What Is a Real Estate Commission? 5 Myths Busted for First-Time Sellers

If you’ve purchased a home before but have never sold one, you most likely haven’t encountered real estate agent fees yet. Real estate fees — or commissions — are typically paid by the seller. So if you’re getting ready to sell your home, you may be wondering: what is a real estate commission?

Top real estate agent Amy Asivido Christman of Oregon and Washington has over two decades of real estate experience. When it comes to real estate commissions, she has the answers. She also reveals five commission myths that often confuse first-time home sellers.

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What are agent fees and commissions?

A real estate commission is the fee paid to real estate agents for their services in helping to sell or buy a property. This fee is typically a percentage of the property’s final sale price, which can vary by region and market conditions.

Christman estimates that most real estate commission fees are between 4 and 10% of the total sales price, but this number can vary greatly depending on your location and market conditions.

Historically, the industry standard was 6%, split between the buyer’s and seller’s agents. Sellers typically covered these commission fees, which are deducted from their total profit on the sale. However, in light of the recent NAR lawsuit settlement, sellers no longer have to offer a commission to the buyer’s agent. Under the new commission structure, buyers are expected to negotiate directly with their agents.

This change means sellers save money since they’ll only be responsible for their listing agent’s fee, usually around 3% of the home’s sale price. However, in some cases, sellers might still need to offer a decent commission to attract buyers or speed up the home sale.

As of writing, the median home price in the U.S. is $407,200. If you sell your home for this price, here are the commission costs you can expect:

• If you pay both the listing and buyer’s agent (6%), the total commission comes to $24,432.
• If you only cover the listing agent commission (3%), your cost slides to $12,216.

Commission rates tend to decrease in a seller’s market since homes are selling for more than they normally do. Therefore, agents don’t need to charge as high of a commission rate to make more money off a home sale. The latest data from August shows that the national average real estate commission fell to 2.34%.

“So at the end of the day, what I think people need to know is that it’s not important how much you pay in commission,” Christman explains. “It’s more important what you net. And the right agent will get you a higher price through better marketing, better negotiation, and the best exposure.” While this amount might still seem high to some sellers, it’s important to remember that your real estate agent is helping you maximize your home sale profit.

Agents on the buyer and seller side both have various responsibilities that impact your home sale. Here are just some of the services agents offer that you may not know about.

What services do real estate agent commissions cover?

Seller’s agent services

• Prepping and presenting the house

As a seller, it’s vital to put the best possible version of your house on display. Many seller’s agents provide professional photography and staging at no extra cost to their clients. Christman, for example, has a professional she hires to help the sellers pack up their belongings for an easier sale process.

Additionally, if you need work done to the house to pass inspection, like electrical or plumbing repairs, seller’s agents will often connect you with the best contractors.

“The contractors we work with are tried and true. We trust them,” Christman explains. “We know they do good work and they’re very competitive with their pricing. All of that together equals more money in the seller’s pocket.”

• Marketing the house

On top of the photography and staging, seller’s agents write the listing and post it on the industry’s multiple listing service (MLS). The exposure a seller’s agent provides often leads to more — and higher — bids.

“A lot of times, when I sit down and go over all the marketing that we do, they think it’s all going to be extra in addition to the commission,” Christman says. “It’s all included.”

• Working with the appraiser

Sometimes, a house appraises for less than the final sale price. This puts the seller and the buyer in an unfortunate spot because most lenders will not provide a loan larger than the appraised value.

Seller’s agents work directly with appraisers to provide comparable nearby properties (comps) and information about the home to help the appraisal equate to the sales price.
“It doesn’t happen very often with our team that we get a low appraisal because we do everything we can ahead of time,” Christman comments. “Like we provide feature lists to make sure the appraiser doesn’t miss anything and we provide the best comps that we can.”

• Holding open houses and conducting tours

Touring your home to strangers can be tougher on your emotions than you might think. That’s why seller’s agents are professionally trained in how to vet buyers, host open houses, and conduct tours of your home.

• Reviewing offers

At the end of the sale process, the seller’s agent helps you go through all of your offers. They can help you negotiate with buyers and will communicate with the buyer’s agent directly. In a seller’s market, sellers will most likely receive multiple offers, and you’ll want to be sure to pick the right one.