5 Important Things to Know about Real Estate Commissions

Here are five important things to know about real estate commissions.
Photo Copyright: ammentorp / 123rf.com

Much consideration goes into selling a home. What price should you list it for? Which photos best show off its unique and charming features? How can you negotiate with buyers for the best price? But how much thought have you given to how your agent gets paid at the end of the transaction. 

Like other aspects of the industry, real estate commissions may be unfamiliar to you. If that’s the case, consider this post a quick primer. Here are five basic, but important, things to know about real estate commissions.

What is a Real Estate Commission?

As it pertains to home buyers and sellers, a real estate commission is the amount of money paid to real estate professionals on both sides of the transaction in exchange for their services. Real estate agents do not work “by the hour.” Instead, they take a percentage of a home’s sale price as commission for their work. Since money is typically only paid out when the deal closes, that means that if you are not successful in selling your home, your real estate agent does not make any money.

Can You Negotiate Your Real Estate Commission?

Sellers can sometimes negotiate the amount of commission money the listing agent receives at the start of your job. However, some firms may have set commission split rates that real estate agents need to adhere to.

What Services Does Your Agent’s Real Estate Commission Cover?

A real estate agent’s fee covers their time researching properties with buyers, or marketing your home if you’re selling, as well as all the questions they answer and help they offer along the way. For buyer’s agents, it also compensates them for showing you properties, including time and gas and arrangements for showing homes. But as a seller, the fee also covers performing a market analysis; coordinating photography, open houses, or prospective buyer visits; providing yard signage; and populating the listing into all major real estate search sites; as well as managing negotiations with the buyer.

What do Buyers Pay?

The National Association of RealtorsⓇ 2020 Profile of Home Buyers and Sellers reported that 77% of sellers pay the agents’ compensation. That’s largely good news for buyers, who are on the hook for many other closing costs, as well as the cost for the home. However, that still leaves a nearly one in four chance that, as a buyer, you’ll be covering your agent’s commission. It’s prudent to ask questions when interviewing your real estate agent and during the buying process to make sure you understand which fees and services you’ll be responsible for covering on closing day.

Sellers often factor in the amount of money they’ll pay to commission when they calculate their asking price for a home. And they will keep the cost of commission in mind during negotiations. As a buyer, you must understand their thinking as you navigate any negotiations you request.

What do Sellers Pay?

Sellers are generally responsible for paying around 6% of a typical home sale toward real estate commissions. This percentage is then typically split evenly between the buyer’s and seller’s brokerages. Each agent then receives a portion of the commission split from their broker.

So, for example, in a home sale totalling $500,000, the seller would pay 6%, or $30,000, toward real estate commission. Each agent’s brokerage would then receive $15,000. Depending on how each agent’s brokerage splits are set up, the agent would then receive a percentage of that $15,000. Typically, an agent receives between 30–50% of their “split”.

Sellers are responsible for these real estate commissions as part of their closing costs. The commission amount gets removed from the total selling amount after the home buyer purchases the home and the funds become available.

So, Why Work with an Agent to Sell Your Home?

On the face of it, a 6% commission sounds like a lot of money, especially as home prices are rapidly increasing. However, it’s important to keep in mind that you get what you pay for. 

NAR’s 2020 Profile of Home Buyers and Sellers reported that in 2019, for-sale-by-owner homes sold for a median price of $217,900 nationwide, while the median home price of agent-assisted homes was $242,300. That 10+% boost is sale price more than makes up for saving 3% in agent commission. After all, you could still be responsible for paying the buyer broker’s 3% commission.

Are You Ready to Connect with an Agent?

Your Beverly-Hanks agent works directly with you to meet deadlines, distribute documents, and account for all details of your home sale. Our proactive management and attention to detail will help make sure your transaction is efficient and seamless. As a result, we get your home more views, more showings, and more offers—which means more money for you, even after paying commission! 

Learn more about selling your home with Beverly-Hanks.

All real estate is local. In order to make confident real estate decisions, it’s important to have timely and neighborhood-specific information. Contact us today to speak with a Beverly-Hanks real estate agent about selling homes and land in Western North Carolina. View all Beverly-Hanks real estate listings.

End of blog post Beverly-Hanks logo


Back to News

Leave a Reply