Is a 1% Commission Real Estate Agent Right for Your Home Sale?

As noted above, the data shows that in a typical real estate transaction, commission fees usually total between 5% and 6% of the sale price. In a traditional commission setting, the listing agent usually splits this with the buyer’s agent.

In addition, both the buyer’s agent and the listing agent will usually pay a portion of their commission to their companies for brokerage and desk fees.

In the new commission structure, the seller is expected to shoulder the 3% commission for the listing agent, while the buyer may be on the hook for the 3% commission for the buyer’s agent. However, with tight competition on the market, you may offer to pay the 3% for the buyer’s agent as an additional marketing push to make your house stand out. This adds 3% to the commission deducted from your sales proceeds whether or not you choose a discount agent to list your property.

“The majority of credible discount brokers are going to [be] up front with you,” Medford explains. “They’ll say, ‘Hey, we’ll sell your house for 3% or 3.5%’; or they’ll say, ‘We have a set fee structure, we’ll put your house on the market for $1,500, and then you’re responsible for paying the buyer agent,’ but they’re upfront about it.”

How much can you save with a 1% real estate commission?

With a 1% commission on the listing agent side, the savings can be significant, depending on your home’s value. With the commission changes, if you choose not to shoulder the buyer’s agent commission to make your property stand out, that means you are only on the hook for the discounted 1% commission for your listing agent. For example, on a $300,000 home, that would be $3,000 in commission.

For comparison, a traditional 6% commission would amount to $18,000, split between the two agents at about $9,000 apiece. If you go with a 1% commission listing agent, that would be $3,000, with the buyer’s agent’s commission potentially remaining at the standard rate, often around 2.5% to 3%, which is $7,500 to $9,000 in this case. Therefore, your total commission could range from $10,500 to $12,000, saving you between $6,000 to $7,500.

This is also the scenario if you go with a 1% commission listing agent and offer to pay the full buyer’s agent commission of around 2.5% to 3% under the new commission scheme.

In the chart below, we show you the total commissions you’ll pay with a discounted 1% listing fee and a 2.9% buyer’s fee. The actual amount you’ll pay a buyer’s agent depends on what’s typical for your area and the rate you agree to pay. (As we discuss later, you can negotiate a buyer’s commission that is lower than the average rate, but there are possible drawbacks.)

*Commission rates are estimates and are not a guarantee for your home sale.

As you consider these potential savings, it’s crucial to remember that they might come with trade-offs in terms of service quality and agent experience. Weighing these potential savings against the value brought by a full-commission agent can help you make an informed decision about which option best suits your needs and sale goals.

“We ask the question, ‘So, are you interested in saving money, or are you interested in making more money?’” Medford says. “We can come in and save you money, absolutely. But I would far prefer — rather than saving you $10,000 — to come in and make you $100,000. Which option would you want?”

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Why would an agent offer a 1% commission?

An agent might be willing to offer a 1% commission for several strategic reasons:

Fewer homes listed

Offering a 1% commission can give a real estate agent an edge in a competitive market where inventory is low, and other agents are clamoring for limited listings. This can happen during seasonal fluctuations in the market, like fall and winter, or when the entire housing market is experiencing a downturn. During these periods, agents may sign on with a discount commission company or be more open to negotiating their commission rates to secure your business.

In a thriving seller’s market

When homes are flying off the market, an agent may not need to invest as much time or marketing resources into selling your home. In such a fast-paced environment, a reduced commission can still be worthwhile for the agent, especially if they are handling multiple transactions in quick succession.

Gaining experience and building a portfolio

Newer or part-time agents often offer lower commission rates to attract more clients. This approach allows them to gain valuable experience and increase their transaction numbers, which is vital for growing their business and reputation in a competitive market.

Your home is highly marketable

If your property is in a sought-after location, priced attractively for its market, or boasts popular features and upgrades, it may be considered an easy sell. Agents might view such properties as less of a risk and be more inclined to take a lower commission, anticipating a swift and successful sale.

High-value properties

For luxury homes or properties with significant upgrades, even a 1% commission can translate into a substantial amount due to the higher sale price. Agents may find these high-value transactions worthwhile, even at a reduced rate.

What services will you get with a 1% rate?

When considering a 1% real estate commission, it’s important to assess what services you’ll receive compared to a full-commission agent. While the prospect of a reduced commission is appealing, be certain you research how this might impact the level of service provided.

Understanding the service trade-offs

At a 1% rate, the services offered by the agent or discount brokerage might differ from those provided by a full-commission agent. This could include aspects like marketing efforts, staging, photography, and the overall handling of the sale process. For instance, a home listed with a 6% commission might benefit from extensive marketing strategies like 3D tours, professional staging, and a strong online presence. These enhanced services can potentially lead to a higher sale price, outweighing the savings from a lower commission.

Evaluating your needs and expectations

If your requirements are minimal, such as simply wanting a listing on the Multiple Listing Service (MLS) and basic representation, a 1% commission agent might meet your needs. However, if you’re looking for comprehensive service, including in-depth market analysis, robust marketing, and regular communication, it’s worth considering whether the reduced commission aligns with these expectations.

Comparing services

Before making a decision, it’s advisable to interview multiple agents and compare their services. Look at what a 1% commission agent offers versus a full-commission agent. This comparison will help you understand if the cost savings of a lower commission are worth the potential trade-offs in service and expertise.

Remember, the goal is to achieve the best possible outcome for your home sale. Balancing cost savings with the level of service required to effectively sell your home is key to making an informed decision.

What are the risks of using a 1% commission agent?

When opting for a 1% commission agent, it’s important to consider potential risks associated with lower fees. The adage “you get what you pay for” can sometimes ring true in real estate, where quality, cost, and speed are crucial. Choosing a lower commission might mean compromising on one or more of these aspects. Here are the main risks to consider:

Compromised negotiation power

An agent offering a 1% commission might not have the same level of experience or confidence in negotiations as a full-commission agent. This lack of experience could result in weaker bargaining with buyers or their agents, potentially leading to a lower sale price. The savings from the lower commission could be offset if the agent is unable to negotiate effectively for the best possible sale price.

Reduced dedication and service

Agents working for lower commissions may need to handle more clients simultaneously to compensate for reduced earnings. This could mean less personalized attention, slower response times, and potentially a lower level of service. If you’re looking for an agent who offers dedicated, comprehensive service, including detailed market analysis, full availability for consultations, and robust marketing strategies, a 1% commission agent might not meet these expectations.

Possibility of underselling your home

Data suggests that top-performing agents often sell homes for a significantly higher price than average agents. These agents bring expertise in local market trends, effective marketing strategies, and insights into buyer preferences, all of which can contribute to a higher selling price. By opting for a 1% commission agent, there’s a risk of not fully capitalizing on your home’s potential value. For example, a top agent’s expertise could increase a home’s sale price substantially, offsetting the cost of their higher commission with the added value they bring to the sale.

In summary, while a 1% commission agent offers an attractive upfront saving, it’s crucial to balance this with the potential impact on the sale’s overall quality, speed, and profitability. Understanding these trade-offs will help you make a more informed decision about which type of agent is right for your home sale.

How does a 1% agent compare to a full-commission agent?

“So what’s the difference between experienced agents and inexperienced agents, or what’s the difference between a full commission and a discount commission?” Medford asks rhetorically. “It’s not just about putting the property on the market.”

Expert and thorough marketing plans

Medford explains that top-performing agents and their offices typically have highly refined local strategies to get the most money for a client’s property. Many will have real estate teams that take on different tasks.

“Let me give you an example using a property we recently listed in Fremont. We have a full-time property prep individual who goes in and assesses the condition of the property and coordinates repairs with the sellers. We also have a designer who then acts as a project manager to enhance the property. We went in and fully staged the home. Essentially, [sellers] are getting a concierge-level service so they get the most return on the dollar. That’s built into our normal commission.”

Network of local resources

While not all full-commission agents will provide staging services, most will have partnerships with local professionals to help coordinate repairs, provide curb appeal tips, and produce high-quality marketing materials. Medford says this often includes expert photos, drone images, videos, and more. “So you’re getting a first-class service, and that’s expected in our California region because of the price point — we average home prices over $1 million.”

More money for your home

According to HomeLight sales transaction data, the top 5% of agents sell homes for up to 10% more than average agents.

How does a 1% commission compare to a flat-fee service?

Comparing a 1% commission to a flat-fee service requires understanding the differences in services and support you’ll receive with each option.

Flat-fee service: Pay once, do more yourself

A flat-fee service involves paying a one-time fee for basic listing services, such as placement on the MLS. This fee can start at around $99 and varies based on the company and package you choose, with options for additional photos or enhanced listing visibility. However, this approach typically places most of the responsibility on you, the seller. You’ll be in charge of prepping and staging the home, pricing it correctly, marketing it effectively, responding to inquiries, scheduling showings, negotiating with potential buyers, and handling all the necessary paperwork and disclosures. It’s a hands-on approach, ideal for those comfortable with the for-sale-by-owner (FSBO) route.

1% commission: More support, but with limitations

With a 1% commission agent, you’re getting more support than a flat-fee service, but potentially less than what a full-commission agent would offer. While you won’t be as involved in the minutiae as with FSBO, the level of marketing, negotiation skills, and overall support might not be as comprehensive as with a higher commission rate. However, you still benefit from the agent’s market knowledge, network, and basic selling services, which can be a significant advantage over going it alone.

Considerations for your choice

If you’re juggling other commitments or are not well-versed in the home-selling process, managing everything yourself with a flat-fee service might be overwhelming. Additionally, National Association of Realtors (NAR) data suggests that FSBO homes typically sell for much less than those sold by agents. While a flat-fee service can save you money upfront, the final sale price — and the effort involved — might not match what you’d achieve with the help of a professional agent, even one charging a reduced 1% commission.

While a 1% commission offers more support than a flat-fee service, it doesn’t provide the full spectrum of services a higher commission agent might. Weighing the pros and cons of each in terms of support, time investment, and potential sale outcomes is crucial to making the right decision for your home sale

8 ways home sellers can save more, or make more

Beyond considering a 1% commission agent or a flat-fee service, there are several strategies to reduce expenses or earn more proceeds during the home-selling process. Let’s look at some ways you can get the most out of your home.

1. Effective home staging

Investing in professional staging or doing it yourself can significantly enhance your home’s appeal. Staging highlights the best features of your property, potentially leading to a quicker sale and a higher selling price. Even simple changes like decluttering, repainting in neutral colors, and minor repairs can make a big difference.

2. Smart pricing strategy

Setting the right price from the start is key. Overpricing can lead to a longer time on the market, ultimately reducing the final sale price. Conversely, underpricing might result in a quick sale but at the cost of potential profits. A top agent can provide you with a thorough comparative market analysis (CMA) to help you set a realistic and profitable listing price.

3. Efficient marketing

Apply cost-effective marketing strategies. High-quality photos, virtual tours, and leveraging social media platforms can be done at a relatively low cost. These tools can effectively reach a broad audience without the need for expensive advertising campaigns. Top agents typically have proven strategies designed for your local market.

4. DIY repairs and improvements

Making minor repairs and improvements yourself can save on labor costs. Focus on high-impact areas like the kitchen, bathroom, and curb appeal, which are key selling points for buyers. Seasoned agents can also tell you what not to fix.

5. Choosing the right selling time

Timing your home sale can also impact your profits. Selling during a seller’s market, when demand is high and inventory is low, can lead to higher sale prices and a quicker selling process. The same holds true for local selling seasons. Check HomeLight’s Best Time To Sell Calculator to see what months typically bring in the highest sale prices.

6. Negotiating agent fees

While not always possible, it’s worth discussing the commission rate with your agent. Some agents are willing to negotiate their fees, especially if they stand to gain multiple transactions from you or if you’re selling a high-value property.

7. Energy-efficient upgrades

Investing in energy-efficient upgrades can be a selling point and might qualify you for tax credits or rebates. These features can attract environmentally-conscious buyers and add value to your home.

8. Use a ‘Buy Before You Sell’ program

The housing market has seen a rise in companies offering innovative Buy Before You Sell programs. These companies simplify the process of buying a new home before selling your current one. By selling your home vacant and potentially staged, top agents estimate you can sell your home for as much as 13% more. In addition, a Buy Before You Sell program allows you to only have to move once, saving you money on expenses like moving and temporary housing.

Here’s how HomeLight Buy Before You Sell works:

Contact HomeLight or ask your agent how HomeLight Buy Before You Sell can help you earn more, and buy and sell with more confidence.

Each of these strategies requires careful consideration and planning, but they can collectively contribute to significant savings and a more profitable home sale.

Earn higher proceeds with a top agent

While the immediate savings of a 1% commission agent are tempting, the true value of your home sale might lie in choosing a full-commission, top-performing agent. The expertise and comprehensive service provided by these professionals typically translate into a more successful and profitable sale.

As Medford says, you may save $5,000 on the listing agent fee but lose tens of thousands of dollars on the sale price.

If you’re seeking a top agent who can guide you through the selling process and help achieve the best possible price for your home, HomeLight is here to assist. Our service is free and tailored to connect you with experienced agents who have a proven track record of satisfying their clients. In just a couple of minutes, we can recommend the best agents in your area, ensuring that you have the right support for a successful home sale.

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