Agent Fees & Commission Standards
Sometimes this percentage can be a fixed number (i.e. fixed percentage), and sometimes the rates can be progressive (i.e. split percentage). Split percentage rates usually get lower as the property value increases. For instance you may be asked to pay 5% on the first $500,000 and 4% on anything above - which would mean for a property you sell for $750,000, you would pay $25,000 (5% of $500,000) plus $10,000 (4% of the remaining $250,000), costing you a total of $35,000 in Realtor fees. This sum would be split between the buyer's agent and the seller's agent, according to the existing agreements setup between them and their brokerages. Three important points to keep in mind:
1. There is a wide variety of fee structures such as low percentages, flat fees, hourly fees for specific services, as well as any combination you can imagine. While some lower fees may appear tempting on paper, when you boil it down, you usually end up getting what you pay for. Considering the dynamic nature of the real estate market and the way prices move, paying an agent a low fee of $5,000 to sell your property may be a significantly worse deal than paying another agent a 7% commission. For instance, if the flat fee agent only manages to sell your property after 9 months at a $50,000 loss, they would be a worse deal than an agent who charges a higher commission, but manages to sell your property in only 1 month for a $50,000 profit. In other words, it is much more important to think about your bottom line rather than the commission structure when picking an agent. At the end of the day, what the agent makes is much less important than what you make. And what really matters is the competence and track record of the agent and their ability to get your property sold. There are great agents who charge flat fees, and great agents who charge percent commissions, just as there are terrible agents who charge flat fees and terrible agents who charge percent commissions. Learn about the agents using Rate-My-Agent.com, do your due diligence, and hire one that will maximize your bottom line.
2. Since your Realtor's fee is likely going to be your biggest expense in selling your property, it is important to realize that what you pay depends on the specific contract you have with your agent and not by some government or brokerage. Remember: you can negotiate your fees, and customize your agreement in a variety of ways, including setting up bonuses for selling your property on a specific date or for selling it over a specific amount. You can even hire multiple agents at the same time and get them to compete. While there are some regulations to be aware of, your contract with your agent is a private contract and you have more flexibility than most people imagine.
3. Please keep in mind that the buyer may be responsible for additional fees to the buyer's agent (depending on their contract). If you use a discount brokerage, it may impact your negotiations.