Real Estate Commissions: What Is It & Who Pays?

Hiring a real estate agent may seem like an added expense when selling or buying a home, but realtors play a vital role in the home-buying/selling process. An agent’s services are worth the commission to ensure your property is properly listed and marketed or to help you find a home that fits your budget and needs. And it’s tough to DIY selling your property or searching for a new home when you’re juggling other responsibilities. 

So let’s dive into how real estate agents are paid and all things real estate commissions.

What is a real estate commission?

A real estate commission is how a realtor is paid because they aren’t paid by the hour! Instead, they’re paid a percentage of the purchase price in a successful real estate transaction.

Who pays a real estate commission?

The seller of a house pays the real estate commission. The commission is then split between the listing agent, the buyer’s agent (if they have one), and the broker (if one is involved).

If you’re buying a home, you don’t pay the commission. But typically, the real estate commission is factored into the cost of the home (so, in a way, it could be argued you are paying it since it’ll affect the size of your mortgage).

What percentage do most realtors charge for real estate commissions?

In the U.S., real estate commissions are commonly 6% of the transaction – but the overall average is 5.37%.

Remember, if the listing agent and buyer’s agent are splitting the commission, then each agent will get about 3% each. On average in the U.S., the listing agent gets 2.72% and the buyer’s agent gets 2.65% of the real estate commission when split.

What is the typical real estate commission in Florida?

The average real estate commission in Florida is 5.40%.

How much commission does a real estate agent make on a $100,000 sale? $500,000 sale?

Here is a breakdown of real estate commissions with a 5.50% rate:

Home Sale Price 5.50% rate Split Commission
$100,000 $5,500 $2,750 / $2,750
$500,000 $27,500 $13,750 / $13,750

Can you negotiate real estate commissions?

Yes, there is a possibility of negotiating real estate commissions since there is no government or industry body that sets rates. Negotiating a lower rate will all depend on the type of transaction, service requirements, relationship with your agent, and if the agent is representing both the buyer and seller. 

But keep in mind that your realtor may only earn 1.5% of the commission at the end of a sale after any splits and expenses. So when looking to reduce the real estate commission, consider the work you want your agent to do to evaluate the value of the commission they’ll earn. Lower commissions may not always be better since this can impact the agent’s marketing budget and other business expenses that help the sale of your home. 

Need help finding a realtor? Let us know, and we can provide referrals!

 Your Team at Liberty Title Company of America

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