Real estate agents are not paid the normal way. They do not usually receive a salary or even hourly compensation from home buyers and sellers for their efforts. Instead, real estate agents and their brokerages make money via commission: a percent of the home’s final selling price paid to them by the seller.
In fact, the seller is responsible for paying commission to both their own seller’s agent and the buyer’s agent as well. That’s just how real estate commissions work. As home prices rise, so too do the commissions paid to real estate agents and brokers.
How much commission do real estate agents expect?
There is no widespread mandate on the amount of commission to be paid to buyers or sellers agents. This is a number you can negotiate with your agent or offer the seller’s agent an incentive to close the deal.
Typically, however, each real estate agent expects 3% of the home’s sale price in commission. This commission is paid to both agents by the home seller, theoretically from the sum you receive from the buyer’s bank.
To put this in perspective, 3% of a $300,000 home would be $9,000 each. This means you as the seller will wind up paying $18,000 out of pocket to cover the commission of both your seller’s agent and the buyer’s agent as well.
What does the real estate commission pay for?
That question can best be answered by breaking down each side of the commission. After all, the listing and and the buyer’s agent have very different responsibilities and therefore different expenses.
The seller’s agent commission
The seller’s agent commission pays for preparing the home and the marketing costs of listing your home publically where buyers can find it. Their commission also covers representing the seller in receiving bids, handling escrow, managing the negotiations, and helping the seller through closing procedures.
However, the majority of the cost definitely focuses on advertising.
Listing your home on the MLS is only the beginning. There was a time when a seller’s agent would take out newspaper and magazine ads, post signs, and other proactive real-world marketing measures.
Hosting open houses and in-person tours are also things your seller’s agent may do while on commission, though there has been refocusing on virtual listing methods.
The buyer’s agent commission
The buyer’s agent commission pays for house-hunting with and for the buyer. They will show buyers house after house, managing tours, and inspections and weighing pros and cons until buyers decide on the house they want.
Buyer’s agents often scour online sites along with the MLS and local advertisements. In addition, a buyer’s agent also handles ushering the buyer through bidding, escrow, negotiations, and closing.
Virtual marketing and listing service costs
Right now, there’s a major shift to virtual marketing in real estate. Not only has virtual marketing become a rising influence, the pandemic then pushed buyers and agents over the edge on online research and virtual tours.
The interesting twist is that virtual marketing costs less overall than traditional real estate marketing methods. It costs less to list online and promote those listings in search engines and real estate platforms than it does to take out magazine ads and put up signs.
Lower costs for realtors
This has significantly lowered the overhead for seller’s agents and listing services. However, most brokerage teams and agents still charge the same commission, whether out of convenience or not to rock the boat of 3% across the board.
However, newer and more adaptive real estate teams like Change Realty are eager to fill the new niche of low-cost listing services. By streamlining the online listing and promotion process, home sellers can achieve the same – if not better – virtual marketing for their homes at a fraction of the cost.
The total real estate commission after selling a house
In a standard real estate exchange, the total cost of agent compensation is 6% – 7% of your home’s selling price. For a $300,000 house, the total commission would be between $18,000 to $21,000 out of your home-selling profits.
However, working with a discount real estate brokerage like Change Realty, you can cut that number to a fraction.
Working with a 1% listing service provides digital marketing, page promotion, and property conveyancing without the extra cost for unnecessary traditional marketing methods.
Commissions at Change Realty
As a home seller, this brings your total real estate commission to 4% after also covering the buyer’s agent, instead of the traditional 6 or 7. At 4%, the total commission for a $300,000 house is $12,000 – $3,000 (1%) for your virtual seller’s agent and the traditional $9,000 (3%) to the buyer’s agent.
Save money using a discount realtor
If you are a homeowner looking to sell at a reasonable cost for effective seller’s agent services, we can help. Here at Change Realty, we are dedicated to providing high-quality virtual listing services at a discount on the traditional real estate seller’s agent price.
We are a discount real estate brokerage and proud to offer sellers a price that more closely fits the real cost of seller marketing today. Contact us to get started with your discount listing to lower your overall real estate commission upon home sale.