Think Realtors Are Rolling in Dough? Think Again!
When you list your home, your realtor will request a fee of somewhere around 5-6%. This varies from company to company in different areas of the country. For our purposes today, let’s use 6%. To some sellers, that number seems daunting: A $250,000 sale makes the seller’s agent $15,000. They see the number as excessive, and want to negotiate the commission down by one or two percentage points.
Here’s the thing, though. Your real estate agent doesn’t get that $15,000 to simply stuff in their pocket. The 6% that realtors earn goes towards giving you an incredible home-selling experience. Realtors spend their fees on marketing your house, with photos, videos, online advertising, preparing and printing flyers, hosting public and broker open houses, and much more. The portion of the commission that ends up in their pocket isn’t as big and flashy as you might have thought.
Is it worth paying the entire 6% real estate agent commission? You bet, and here’s why.
A realtor fee is the way that a real estate agent earns a living. Using our 6% example, when your home closes, the 6% is split between the seller’s broker and the buyer’s broker. The other broker takes a cut of the commission before the agent gets their check.
So, your amazing seller’s agent doesn’t get to keep their entire commission after all. Think about the realtor fee this way. If you paid any less than 6%, your realtor would wind up with either no cash to advertise the home that you’re trying to sell, or no takeaway pay. Neither situation is ideal.
Here’s a breakdown:
Sale Price: $250,000
Realtor Commission: $15,000
Selling broker gets $7,500.
Listing Agent's broker keeps a percentage—again, this varies, but let’s say 40% = $3,000.
This only leaves $4,500 for the selling agent.
If there is a relocation company involved, or if the seller’s agent received the listing through a referral from another agent or an online lead source, those also take a cut before the agent receives a check.
Keep in mind that a realtor does not receive a salary from the real estate company that they work with. They only get paid when they close a sale. So that $4,500, which has already been partially used for advertising expenses, also goes to pay licensing and continuing education fees, office fees, and general advertising fees, not to mention the time the agent spends and the skills needed to do the work of advertising, coordinating showings, negotiating, and being there for you throughout the biggest transaction of your life. They also must pay taxes on that money. In addition, the money they make goes to support themselves and their families.
Still think realtors make too much?