How Real Estate Commission Works Krishna Realty

How much is real estate commission?

Real estate commissions are negotiable and can differ from sale to sale. They vary by region and the firm the agent works for.

Who pays the commission?

The payment of real estate commissions is flexible and negotiable. Buyers and sellers can determine who pays the commission in a transaction. Some sellers may cover the buyer's agent's commission, while others might not. If the buyer wants representation but the seller doesn't cover the commission, the buyer will need to pay their agent as per their agreement.

Here’s an example of commission costs at different home sale prices, using commission rates of 5%, 3%, and 1.5%:

Home Sale Price 5% Real Estate Commission 3% Real Estate Commission 1.5% Real Estate Commission
$150,000 $7,500 $4,500 $2,250
$200,000 $10,000 $6,000 $3,000
$250,000 $12,500 $7,500 $3,750
$350,000 $17,500 $10,500 $5,250
$500,000 $25,000 $15,000 $7,500
Can you negotiate Realtor® commission fees?

Yes, you can! No laws in the U.S. set commission rates, allowing room for negotiation based on the transaction type, required services, and relationship. Some agents may offer lower fees for dual agency, where they represent both buyer and seller. However, a lower commission might reduce the marketing budget, potentially affecting the sale's exposure.

What does the commission cover?

A typical real estate agent commission includes services like pricing the home, marketing it, presenting it to buyers, negotiating details, overseeing inspections and appraisals, and closing the sale.

Do agents split the commission?

Commissions are often split between the buyer’s agent and the listing agent. For example, on a $250,000 sale with a 6% commission, if split equally, each agent gets $7,500. The agent’s share might then be divided further with their broker, often resulting in the agent receiving around 1.5% of the total sale price.

How does commission work for buyers?

If buyers seek representation, they must pay their agent as per the agreed terms in their contract. These terms can vary based on negotiations, regional practices, and the policies of the agent’s firm. It's essential for buyers to understand these terms before proceeding.

Do you have to pay commission if you don’t buy a home?

Typically, no. Agents are paid upon the sale of a home. If you don’t buy, the agent doesn’t get paid. However, if you’ve signed a buyer’s agency agreement, breaking up with your agent might be challenging, so understand your contract fully.

Is commission included in closing costs?

No, agent commissions are separate from closing costs. Closing costs include fees like taxes, title insurance, and appraisal fees, usually totaling 2%-5% of the home’s price.

Do you have to pay commission if your home doesn’t sell?

Generally, no. Agents earn their commission when the home sells. If the home doesn’t sell within the contract period, you typically don’t owe the agent. Exceptions include scenarios where the agent found the buyer during the contract period or if you back out of a sale after accepting an offer.

What is dual agency?

Dual agency occurs when one agent represents both buyer and seller. It’s legal with full disclosure but banned in some states.

Bottom line

Read all contracts carefully. To save on commission when selling or get a rebate when buying, contact a Krishna Realty Agent. We're active in over 80 markets, including Denver, Austin, Raleigh, and Fort Lauderdale.