What’s the Average Minnesota Real Estate Commission Rate?

Does the agent get to keep the full commission?

Although the seller pays the entire commission, the listing agent, who is representing the seller in a transaction, doesn’t keep it all. As mentioned, a sizable portion will go to the buyer’s agent, since they are doing the work of introducing the buyer to the home and helping them through negotiations.

Unlike other states, the split between the seller’s agent and the buyer’s agent is not necessarily 50/50 in Minnesota. Because the seller’s agent has more invested in the sale, it’s generally understood that they keep more of the commission. The selling agent invests money in marketing initiatives (such as staging, photography, signage, and more that we’ll discuss below), and in Minnesota, real estate brokerages mutually agree that those investments should be recouped by keeping more of the commission.

Augustinack says, “In our area, it’s a pretty standard [for a buyer’s agent to receive] 2.4% of the purchase price. I know for the metro area, it tends to be a little bit closer to 2.7% and even sometimes 3%.”

In addition, both the seller’s agent and the buyer’s agent will then share a percentage of their commission with their sponsoring broker. These agent/broker split rates vary significantly depending on how the brokerage is structured internally. Augustinack says that the listing agent will give their broker anywhere from 30%-70% of their commission, depending on the agent’s level of experience, their market size, the brokerage agreement, and the specifics of the transaction.

How is the commission divided between agents?

The commission that’s paid by the seller will typically be split among each agent and the brokerages through which they hang their real estate license.

Let’s say you sell your Maryland home for $320,000 with a 6% commission rate. You pay a commission of $19,200, and each agent has a 50/50 split agreement with their brokerage. Here’s how your commission payment might be split up among the listing agents and their brokers:

• Listing agent: $5,760 (Their half of a 3.6% commission rate)
• Listing broker: $5,760 (Their half of a 3.6% commission rate)
• Buyer’s agent: $3,840 (Their half of a 2.4% commission rate)
• Buyer’s broker: $3,840 (Their half of a 2.4% commission rate)

Are Minnesota commission rates negotiable?

You can negotiate real estate agent commission rates, but don’t be surprised if your agent holds firm on how much they charge. A Consumer Federation of America report found that only 27 percent of agents are willing to negotiate the commission.

One reason agents often don’t lower their rate is that it may reduce their ability to negotiate a higher sale price for the seller. An agent’s services often include photography and pricing analysis, so a lower commission could also translate into a smaller marketing budget for your property, an inaccurate list price, fewer home promotions, and a lower likelihood of selling.

Overall, commissions in Minnesota are negotiable but do your research first. When asking an agent to lower their pay, you’re limiting the pool of agents willing to work with you. And the downsides to working with a low-commission agent can be steep. Without a top Minnesota agent in your corner, you could dramatically undersell your home, have a rough selling experience, or fail to sell the home at all.

Augustinack says, “Everything in real estate is negotiable, including commission. I just caution sellers that sometimes the cheapest is not always the best. I would encourage them to ask what is provided for their 6%-7%. If that agent doesn’t have a very good answer, they’re probably just going along with whatever anybody else does. That’s where we try to stress that there’s a professional way to do this, and there are ways to just do [the bare minimum].”

What is included in a real estate agent’s commission?

A full-service real estate agent in Minnesota will provide a high level of offerings that go toward giving you a great selling experience and boosting exposure to your home.

An agent’s services fall into a few main categories:

Guidance on pre-sale improvements

Agents see a lot of houses in their Minnesota markets. They will have an eye for the small but impactful improvements you could make to help it sell for more. The best agents will go above and beyond to help their clients get the job done.

Augustinack says, “Full-time agents frequently walk through different houses, and we hear what buyers are saying –– we hear the objections, and we work to overcome those.” He relates a recent example where he helped a seller get their siding repaired professionally, knowing that otherwise, it would be a big turn-off for buyers. “It’s taking a preemptive step to present the best product possible.”

Pricing strategy

An agent will put together a comparative market analysis in the form of a thick packet featuring charts, facts, figures, and photographs of houses. The analysis will show you what your home is worth based on comparable sales in the neighborhood, market trends, and local price per square foot. This key tool helps you set a realistic price that can attract offers right off the bat in a fraction of the time it would take a non-professional to determine.

Marketing services

As part of their commission, at a minimum, Minnesota agents should offer expert home prep and staging, professional photography, marketing flyers and pamphlets, direct mail, automatic postings of your listing on major home search sites, local advertisements, exclusive previews for other brokers, and open house coordination. Advanced agents may also offer the development of a virtual tour.

Augustinack emphasizes the importance of marketing correctly. “You’ve got to get buyers, and the more buyers you can get in the door, the more opportunities you’re going to get someone that wants to buy your home.”

Offer management and negotiations

When you receive one or multiple offers, an agent will help you determine the strength of the offer and work with you to proceed with responding to buyers. They’ll advise on whether to accept, reject, or make a counteroffer while putting together offer spreadsheets to identify the best offer in bidding war situations.

If a buyer requests repairs after the inspection, an agent will help you push back where appropriate and advise on when to concede. Should the appraised value be lower than the contract price, an agent can help you determine whether to ask the buyer to make up the difference or if you should lower your price.

Market knowledge and neighborhood expertise

Great Minnesota real estate agents know what local buyers seek in homes and which of your home’s attributes to highlight. An agent will skillfully incorporate key features into your home’s listing description and immediately be able to recognize what makes your house or the surrounding area special.

“It takes time and effort to figure each property out,” Augustinack says. He shares that some homes in his area lend themselves to the short-term rental market, and they need to be positioned as such. Other times, he may advise a seller to wait for a thaw so that the best outdoor features can be shown. “It’s about being able to take a property and strategically market it in a way that you’re gonna put it in front of the right [people at the right time].”

What is a fair real estate commission in Minnesota?

As noted above, the average commission rate in most Minnesota markets is between 6%-7% to hire a full-service real estate agent. This rate should mean you have an agent who is dedicated to selling your home for the best possible price, who is available and communicative, and who is willing to shepherd the transaction from start to finish. If an agent isn’t willing to offer all or the majority of services listed above, you should interview more candidates.

“Some people just go with the very first agents they talk to, and feel this sense of obligation,” Augustinack says. “But I strongly encourage people to go out and meet with two or three different people. Because everybody does business in different ways, and some will put in more effort than others.”

What if my Minnesota house doesn’t sell?

Real estate agents only get paid commissions if and when your home sells successfully. Most real estate contracts include an exclusive right to sell, which gives the real estate agent the sole rights to market the property, list the property on MLS, and receive the commission if the sale closes in a determined time frame. If your house remains on the market beyond the time period outlined in the listing agreement, you are not obligated to pay your agent.

However, keep in mind that your listing agreement may contain a protection clause, also known as a “brokerage protection clause,” “safety clause,” “extension clause,” or “tail provision.” The protection clause states that if a buyer who the listing agent introduced to the property purchases the property after the listing agreement expires, the seller still must pay the agent a commission.

“Traditionally, there’s nothing that sellers have to pay out if it doesn’t sell,” Augustinack says. But he adds that in rare circumstances, an agent may ask to be reimbursed for the photographer and videographer. This would mainly happen in situations that are high-risk for the agent, such as a deteriorating home or a seller who insists on a list price that’s higher than market value. In most situations, the agent is willing to take on the risk of those marketing costs because they’re confident they can sell the house.

How can you avoid paying Realtor fees?

There are two main ways to avoid paying Realtor® fees. You can either sell your Minnesota home without an agent’s help, or sell it directly to a cash buyer without ever going on the market.

For Sale By Owner

Without a real estate agent, you’re responsible for preparing your home for sale, marketing, negotiating, and navigating legal and financial documents. When selling a house on your own, you’ll need to hire an attorney, at a minimum, to make sure the paperwork is right.

Typically, For Sale By Owner (FSBO) makes the most sense if you already have a buyer. As of 2022, 50% of FSBO sellers knew their buyer.

This indicates that while the FSBO route is rare, making up just 10% of sellers, it’s even more rare to forgo a real estate agent’s help when you don’t already have a buyer lined up and ready to go. In addition, according to a 2022 National Association of Realtors report, the median FSBO house sold for $225,000, compared to a median of $345,000 for agent-assisted sales. That’s a significant loss of proceeds in an effort to save 6% on commissions.

Sell to a cash buyer

Cash buyers — including iBuyers, investors, and house-buying companies — are individuals or entities that purchase your home outright, without the need for lender financing. These buyers typically make off-market purchases and can provide speed and convenience to sellers.

Just be aware that the price offered by most cash buyers may not match what you could receive on the open market with the help of a top agent.

If you’re interested in a cash sale, you can receive a no-obligation offer through HomeLight’s Simple Sale platform, with no hidden fees or agent commission. Simple Sale connects you to the largest network of cash buyers in the U.S.

Now you know how Minnesota agent commissions work

Sellers pay real estate commissions in exchange for an agent’s expertise and services throughout the sale process. If you’re worried about the cost of the commission, consider that targeted upgrades, stellar marketing, and savvy negotiations can help you maximize your sale price. With a performance-proven Minnesota agent to guide you, you also avoid the stress of navigating this complex process without professional oversight.

The key is finding a quality agent who provides the highest amount of value for their commission fee. In fact, our transaction data shows that the top 5% of agents in Minnesota sell homes for as much as 10% more than the average agent.

HomeLight can connect you with top Minnesota agents with experience tailored to your needs. Whenever you’re ready to get started, HomeLight would be happy to put your commission worries to rest by introducing you to several agents in your area who are well worth it.

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