Is a 2% Real Estate Commission a Good Way to Save Money?
Editor’s note: On March 15, 2024, the National Association of Realtors (NAR) announced a landmark lawsuit settlement that will change the way real estate agent commissions are handled in the future. These changes will “decouple” seller and buyer agent compensation. Industry experts predict that this decoupling will likely lower agent fees and give buyers the ability to negotiate commission amounts directly. Learn more.
If you’re selling your home, a 2% real estate commission may seem enticing in comparison to the average 5% to 6% rate. But you may be wondering if you can expect the same value from a low-commission real estate agent that you’d receive from a full-commission agent.
In this article, we explore the reasons why some agents might offer a discounted rate and what kind of service you can expect from a low-commission agent or discount brokerage. To help you make an informed decision in your search, we spoke with top-performing real estate agents for expert insights.
How does a 2% real estate commission work?
Low-commission agents, 2% commission companies, or discount brokerages charge a reduced 2% commission to home sellers. While this may look like a 3% to 4% discounted commission fee of the average 5% to 6% commission, it’s actually a 1% discount or less, because it typically only applies to the listing agent’s commission.
Still, that one percent can add up to thousands of dollars in savings depending on the price of your home. However, paying a reduced commission may impact the total profit you make on your home sale, leaving you with less money at the end of the day.
What is the average real estate commission rate?
According to HomeLight’s real estate transaction data compiled from thousands of home sales each year, the national average real estate agent commission rate is currently 5.8%. Locally, commission rates can vary. Here’s a round-up of commission rates across a few major U.S. cities:
Los Angeles real estate commissions: 4.58%
San Francisco real estate commissions: 5.46%
New York City real estate commissions: 5.50%
Bakersfield, California real estate commissions: 5.12%
San Diego, California commissions: 4.82%
Atlanta, Georgia commissions: 5.72%
Washington, DC commissions: 5.30%
Fort Lauderdale, Florida commissions: 6.60%
The data shows that in a typical real estate transaction, the seller usually pays somewhere between 5% and 6% in commission. However, the listing agent doesn’t pocket the entire fee. The buyer’s agent generally takes a 50% cut of the total commission fee. In addition, both the buyer’s agent and the listing agent will pay a portion of their commission to their companies for brokerage and desk fees.
How much can I save with a 2% real estate commission?
In a 2% real estate commission scenario, the 2% commission fee only applies to the listing agent’s commission. It’s important for a seller to understand that the commission paid to the buyer’s agent doesn’t disappear. Your listing agent may recommend that you also pay the buyer’s agent anywhere from 2% to 3% in commission.
For example, if the average commission in your area is 5.8%, you may pay 2.9% (50% of 5.8%) to the buyer’s agent on top of the discounted 2% fee paid to the listing agent, for a total of 4.9% commission. When you account for the buyer’s agent costs, the savings gap you’d earn with a 2% versus a 6% commission agent narrows considerably.
In the chart below, we show you the total commissions you’ll pay with a discounted 2% listing fee and a 2.5% buyer’s fee. The actual amount you’ll pay a buyer’s agent depends on what’s typical for your area and the rate you agree to pay.
Sale Price
2% Commission for listing agent
2.5% commission for buyer’s agent*
Total commission paid (4.5%)
Standard 6% Commission
Potential commission savings
$175,000
$3,500
$4,375
$7,875
$10,500
$2,625
$225,000
$4,500
$5,625
$10,125
$13,500
$3,375
$300,000
$6,000
$7,500
$13,500
$18,000
$4,500
$400,000
$8,000
$10,000
$18,000
$24,000
$6,000
$525,000
$10,500
$13,125
$23,625
$31,500
$7,875
$700,000
$14,000
$17,500
$31,500
$42,000
$10,500
$1,000,000
$20,000
$25,000
$45,000
$60,000
$15,000
*Commission rates are estimates and are not a guarantee for your home sale.
