In today’s evolving real estate landscape, understanding realtor commissions is crucial for both buyers and sellers. This guide dives deep into how much commission realtors make, the factors influencing these earnings, and the recent changes impacting the industry.
Understanding Realtor Commissions
Real estate agents primarily work on commission, earning a percentage of a home’s final sale price. The higher the property value, the more they earn. While a small percentage of realtors might be salaried, the commission-based model is standard.
Traditionally, a 6% commission was common, split evenly between the buyer’s and seller’s agents. However, the rise of discount brokers and accessible online listings has led to fluctuations. Today, a total commission closer to 5% is more typical. The exact commission terms can vary based on the sale, region, and brokerage. Realtor fees are paid upon the successful closing of the sale.
For example, a 5% commission on a $250,000 home equates to $12,500, whereas the same rate on a $1,000,000 home results in $50,000.
| Home’s Sale Price | Seller’s Agent Commission (2.5%) | Buyer’s Agent Commission (2.5%) | Total Commission (5%) |
|---|---|---|---|
| $250,000 | $6,250 | $6,250 | $12,500 |
| $500,000 | $12,500 | $12,500 | $25,000 |
| $750,000 | $18,750 | $18,750 | $37,500 |
| $1,000,000 | $25,000 | $25,000 | $50,000 |
The Impact of Dual Agency on Realtor Earnings
Dual agency, where one agent represents both buyer and seller, can influence commission structures. In such cases, the agent may have more negotiation room due to earning a fee from both parties. However, dual agency regulations vary by state, with some states prohibiting it.
While agents must prioritize their clients’ interests, dual agency can create conflicts. Samantha Fish, an agent with Wesely & Associates, emphasizes the ethical obligations, stating, “It’s in our ethics; it’s in our contract.”
How Brokerages Affect Realtor Commission Splits
Real estate brokerages often take a portion of the commission. For instance, RE/MAX offers a split commission plan where agents receive 95% of the full commission, with the remaining 5% going to the company. This split varies among different brokerages.
What Services Justify Realtor Fees?
Realtor commissions cover a range of services vital to a successful real estate transaction. These include:
- Expert Market Knowledge: Agents possess in-depth knowledge of the local market.
- Negotiation Skills: Skilled negotiation to benefit their clients.
- Time and Expertise: Agents dedicate time answering questions and guiding clients through the complexities of the process.
Access to the Multiple Listing Service (MLS), a comprehensive database of properties for sale, is a significant advantage. The MLS broadens the scope for both buyers and sellers.
For buyers, realtors can uncover properties and neighborhoods that might otherwise be missed. They handle scheduling, offer preparation, and paperwork.
For sellers, realtors provide price research, market analysis, marketing, staging, showings, and offer management.
Average Realtor Commissions by State in 2024
According to data from Clever, the national average realtor commission in 2024 was 5.32%. The average split was 2.74% for the listing agent and 2.58% for the buyer’s agent.
However, commissions can vary significantly by state:
| State | Total Average Commission Rate |
|---|---|
| Alabama | 5.31% |
| Alaska | 5.04% |
| Arizona | 5.40% |
| Arkansas | 5.30% |
| California | 4.99% |
| Colorado | 5.29% |
| Connecticut | 5.25% |
| Delaware | 5.30% |
| District of Columbia | 4.82% |
| Florida | 5.05% |
| Georgia | 5.62% |
| Hawaii | 5.04% |
| Idaho | 4.68% |
| Illinois | 5.07% |
| Indiana | 5.31% |
| Iowa | 5.51% |
| Kansas | 5.51% |
| Kentucky | 5.30% |
| Louisiana | 5.30% |
| Maine | 5.25% |
| Maryland | 5.30% |
| Massachusetts | 4.47% |
| Michigan | 5.86% |
| Minnesota | 5.77% |
| Mississippi | 5.30% |
| Missouri | 5.73% |
| Montana | 4.68% |
| Nebraska | 5.51% |
| Nevada | 3.51% |
| New Hampshire | 5.25% |
| New Jersey | 5.07% |
| New Mexico | 5.68% |
| New York | 5.36% |
| North Carolina | 5.47% |
| North Dakota | 5.51% |
| Ohio | 5.60% |
| Oklahoma | 5.68% |
| Oregon | 5.00% |
| Pennsylvania | 5.35% |
| Rhode Island | 5.25% |
| South Carolina | 5.36% |
| South Dakota | 5.51% |
| Tennessee | 5.54% |
| Texas | 5.76% |
| Utah | 4.68% |
| Vermont | 5.25% |
| Virginia | 5.19% |
| Washington | 5.18% |
| West Virginia | 5.30% |
| Wisconsin | 5.78% |
| Wyoming | 4.68% |
It’s worth noting that realtors may accept lower commissions for high-priced homes.
Alternatives to Paying Traditional Realtor Fees
Avoiding traditional realtor fees is possible, though it requires careful consideration.
Selling “For Sale By Owner” (FSBO) is an option, but it involves significant effort and time. Between July 2023 and June 2024, 6% of home sales were FSBO, according to NAR data.
Other alternatives include:
- Low-Commission Real Estate Agents: These agents charge less (typically 1-1.5% of the sale price) but may offer less personalized attention.
- Flat-Fee Agents: These agents charge a fixed fee regardless of the home’s sale price.
- Selling to iBuyers or Cash Buyers: While convenient, offers from these buyers are usually lower than market value, and some charge service fees.
Regardless of how you sell, remember that closing costs still apply.
Conclusion: Realtor Commissions and Informed Decisions
Understanding how much commission realtors make empowers you to make informed decisions in your real estate journey. By weighing the costs and benefits, you can choose the best approach for your unique situation. Be sure to negotiate terms and clarify who pays which commission upfront. This ensures a smooth and financially sound real estate transaction.
