Real Estate Commissions Explained

In the complex world of real estate, commission rates can seem like a black box. Understanding the intricacies of commission structures, payment methods, and the factors that influence them can greatly empower buyers and sellers in navigating the real estate market with confidence

What are real estate commissions?

Real estate commissions are fees charged by a real estate agent for services in facilitating a property transaction.

These commissions are typically split equally between the seller's and buyer's agents. They are usually a percentage of the sale price of the property—often set at 5-6% of the sale price in total and are paid by the seller at closing.

Real Estate Commission Example

Let's break this down.

In a traditional setting, when selling a house, you'd typically be expected to pay 5-6% of the sale price as the real estate commission.

Let's assume a final sale price of $500,000 and a 6% real estate commission.

With 3% of the commission going to the seller's agent and the other 3% going to the buyer's agent, each real estate agent would make $15,000 for a total cost to the seller of $30,000!

What Does the Buyer Pay for Their Real Estate Agent?

Historically, buyers do not directly pay their real estate agents.**

The Buyer's agent commission is paid for by the seller of the property (demonstrated in the example above).

Prior to a property being listed for sale, the seller agrees to a commission outlined in the listing agreement.

This commission is then split between the seller's agent and the buyer's agent. While it may seem like the buyer's real estate agent is offering their services for free, their payment is factored into the transaction indirectly.

It's important to understand this dynamic as it can significantly affect the negotiation process and the final sale price of the property.

Are Real Estate Agent Commissions Negotiable?

Yes, real estate agent commissions are negotiable.

Whether you work with a Houwzer real estate agent or someone else, be sure to ask:

• What the commission is set at.
• Whether the commission is a flat fee or a percentage.
• Whether or not the commission is negotiable.

If an agent tells you that agent commissions are not negotiable, this is a significant red flag. In this case, you should look to seek the services of a different real estate agent.

There's no legally mandated commission rate. Sellers should discuss commission rates with their real estate agents. It's not uncommon for agents to agree to a lower rate if the property is high-value or likely to sell quickly.

Remember, as with any negotiation, it's important to discuss these matters upfront and ensure they're clearly stipulated in the contractual agreement.

The Houwzer Difference: 1% Seller's Agent Commission

At Houwzer, we're rewriting the rules in favor of the consumer. Our next-generation real estate brokerage offers full-service real estate services from the top agents across the country, while only charging a 1% listing commission to the seller.

This is not a discount—it's not a limited-time offer; it's our standard approach to honest, fairly priced real estate brokerage services.

What does this mean for you? Let's use the same example from above—the $500,000 final sale price. Instead of us charging 3% or $15,000 at the closing table, we charge only 1%: a total of $5,000.

The Houwzer difference doesn't stop there. We educate home sellers about commissions upfront. Cooperating buyer agent commissions can be a good tool for driving interest in your property, but they may not need to be 3%. Oftentimes, our sellers will offer 2%.

If you sell a home for $500,000, that means the real estate agent who represented the buyer will be paid $10,000.

Do the math—with a $500,000 home, 1% to the listing agent ($5,000), and 2% to the buyer agent ($10,000), that's a total cost to the seller of $15,000. That's a savings of 50% compared to the traditional model of 6% commissions—$15,000 in savings.

Get all the services offered by traditional brokerages, including professional photos, a dedicated agent, negotiation support, and more. It's not about cutting corners; it's about creating value.

Are you considering selling your home?

Choosing Houwzer's 1% listing commission doesn't just mean saving money. It means choosing a company that values transparency, honesty, and customer satisfaction. Here's why our 1% listing commission makes sense:

• Uncompromised Service: Despite our lower commission, we never compromise on the level of service we provide. You'll receive the same high-quality service as a traditional brokerage.
• Cost Savings: With our 1% listing commission, you can save thousands of dollars on your property sale. This means more money in your pocket.
• Transparency: We believe in being upfront about our fees. With our 1% listing commission, you'll always know what you're paying for.

Conclusion

Understanding real estate commissions doesn't have to be complicated. At Houwzer, we're committed to simplifying this process and offering transparent, cost-effective solutions. With Houwzer, you can sell your property with confidence, knowing you're getting the best value for your money.

**Note: This article was written before the Sitzer/Burnett commission changes went into effect.