The Truth About Real Estate Agent Fees: What You Need to Know

Did you know you could be on the hook for thousands of dollars in real estate agent fees when you buy or sell a house? Don’t go into the real estate process blindly if you’re considering working with an agent. Otherwise, you might be digging into your savings on closing day.

It’s critical to know about the fees you’ll face for working with agents – and learn about alternative ways to sell your house quickly. Read on to learn the truth about real estate agent fees!

Understand How Real Estate Agents Are Paid

First, it’s important to know the intricacies of how real estate agents earn their income. Much like other individuals in sales roles, they work on commission. In other words, they only get paid when they make the sale. 

Agents don’t take home a consistent annual salary. How much they make depends on their productivity and success as agents. If you’re buying or selling, they’ll work at any hour of the day to facilitate a transaction.

Agents are paid an hourly rate for their efforts. They might put in a lot of work on behalf of a client before finally helping a buyer get an offer accepted. This is particularly true if the market favors sellers, and their client has to be savvy with a good offer and negotiations.

But in other instances, an agent might not need to do much to earn their commission. If a buyer is decisive and can pay at or above the asking price, their first offer could be accepted within days. Regardless of an agent’s time commitment, they’ll earn the same commission. 

Know What Agent Fees Cover

Home buyers need to go into the real estate process fully aware of the costs associated with a home purchase. After all, if you’re selling a $400,000 house, you could be spending around $10,000 in real estate agent fees just for your agent. 

Agent fees cover the agent’s efforts to help you buy or sell a house. An agent may take professional photos of your home, for instance, and craft a listing that highlights your home’s best features.

They’ll know the appealing language to entice people to look at your ad. They’ll help with staging and marketing. They’ll send you updates regularly, too, about potential leads.

With an agent, you’ll gain access to an online database for real estate listings. This can give your property better visibility if you’re selling. And if you’re buying, your agent could have access to new listings faster than anyone without access to the network. 

An agent will tackle open houses and showings. They’ll have all of the stats on your home, like yard size and basement square footage, to share with potential buyers. 

Agent fees cover financial analyses to help determine a good listing price, too. They cover the agent’s efforts to negotiate and arrive at the best deal. And the agent takes the lead on guiding their client through what can feel like piles of paperwork. 

Be Aware of the Going Rates

Every state is different when it comes to real estate commissions. And even if an agent has a standard commission rate, they may be willing to negotiate.

This is especially true if you’re trying to sell a more expensive house where the commission fee will be higher to begin with. For a $1.5 million house, even a smaller commission of 4% earns the agents $60,0000.

If you’re moving somewhere new, be aware of the commission rates in your new state. If you’re moving from Delaware to Kentucky, for instance, you may be surprised to learn that the commission rate is roughly 1.1% higher in Kentucky. 

You can expect to find a commission of somewhere between 5 and 6% in most states. That percentage may seem small at first glance. But when you apply it to even a $200,000 house, you’re looking at $1,000.

Typically, the total commission paid is split between the buyer’s agent and the seller’s agent. So, what could be a 5% or 6% real estate agent fee applies to both agents. 

What a Seller Pays

Are you wondering, “How much will I owe if I sell my house?” As the seller, you might end up paying more. That’s because sellers often pay the brunt of a real estate commission. 

Sellers can help offset these fees by factoring them into their selling price. For instance, if a seller wants to sell their home for $300,000, they may actually list it for $315,000. That price would account for a 5% total commission for a home that is $300,000.

It pays to do some math on the front end as a seller. You don’t want to be surprised by a larger fee at the end of a transaction if you’ve already stretched yourself to make a down payment. 

For sellers, new legislation has enacted some positive changes. A recent court ruling now means that the obligation to pay for both the buyer and seller’s agent will no longer be an obligation for sellers. Assuming the federal court approves this legislation, buyers will pay agents themselves.  

Even so, sellers still will need to account for their agent. And that commission could be around 3% for an agent and broker. Sellers may want to focus on finding an agent with a competitive and flexible commission fee.

What a Buyer Pays

Traditionally, home buyers haven’t had to pay real estate commissions upon buying a house. That’s not always been the case, but it has been the more common scenario in real estate transactions. 

With the aforementioned recent legislation in play, buyers may need to pay more at the end of a transaction. Previously, buyers could count on sellers to pick up the bill. 

In the future, buyers will need to shop around for an agent with a reasonable commission. After all, if you’re buying a house, you don’t want to get stuck with a big bill in addition to your mortgage!

Buyers may need to slide their budget lower for a new house to account for this change. And they’ll end up spending more time researching agents before agreeing to work with one. 

Consider the Brokerage

Depending on the situation, a brokerage may take money, too. Think of a brokerage as the larger firm where a particular agent works.

That brokerage provides brand value and other resources to help their agents make a sale. They may provide office space and pay fees for access to real estate listing services. And they could help with production or marketing materials. 

It’s not surprising, then, that the brokerage would feel entitled to some of an agent’s earnings. Plus the brokerage is liable for everything one of their agents does. An agent who acts unethically could get the entire brokerage in legal trouble. 

Every brokerage divides the commission differently. For example, one approach is to give the agent 95% of the commission. The remaining 5% would be for the brokerage. 

Another approach would give the brokerage up to 40% of the commission. The more experienced the agent, the larger the cut they’ll take home. Some agents will attempt to negotiate more favorable ratios, so there can be variations within one brokerage. 

Explore Other Options

You may be thinking, “I want someone to buy my house, but I don’t want to owe money!” Real estate agent fees can be crippling when you’re simply trying to unload a property. 

You can try an FSBO approach where you work alone, without an agent’s help. You’ll be able to steer clear of agent fees when you go this route.

But you’ll end up doing a lot of the legwork yourself. You’ll need to stage and market your home, for instance. You’ll need to host open houses and maintain strong curb appeal.

And you’ll be stuck navigating piles of paperwork that may be intimidating. You can know for certain that all of this will be time-consuming, too. When you’re trying to start a new job or move your family across the country, the time investment may not be worth the stress. 

Another better option is to work with a cash home buyer. If you go this route, you’ll experience a much more efficient transaction. As an added perk, you’ll have money in your pockets within as little as a few hours.

That’s because cash buyers focus on offering you a quick assessment and a fair price for your home. When you’re thinking, “I can’t sell my home because it’s in poor shape,” they’ll still buy it. 

You don’t have to bother with home inspections, negotiations, and other normal parts of a real estate transaction. Instead, you’ll get an offer within minutes after completing an online form – and you won’t have a prolonged closing.

For buyers seeking a no-nonsense approach to selling a home, cash buyers make a lot of sense. They’re also ideal for anyone on a tight timeline. And best of all, there aren’t real estate fees to worry about. 

Learn the Truth About Real Estate Agent Fees

Real estate agent fees can cut into your bottom line in a hurry. Look carefully at commission rates and know what they cover. And consider other options, like cash buyers, for an easier process. 

At We Buy Houses Memphis, you can find a more efficient way to buy your house. You’ll get an offer from us within 24 hours and a fast transaction process. Contact us to learn more!