The Texas real estate market is in a transitional phase; while median statewide home values are quite affordable, sitting at just over $211,000 according to Zillow, it’s really a state of contrasts.
But one thing that’s consistent across all Texas markets is how much real estate commission they pay. As of August 2020, the average real estate commission in Texas is 5.63%, with a typical range of 5.23% to 6.03%.
While Texas real estate commission is slightly higher than the national average of 5.45%, it’s still less than the typical 6% that most sellers have come to expect. And every percentage point counts; real estate commission is almost always the largest chunk of closing costs, which typically set sellers back by about 10% of the sale price.
Read on to find out exactly how much the average Texas real estate commission is, who’s responsible for paying real estate commission in Texas, and how sellers can reduce the amount they pay.
Average Texas Real Estate Commission Percentage
Of course, this doesn’t mean that most home sellers are paying a commission of 5.63%; it just means that, alongside the standard 6% commission, there are enough people paying less than that to bring the statewide average down nearly half a percentage point.
If you ask an agent in Texas, they’ll probably quote you around 6% – but there’s a lot of wiggle room in that 6%! For enterprising Texas sellers, there’s ample opportunity out there to pay a reduced commission.
So what does a 5.63% commission look like in terms of real dollars? Well, using the Texas median home value of $211,000, the math looks like this:
$211,000 x 0.563 = $11,879
So the average Texas real estate commission comes to just under $12,000. That’s a lot of money to pay right off the top. The next logical questions are: Who pays the commission? And how can you bring it down?
Who Pays Real Estate Commission in Texas?
In Texas, as in nearly every other U.S. state, the seller typically pays the commission.
The commission is usually paid out at closing— the title company deducts the commission from the seller’s proceeds, and pays 3% to the listing broker and 3% to the buyer’s broker. The brokers then pay the agents based on a previously agreed-upon rate. Brokers and agents generally split their half of the commission, meaning that even though a seller may pay 6%, each agent pockets only around a quarter of that, or 1.5%.
This setup might seem unfair to sellers, but think of it this way; if commission didn’t exist, home prices would likely be 6% lower. That means the commission is baked into the price of the home, and the seller was never going to pocket the commission money they pay out.
How to Calculate Your Texas Real Estate Commission Rate
Since commission is percentage-based, the amount you pay depends on how much you sell your home for. Let’s look at some different median home values from around the state to see just how much commission you’d pay at each tier.
|Texas City||Median Home Value||Commission Percentage||Total Commission Fee|
When you see the concrete numbers, it’s clear that, the more your home sells for, the more you stand to save by paying less-than-full commission. That is, halving your commission on a $115,000 sale in Prairie View saves you less than $3,300, while halving commission on a $402,000 Austin home (which for that market is merely average) saves you five figures in cash.
So what’s the best way to lower your Texas real estate commission?
Different Approaches, Different Rates
Over the past decade, several different real estate agent models have emerged to challenge the traditional 6% full service model.
These models offer radically different levels of services, at radically different price points. The key to deciding which approach is best for you means more than just comparing price tags— it means looking at the true value of each option, i.e. what you’re actually getting for the money you pay.
The Traditional Model
Let’s start with the full service 6% model. In this case, you’re paying a lot, but you also receive a lot. A full service agent will advise you on everything from staging your home, to setting a viable list price, to when you should list for the best results. They’ll also run your open houses, negotiate with the buyer’s agent, and guide you through closing. Essentially, this is the gold standard of selling experiences.
However, as the term “gold standard” implies, it comes with a hefty price tag. If we apply the 6% commission to the Texas median home price, it looks like this:
$211,000 x 0.06 = $12,660 commission paid
Now let’s look at some alternative models.
The Discount Agent
Companies like Clever Real Estate have pioneered a discount agent model that essentially offers a full service selling experience at a dramatically lower rate. To use Clever as an example, they pair sellers with pre-vetted top local agents who offer a full service experience for a flat fee of $3,000, or 1% if your home sells for over $350,000.
This represents a significant savings compared to the traditional 6% model and, crucially, the seller is receiving the same level of services.
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How is this possible?
Well, the local agents who accept referrals from companies like Clever agree to handle them for a lower fee because the leads are generally of a higher-than-average quality, and thus take less time to sell. Think of a home that gets multiple offers after its first open house, versus a home that may take months, and several price cuts, to get its first offer.
It’s important to mention here that models like this offer savings on the listing agent’s commission, but not the buyer’s agent commission. The buyer’s agent who brings in the buyer isn’t usually willing to negotiate their share of commission, so they’ll still receive their full 3%. So the numbers break down like this:
$211,000 sale price – $3,000 flat fee + 3% buyer’s agent commission ($6,330) = $9,330 total commission paid
In this case, the seller is in line to save $3,330, or over 25%, while receiving the same level of services they would’ve received from a traditional 6% agent.
The Flat Fee MLS Listing
The flat fee MLS listing is the barebones, do-it-yourself path to selling your home. With this model, you don’t work with a listing agent at all, meaning that you’re handling your home sale on your own, as an FSBO (for sale by owner) listing.
A flat fee MLS listing is exactly what it sounds like: for a small, flat fee, your home is listed on the local MLS, from which it’s also populated onto big, high-traffic real estate websites like Redfin, Realtor.com, and Trulia. These services generally charge between $99-$500, with an average of $299, so it offers a huge savings.
It also comes with a huge reduction in services. A flat fee MLS listing gets you 6 months on the MLS, around 25 listing photo uploads, and some support services like downloadable legal forms, flyers, and, at the higher end, assistance with setting a list price.
But beyond that, the seller is on their own. That means they have to market their home themselves, they have to run their open houses themselves, they have to negotiate with the buyer’s agent alone, and they have to navigate the closing process without any assistance. Any one of those tasks is a big ask for an inexperienced seller; all of them, consecutively, is incredibly difficult.
That being said, if the seller is a real estate professional, or knows one who’d advise them for free, or if they’re in a very hot market, where properties attract multiple buyers within hours of listing, a flat fee MLS listing could be the way to go. The numbers look like this:
$211,000 sale price – $299 MLS flat fee + 3% buyer’s commission ($6,330) = $6,629 total commission paid.
This is a nearly 50% discount compared to the 6% commission model, but it comes with a 95%+ reduction in services. And there’s also the issue of FSBO listings generally selling for less than agent-assisted listings. Put it this way: in the example above, the seller would save around $6,000. But if their home sold for $10,000 less than it would’ve with a traditional agent, they’ve actually lost money.
Now that we’ve covered the three main models, let’s do a side-by-side cost comparison.
We’ll use the real estate commission formula:
Home price x commission fees = total commission paid
The Traditional Model
- Home price: $211,000
- Seller Commission Fee: 3%
- Buyer Commission Fee: 3%
- ($211,000 x 0.06) = $12,660 total commission paid
The Discount Agent Model
- Home price: $211,000
- Seller Commission Fee: $3,000 flat fee
- Buyer Commission fee: 3%
- Service Fees: $0
- ($211,000 x 0.03) + $3000 = $9,330 total commission paid
The Flat Fee MLS Listing Model
- Home price: $211,000
- Flat Fee MLS Service Fee: $299
- Buyer Commission Fee: 3%
- ($211,000 x 0.03) + $299 = $6,629 total commission paid
The conclusion here seems pretty straightforward: the discount agent model offers the best of both worlds. Sellers get the same full service sale experience that the traditional 6% model offers, but at a steep discount. While the flat fee MLS listing is even cheaper, those sellers get almost no services at all, which often results in a lower sale price— meaning that, even with the commission savings, they still lose money compared to the other models.
Real Estate Witch has partnered with Clever Real Estate to help our readers access the full service discount agent experience described above. Sellers who partner with our friends at Clever get everything they’d get with a traditional 6% agent, but at a much lower price point, and they’re paired up with a pre-vetted local agent with a proven track record. Contact Clever today to find out what they can do for you!
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