A Guide To REALTOR® Fees: What Are They, Who Pays Them And How Much Do They Cost?

When buying or selling a home, you’ll encounter various costs associated with closing, including REALTOR^® fees. If you hire a real estate agent or REALTOR^® to help you buy or sell a house, you’ll pay the real estate agent a commission, so it’s valuable to know how much you might pay and why.

Let’s explore a few key details you’ll need to know about REALTOR^® fees – including more on what they are, who pays them and how much they cost.

A REALTOR^® fee, also known as real estate commission, is the price you pay to work with a real estate agent or REALTOR^® to buy or sell a house. These fees cover the cost of many services your real estate agent or REALTOR^® may provide, from marketing your home to walking you through the various processes involved with selling or buying a house.

In some markets, real estate agents and REALTORS^® (real estate professionals who are members of the National Association of REALTORS^®) work for a flat fee. But they typically work on commission, so you won’t have to pay your agent unless they successfully sell your home or help you purchase a new one.

The home seller usually pays the REALTOR^® fees. They’re calculated by subtracting the agent’s commission costs from the total sale price of the real estate transaction. The fee goes to the seller’s agent – also known as the listing agent – who splits the commission with the buyer’s agent.

Home buyers don’t typically pay REALTOR^® fees in the strictest sense, but the buyer’s money – usually in the form of a mortgage loan – is what the seller uses to cover both agents’ commission costs. In that way, both the buyer and the seller contribute to this expense.

When buying a for sale by owner (FSBO) home, the buyer’s agent will often negotiate directly with the homeowner for the payment of REALTOR^® fees. If the homeowner – or seller – agrees, they’ll pay the commission of the buyer’s agent.

Real estate commission is usually calculated as a percentage of your home’s final sale price. This percentage varies, but 5% – 6% is typical.

While this may seem like a lot – especially if your home is worth a lot of money – think of it as an investment opportunity. You’re investing in a real estate agent to help you get the best price possible when buying or selling a house. The guidance of a professional can turn negotiations in your favor, and that’s often worth more than the cost.

Average Cost Of REALTOR^® Fees

The commission rate can vary from one transaction to another. Estimating 6% of your home’s sale price can give you a good idea of how much you might pay in real estate commissions.

For example, if a house sells for $200,000, you can expect to pay around $12,000 for the REALTOR^® fee. If you’re the homeowner, you should take this into consideration when determining the listing price of your home.

Remember, there are many fees involved with closing – and the fee paid to real estate agents will not cover all these costs. The REALTOR^® fee typically only covers your real estate agent’s work to market your home, negotiate on your behalf and take care of the details throughout the deal.

Depending on your situation and what costs you may have incurred along the way, expect to pay your real estate agent extra for various items, including:

• Scheduling the home inspection and appraisal
• Ordering photography and videography when listing a home
• Preparing virtual or in-person staging
• Arranging, advertising and hosting open houses
• Scheduling and conducting showings

While the real estate commission gets paid when a home closes, technically, it isn’t included in your closing costs. Closing costs are made up of other expenses that are usually related to your loan, not your REALTOR^® or real estate agent’s work. Closing costs typically include expenses like legal and loan processing fees. Closing costs will vary, but on average, closing costs in the U.S. for 2021 were $6,905 (taxes included), according to data gathered by ClosingCorp.

Here are a few items you can expect to pay for at closing besides your REALTOR^® fee:

• Homeowners insurance
• Title insurance
• Processing and underwriting the loan
• Property tax
• Deed recording costs
• Closing or escrow fees

You’ll have a lot to consider during the process of buying or selling a home, so it can be advantageous to have a real estate expert with lots of experience on your side. No one expects you to tackle buying or selling all on your own – it’s OK to ask questions, and real estate agents and REALTORS^® can usually answer them.

When looking for the right real estate agent or REALTOR^® to work with, it’s a good idea to shop around a bit. Buying or selling a home is one of the biggest financial commitments you can make, so it’s important to work with someone you trust.

When looking for a real estate agent, keep the following in mind:

• Be transparent and let them know what you’re looking for. There are plenty of agents out there, so chances are you’ll be able to find one who can meet your buying or selling needs.
• Ask any questions you have – it’s always better to be informed than confused.
• Be upfront about not knowing which real estate agent or REALTOR^® you want to work with.
• Try to negotiate the fee with the real estate agent. But you can only expect so much wiggle room since the real estate commission fee will depend largely on the price of your home.

Negotiating REALTOR^® Fees

You can sometimes negotiate the cost of real estate commission fees, though you should accept that you’ll likely get what you pay for. Negotiating for a lower REALTOR^® fee could mean less money going toward marketing your home to buyers and other tasks your real estate agent may take on for you.

In the case of dual agency – when one agent represents both the buyer and seller – your REALTOR^® may be willing to reduce their fee rate because they’re not splitting the commission with another agent. Some states don’t allow dual agency representation due to conflict of interest.

REALTOR^® fees can add up quickly, so it’s important to understand what you’re paying for. Let’s go over some of the most frequently asked questions about REALTOR^® fees.

Do buyers pay REALTOR^® fees?

Home sellers typically pay REALTOR^® fees with proceeds from the sale of the home, which is paid for by the buyers.

What is the average real estate commission?

The average real estate commission is 5.37%. Commission rates can vary from state to state, city to city and even between brokerages. As you search for the right real estate agent, it’s common to see different rate quotes.

Where can I find out how much I’ll pay in fees and commission?

When you hire a real estate agent or REALTOR^®, the agent fees and commission should be detailed in your listing agreement, which serves as the employment contract between the agent and the property owner.

Essentially, REALTOR^® fees are the investment you make if you work with a real estate agent or REALTOR^® to get the best home sale price possible. Whether you’re buying or selling, it’s important to take into account how much you might pay in real estate commission fees and closing costs so you won’t encounter any surprises when it’s time to close.

When you’re ready to take the next step in home buying or selling, it’s important to choose a real estate agent you trust. Visit Rocket Homes^SM today to get matched with one of our Verified Partner Agents.