Is 6% a Lot for a Real Estate Agent?

Brad Johnson
9:06 pm

Are you selling your home and wondering how much you should expect to pay your real estate agent in commissions? Like most people, you’ve probably heard that the standard commission real estate agents charge is 6%. But is that really a lot? Let’s look at how real estate agent commissions work and see if 6% is really as high as it sounds.

How Realtor Fees Work

When it comes to real estate transactions, agents act as intermediaries between buyers and sellers. Generally, the seller will pay a commission to both the listing agent and the buyer’s agent, usually in the form of a percentage of your home’s sale price. How much of that percentage they receive depends on their agency agreements with those they represent. The split between most real estate agents is typically a 60/40 arrangement (60 for the listing agent and 40 for the buyer’s agent) but can vary depending on certain factors, such as local customs or market conditions. Since commissions can sometimes be negotiated, buyers and sellers need to do their research on regional averages to get an idea of what is fair before entering into any agreements.

So, just to be clear, the 6% we’re talking about here is a 6% split between two agents – the one who represents the seller and the other who represents the buyer – in a real estate transaction. It’s not typically 6% per person; it’s split between two individuals, usually 60/40 or 50/50 for a more competitive buyer’s agent commission.

How the Commissions Are Split

Realtor fees are split between the seller’s and buyer’s agents. Generally, the agent who lists the property (the seller’s agent) will receive a slightly higher commission percentage of the home’s selling price, while the buyer’s agent will receive a lesser percentage. These percentages are dependent on local real estate laws and sometimes fall within different ranges based on a property’s sale price. For example, in some areas of the country, the seller’s agent might be entitled to a 9% commission if a home sells for more than one million dollars.

Conversely, many listings under $500k might have a reduced commission structure of around three or four percent total for both agents. It’s essential to keep this in mind when drafting an offer and negotiating commissions for real estate agents – understanding how much money your agents make from completing their services can give you insight into just how important it is for them to get your deal across the finish line!

How Commission Percentages Are Determined

Determining the commission percentage for a real estate transaction can be a complex process, as price fixing is strictly illegal. However, typically the amount of the commission is set between the buyer and seller through negotiation, or through established conventions in a specific area. When agents from different agencies are involved in a transaction, they may split their respective commissions according to an agreed-upon percentage between both sides. The commission percentages for real estate transactions tend to vary depending on geographic region, market activity, and price point. Ultimately, when considering how best to calculate desirable commission percentages for real estate agents it’s essential to take into account all relevant factors including location and current market trends.

Why Some People Think 6% Is a Lot for a Real Estate Agent

6% may seem like a lot to pay for the services of a real estate agent, but buyers and sellers should consider the amount of work that goes into every transaction. Not only must agents interact with clients and complete paperwork, but they must also handle negotiations, marketing, inspections, appraisals, and due diligence. All these tasks combined can result in a significant workload that often requires their full attention.

Being a realtor is like running your own small business. There are endless costs and tremendous overhead that eat up most of a real estate agent’s commission. Not to mention all of the training, continuing education, state and national association fees, brokerage fees, licensure fees, wardrobe, office, car, and office supplies fees that local agents have to pay all on their own.

Almost none of an agent’s check is leftover as profit, especially for those just starting out. That’s one of the main reasons why a whopping 87% of all real estate agents who get in the game must leave after just two years. They can’t afford to have a hand at the table. Only the top real estate agents survive. Also, most local agents start out as a buyer’s agent primarily, and the buyer’s agent fee is generally less than what the listing agent makes.

As such, it’s important to recognize that 6% is typically an average fee that covers the costs associated with having a real estate agent do all the necessary work related to any transaction.

Does It Always Have To Be 6%?

6% is generally what most agents are comfortable splitting in Minnesota. However, everything is negotiable in real estate. Both agents and their clients have the ability to negotiate commission percentages. If you’re an agent, set the bar where you want it, and carefully consider whether or not you want to set the precedent of being someone who takes less money, charges too much, or is reasonable. Are you willing to earn your keep? The only one holding you accountable is you. Do you bring enough value to a client to accept your commission?

If you’re a client (since sellers typically pay commissions, this most often applies to sellers rather than buyers) be upfront about asking your agent what level of commission they typically accept. If you don’t like what they say, try to work something out. Ask your agent to explain why they charge that amount. I’m sure they’ll gladly break it down for you. If you’re still not satisfied, walk away. Hash things out before you sign any documentation, and bring your contracts to legal counsel if you aren’t confident in your ability to interpret them.

Are You Satisfied With 6%?

Understanding how real estate agent commissions work is essential for buyers and sellers looking to maximize their profits. They have outstanding fees they have to pay, and they spend a lot of time working on getting your house sold or finding the best property for your needs. While 6% may seem like a lot at first, it is important to remember that the commission is split between the listing and buyer’s agents and that your agent does all of the work upfront with no hourly wage or guarantee of a sale. Additionally, agents are typically able to negotiate a fee structure so that both parties get a fair deal in the end. Ultimately, when handling real estate transactions, it is important to take all these factors into account to ensure maximum benefit for both buyers and sellers.