of service will vary from agent to agent.
So, how will you know what your realtor is willing to do and what services they'll pay for when selling your home? Typically, the details of what your agent will do to sell your home is decided when you sign your listing agreement. They may provide this through a marketing plan, which presents the agent's plan for attracting potential buyers.
Your agent may refuse to pay out of pocket if you want more expensive marketing — such as staging, 3D tours, or extensive social media advertising. If you know you want these things for your home, make sure you discuss this with your agent before you sign a listing agreement.
Note that realtor fees do not include closing costs, which could add an additional 1-3% to the seller's and buyer's expenses at closing.
Is realtor commission negotiable?
Realtor commission is completely negotiable, and negotiating can save money when selling a home.
Just because commission rates are negotiable doesn't mean an agent will lower their fees for you. To successfully negotiate for lower commission rates, you'll likely need to convince your agent of one of two things: your home will be easy to sell or make your agent more money than they'd typically earn on a sale.
| Things that show your home will be easy to sell | Things that show your home will make your agent more money than normal |
|---|---|
| Homes in your neighborhood are selling fast | Your home has a high value relative to others in your area |
| You can vacate your home right away | You don't need expensive marketing for your home |
| You'll pay out of pocket to have the home staged | You'll use them to buy a home in the future |
| Your home is in excellent condition | You'll refer them to your friends who are looking to buy or sell soon |
You also may get lower rates just by shopping around and comparing agents. Some agents will be more willing to offer you low rates than others. Remember that commission rates aren't the only thing you should consider when choosing an agent: their experience in your neighborhood and price range, customer reviews, and personal rapport with them are also important.
Our Concierge Team will find the top agents in your neighborhood and price range — AND we’ll negotiate so you pay just 1.5% in listing commission.
Compare agents with no fee and no obligation. Save thousands when you sell.
Do you have to pay realtor fees if your home doesn't sell?
Most of the time, if your home doesn't sell, you don't have to pay realtor commission. However, the specifics of whether or not you owe realtor fees depend on what you agreed to with your agent.
Home sellers only have to pay realtor fees if their agent fulfills the terms outlined in their listing agreement, which specifies exactly what they must do to get paid. Usually, listing agreements require that the agent finds a buyer and sells the home within a set time frame.
Sometimes, sellers might owe realtor fees even if their home doesn't sell. A listing agreement might stipulate that if the listing agent brings the seller an offer for at least the full asking price of the home, they’re owed a commission. So in this case, if the seller chose to reject a full-price offer, they'd still owe realtor fees.
Additionally, your listing agreement might say that you must reimburse your agent for some of their marketing expenses if you take your home off the market before the listing term ends.
Read the fine print of your agreement carefully.
How realtor commission works on rentals
Realtor commission works differently on rental properties than most home sales. The main difference is that typically the landlord pays the agent's commission when they find a tenant.
If you're using a rental agent to help you find an apartment, you're probably off the hook in paying commission.
One notable exception is New York City, where the renter usually pays the rental agent's commission.
