The 3% Commission Model | How To Save on Commission | Selling FSBO | Negotiating a Lower Rate | How Low Commission Companies Work | Top Low Commission Companies | FAQs
If you sell your home conventionally, you’ll typically pay a 3% real estate commission to the two agents who handle your transaction: your listing agent and the buyer’s agent. That equals a 6% total commission. For a $350,00 home, that’s over $20,000!
Thankfully, a number of approaches can help you save big on your home sale. And even a marginal reduction in your price can lead to massive savings.
One of the easiest options is to work with a company that negotiates a reduced rate for you. For example, our friends at Clever connect you with top agents in your local area who work for a 1% listing commission (or a flat fee of $3,000 for houses that sell for less than $350,000).
>> Find out how much you can save with Clever!
Key Takeaways
- Cost-conscious sellers have many options to pay less than the conventional 3% listing fee to their listing agent
- Negotiating with your agent, using a discount company, and taking a “for sale by owner” approach are a few ways around the standard 6% real estate commission model
- Low commission real estate companies are an easy way to save big on your home sale, without negotiating with an agent or handling the sale yourself
The Traditional 3% Commission Model
When you sell your home, you’ll usually pay out a portion of your sale proceeds to your listing agent and the buyer’s agent. Traditionally, each agent will earn 3%, for a 6% total commission on your home sale.
| Fee | Rate |
|---|---|
| Listing agent's commission | 3% |
| Buyer's agent's commission | 3% |
| Total | 6% |
Realtor commissions will also vary depending on your location. In some places, realtors may make closer to 2.5%. Reach out to a real estate professional to find the competitive rate in your area.
How much is a 3% real estate commission?
The typical 3% commission may not sound like much, but with a transaction as large as a home sale, it can add up to quite a bit of money. As home prices grow, so do the commissions of the agents involved in the sale.
| Price Point | 3% Listing Commission | 3% Buyer's Commission | Total Commission Fee |
|---|---|---|---|
| $100,000 | $3,000 | $3,000 | $6,000 |
| $250,000 | $7,500 | $7,500 | $15,000 |
| $500,000 | $15,000 | $15,000 | $30,000 |
| $750,000 | $22,500 | $22,500 | $45,000 |
| $1 million | $30,000 | $30,000 | $60,000 |
| $2 million | $60,000 | $60,000 | $120,000 |
Why do listing agents earn a 3% commission?
Real estate agents are paid for their services via commission. To earn that commission, the agent who lists your home for sale does a lot!
Your listing agent provides a variety of valuable services, including:
- Offering advice on pre-sale renovations
- Staging your home to maximize its appeal to buyers
- Hosting your showings and open houses
- Negotiating offers and counteroffers
- Guiding you through the complex closing process
Agents who work for a brokerage (such as RE/MAX or Keller Williams) don’t pocket their full commission. Instead, they must pay a portion to their brokerage to cover costs like advertising and office space.
>> Learn more about realtor fees
What about the buyer’s agent commission?
Most approaches to lowering commission rates focus exclusively on the listing agent’s commission. You’ll usually always want to offer a full 3% commission to buyer’s agents.
Like listing agents, buyer’s agents provide critical services to earn their typical 3% commission, such as:
- Identifying homes for sale that meet their client’s criteria
- Accompanying clients to home showings and open houses
- Writing and submitting home purchase offers on behalf of clients
- Overseeing and advising on purchase negotiations
- Assisting their clients through the escrow process to close
As the seller, it’s important to offer a competitive buyer’s commission paid out of your sale costs. Why? The buyer’s agent commission acts as an incentive for realtors to bring their clients to see your home.
Offering a reduced buyer’s agent commission could put you at a steep disadvantage. For instance, if one seller offers a 3% buyer’s agent commission and a seller with a similar house doesn’t offer any commission, an agent will naturally steer their client towards the home where they stand to make the most money!
There are some rare conditions when slightly lowering the buyer’s agent commission may be possible (like in an extremely hot seller’s market). But, for the most part, it’s not a good idea.
✍️ Editor’s Note
Be careful with any discount company that claims to save you money by reducing or eliminating the 3% buyer’s agent commission. Doing so will almost certainly reduce the amount of interest in your home, which translates to more time on the market and a drop in sale price!
How To Save on Your Commission
It is possible to pay less than the typical 3% commission rate to your listing agent! If you want to save money on real estate agent commission fees when selling your home, consider:
- Listing for sale by owner (FSBO)
- Negotiating a lower rate with your agent
- Working with a company that offers discounted commission fees
Each of these alternatives has its own advantages and drawbacks depending on your unique circumstances, past real estate experience, and comfort with risk.
>> Read more about how to save money on realtor fees
How much can I save?
Using one of these options can potentially save you thousands of dollars compared to the typical 6% commission model.
Based on these different approaches, the following examples illustrate just how much you could potentially save on your listing agent commission!
| Example Approach | Listing Agent Commission | Total Savings on a $200,000 Sale* | Total Savings on a $750,000 Sale* |
|---|---|---|---|
| FSBO | 0% | $6,000 | $22,500 |
| Discount realtor | 1% | $4,000 | $15,000 |
| Agent negotiation | 2% | $2,000 | $7,500 |
Ready to save? Our friends at Clever have pre-negotiated a 1% listing fee with partner agents in its network.
Selling FSBO
One way to considerably lower real estate agent commission on your sale is to sell your home without an agent. However, this approach will require a significant investment of your time and energy.
In a FSBO sale, you assume responsibility for everything your listing agent would’ve done — from staging to marketing to showings to negotiations to closing. That’s a lot of work if you don’t have experience in the real estate industry!
And, if you make any mistakes along the way, you could run into issues.
For example, price your home too low and you’ll leave money on the table. Price it too high and you’ll drive away buyers.
With FSBO, you’ll also need to comply with all local legal requirements. Not making the right disclosures could lead to legal issues in the future.
✅ Benefits of selling FSBO:
- You’ll have complete control over all aspects of your sale, from marketing to pricing
- Commission costs are slashed in half by not paying a listing agent fee
🚫 Drawbacks of selling FSBO:
- Individuals with little or no real estate industry experience may face challenges without the support of an agent’s expertise
- Selling your home yourself may require a bigger time commitment than you can make
>> Learn more about how to sell a FSBO listing
Negotiating a Lower Commission with Your Agent
Everything in a real estate transaction is negotiable — and that includes your listing agent’s commission.
It doesn’t hurt to ask if your agent is open to working for a lower commission rate. But just because you ask for a discount doesn’t mean you’ll get one.
You’ll increase your chances of scoring a lower commission rate in a hot seller’s market, with a particularly attractive home, or if you’re willing to do some of the heavy lifting to make your agent’s job easier.
✅ Benefits of negotiating:
- You’ll potentially get the same level of service at a lower price
- It allows you to save money by drawing on your talents, like photography or home staging
🚫 Drawbacks of negotiating:
- Asking your realtor to work for less could set an awkward tone between the two of you
- You might have to give up some traditional services in exchange for a discount, like personally hosting showings
>> Learn more about how to negotiate real estate commission
Using a Low Commission Approach
Want to save, but the idea of negotiating with your agent makes you cringe? Some listing brokerages offer discounted commission rates as low as 1%. While the savings you’ll experience working with these low commission agents is real and potentially significant, you may sacrifice some services for savings.
That said, there are an array of options and price points available from discount real estate companies. Some charge a percentage of your sale price, while others tout a flat-fee service.
>> Learn more about selling with a discount brokerage
Types of Discount Companies
Generally, most low commission real estate businesses fall into a few common categories.
Flat-fee MLS companies
Listing on your local multiple listing service (MLS) is the best way to gain visibility with buyers and their agents since these services syndicate to all the popular real estate sites like Zillow. But only an agent can list your home on the MLS.
If you’re going through a FSBO sale, a flat-fee MLS service helps you get your property in front of potential buyers.
With a flat-fee MLS service, you’ll pay about $300-$400 for the à la carte MLS listing. From there, you’ll handle all the duties typically performed by an agent, including hosting showings and negotiating with buyers.
✅ Benefits of a flat-fee MLS service:
- Extreme savings on your listing commission
- Your listing gains visibility with potential buyers
🚫 Drawbacks of a flat-fee MLS service:
- You’ll have to do all the work of a traditional agent, aside from the MLS listing
>> Learn more about listing with a flat-fee MLS service
Limited-service brokerages
Don’t need the support of a full-service agent? A limited-service broker allows you to pick and choose which services you need, either by service tier or à la carte. For example, you may pay for MLS listing and negotiation assistance, but opt out of a yard sign, lockbox, and professional photography.
Limited-service companies usually charge a flat fee or a reduced commission percentage.
These companies are ideal for sellers who want to save money and know exactly what they can manage on their own to achieve those savings.
✅ Benefits of limited-service brokerages:
- You get the exact support you want and don’t have to pay for anything more
- Expectations for agent and seller responsibilities are extremely clear
🚫 Drawbacks of limited-service brokerages:
- You’ll have to handle any traditional agent duties you don’t choose to pay for
>> Learn more about limited-service real estate agents
Discount full-service brokerages
These companies typically offer many of the same services that traditional 3% realtors do, but at a lower rate.
Many discount brands are able to offer the savings they do by running more efficiently and reducing overhead in non-traditional ways. For example, Redfin uses a team-based approach to manage your real estate transaction. Homie handles all transactions virtually, so you’ll never interact with your agent face-to-face.
While you may save in commission, you could sacrifice a bit of service quality depending on the brokerage’s business model. Always read company reviews thoroughly to ensure you’ll get the support you need for your sale.
✅ Benefits of discount brokerages:
- You get many of the same benefits of working with a traditional agent, but at a reduced price
- With so many options, you can choose a brokerage that best fits your unique style and preferences
🚫 Drawbacks of discount brokerages:
- The service quality amongst this group varies widely, as many discount brokerages cut corners in some way to help customers achieve savings
Agent-matching services
Agent-matching companies connect customers with their network of agents, usually from a variety of traditional brokerages. You’ll be matched with a local agent who has the experience to help you achieve your goals.
While most agent matching services do not offer a discounted commission rate, some, like our friends at Clever, do.
Clever pre-negotiates a 1% listing commission (or flat $3,000 fee for homes under $350,000) with its network of agents. These agents work at nationally-recognized full-service brokerages like Century 21 and Coldwell Banker. Learn more about Clever and start saving now!
✅ Benefits of agent-matching services:
- You leave the legwork of finding an agent to someone else
- You can save big if the service pre-negotiates a lower full-service commission rate
🚫 Drawbacks of agent-matching services:
- Your pool of potential agents is limited to the company’s network
Top Low Commission Companies
For many cost-conscious sellers who don’t want to pay a 3% listing commission, low commission realtors offer the best of both worlds, providing quality service at a reduced rate.
>> Learn more about which companies offer the lowest commission fees
| Company | Average Rating | Locations | Listing Fee | Average Savings* |
|---|---|---|---|---|
| Clever | 4.9 (590 reviews) | Nationwide | 1% or $3,000 for home sales of $350,000 or less | $7,375 |
| Redfin | 3.2 (287 reviews) | Nationwide (select markets) | 1.5% (or 1% if you buy with Redfin) | $5,550 |
| REX | 4.7 (765 reviews) | Select states | 2.5% | -$325 |
| Reali | 4.6 (415 reviews) | CA | 1% ($5,000 minimum) | $6,375 |
Clever Real Estate
Clever Real Estate is a national agent-matching service that connects sellers with pre-vetted, high-performing agents in their local markets.
These agents have already agreed to a low, pre-negotiated commission of $3,000 (or 1% if your home sells for more than $350,000), and offer a full-service sale experience. With Clever, you can interview several agents from national brokerages before signing with the one that best meets your needs.
>> Learn more about Clever Real Estate
Redfin
Redfin is one of the largest discount real estate brokerages in the U.S. It’s known for a low 1.5% listing fee, which can drop as low as 1% if you also buy through Redfin.
Redfin achieves these savings by using a team-based service model to turn over a higher volume of transactions. A series of specialists work on each sale before handing it off to the next specialist — a marked departure from the traditional model of a single agent guiding a sale from start to finish.
This efficiency is how Redfin can afford to offer such a low listing commission. However, customer reviews have noted that this strategy can result in poor communication and unsatisfactory service.
REX Real Estate
REX takes a novel approach to cutting commission costs. This company charges a 2.5% listing fee, which is only half a percent less than normal, while advertising that it can eliminate the 3% buyer’s commission entirely. It also bypasses the MLS, preferring to advertise and market properties through social media and other channels.
This strategy is incredibly risky, as it cuts out the majority of the traditional home buying audience. However, if your property can easily find an unagented buyer in a hot market, you could be in for huge savings.
>> Learn more about REX Real Estate
Reali
Reali offers a technologically forward, full-service sale experience, with much of the transaction managed through the Reali app. Users pay a listing commission of 1% or 2%, depending on the package they choose.
Reali also offers home trade-ins, in-house loans, and buyer rebates.
Though Reali’s technology is effective at what it does, some customers complain that the company lacks a human touch.
Sell at a Lower Real Estate Agent Commission
There’s no “one size fits all” when it comes to saving on the traditional 3% real estate commission model. The ideal rates and approach will depend on your unique situation, desired savings, knowledge of the industry, and comfort with risk.
That said, Clever Real Estate offers a package that’s hard to beat.
You’ll get to work with a full-service realtor for only $3,000, or 1% if your home sells for more than $350,000. And you can interview as many agents as you need to find the perfect fit.
Intrigued? Contact Clever today to get selling!
Related Links
Want to net the highest price for your home at a low commission rate? Read the following links to learn more.
These Companies Offer the Lowest Real Estate Commission Fees: It can be tough to figure out which companies, exactly, offer you the best deal on real estate commission fees. This guide offers clear, definitive answers!
Discount Agents and Real Estate Brokers — Are They Legit Or a Scam? Are discount agents and rock bottom rates too good to be true, or the real deal? In this piece, we sort through the hype, and uncover the truth.
How to Negotiate Your Real Estate Fees — and Save Thousands: Negotiating your real estate fees against a professional negotiator can be tough, unless you’re a lawyer or a professional poker player. This guide gives you some tips to even the playing field.
FAQs
Can I sell my home for 3% real estate commission total?
Yes. It is possible to sell your home for 3% total commission, but it's difficult.
For example, you could sell your home FSBO and offer 3% for the buyer's agent. Or you could work with a discount brokerage that charges a 1% listing commission and offer a reduced 2% buyer's agent commission.
These options may make sense in specific situations, like if you're an experienced seller or have a desirable home in a hot market where a buyer's agent won't be deterred by a reduced commission.
Even in these situations, though, targeting a total 3% commission on your home sale will be difficult. Selling FSBO is challenging and requires a huge personal time investment. Offering a discounted buyer's agent commission is risky, limiting your home's visibility and pool of qualified buyers.
While you might save on commission using these approaches, you may end up losing more with a lower overall sale price. Or, your home may not sell at all, putting you back at square one.
Is it possible to sell my home and pay no real estate agent commission?
Yes, you could technically avoid paying commission on your home sale. However, it would require a very unique set of circumstances.
For instance, if you sell your home without an agent and find an unagented buyer on your own, you won't pay a realtor commission.
It is unlikely that a realtor would show your home to a client if you did not offer a buyer's agent commission, so locating a willing buyer will be completely on your plate. If you identify a friend or family member who'd like to buy your home and avoid listing altogether, you can circumvent paying an agent commission.
These situations are rare and improbable. So, it's best to budget for a competitive buyer's agent commission even with a for-sale-by-owner listing.
Will I sacrifice service quality by working with a low commission realtor?
It depends. Agent-matching services like Clever Real Estate and Ideal Agent connect you with top-rated full-service agents who have already agreed to work for a discounted commission. Other low commission real estate services may cut corners so they can still make money while offering reduced fees.
Taylor Hansen says
I like how you mentioned that sellers pay less on commission with a discount brokerage. My wife and I are wanting to sell our home this year and I’m wondering what kind of broker to work with. We might have to choose a low commission broker to get the most out of negotiations.