What Is a Real Estate Commission? 5 Myths Busted for First-Time Sellers

Buyer’s agent services

• Building a relationship with the seller

Although “love letters” are largely controversial, buyer’s agents can still make an introduction between the buyer and the seller. In a seller’s market, where many sellers are receiving multiple offers, getting your face and name out there is vital.
“We just share a little bit about them personally in the intro of the email just to help the seller connect with the buyer as a person,” Christman states.

• Make a compelling offer

As a buyer, it’s vital to make the best offer possible to increase your chances of being accepted. That doesn’t always mean offering more money, though.

“We can sometimes get our offers accepted when they’re not the highest offer because of offering more appealing terms,” Christman comments. “Like maybe they can’t offer the highest price, but they can let [the seller] stay for free for two months.”

• Show properties

Buyer’s agents also do the hard work of searching for properties that fit their clients’ wishlists, driving them to the properties, and showing them. With so many properties coming on and off the market the last couple of years, this timesaving skillset is especially important.

5 commission myths to watch out for

If you’re not familiar with the ins and outs of commission fees, you may have fallen into the trap of some pervasive myths about them. Our expert agent Christman sets the record straight. Here are some myths you can be assured are false:

Myth 1: A discount commission agent will save you money in the long run

Some agents with less experience will offer a lower fee to their sellers, which might save them 1 to 2% of their sales price. However, just because one real estate agent offers a lower percentage commission than another doesn’t mean you’ll net more money working with them.

“I will say that if they offer a low commission to a cooperating agent, there is a risk that they won’t get as much exposure,” Christman explains.

Exposure often leads to more offers, meaning a lower-rate agent might not bring in as many offers. That could lead to a lower sales price and less money in your pocket in the end.

Myth 2: You can’t negotiate a real estate agent’s fee

Almost everything in real estate is negotiable. Especially in a seller’s market, you can definitely negotiate your agent’s commission. Christman says that sellers usually request a lower commission in order to net more, which she can help alleviate by bringing in higher offers. Still, she’s open to negotiating her terms.

“I’m committed to net them more than any other agent will,” she explains. “So I’ll definitely work with them, especially if they’re in a life crisis.”

Myth 3: You still have to pay an agent’s commission if your house doesn’t sell

This is wrong in most instances. The vast majority of buyer’s and seller’s agents will not charge a commission on a deal that doesn’t go through. So don’t worry about having to shell out thousands of dollars even if your house doesn’t sell.

“So [the agents] may spend a ton of time marketing a house, but if it doesn’t close, they’re just out that money,” Christman comments.

Myth 4: Real estate agents net all of their commissions

This is a common myth. It can be jarring to see a commission of $15,000 on a $300,000 home sale. Sellers might wonder why a real estate agent earns that much money on one transaction. However, not all of that money goes into their pocket. If you cover both the listing and the buyer’s agent fees, your agent will split the fee with the buyer’s agent. Sometimes this is split 50/50, but other times it might be divided unevenly if the seller’s team had higher upfront costs.

Additionally, real estate agents have to pay their brokerages unless they are brokers themselves. Brokers have received more training and can have other real estate agents work under them. The title also comes with more responsibility. Agents and brokers also have additional costs such as insurance and taxes.

“It’s not all just this money in our pocket. And I think a lot of times people think we’re literally just sitting in an office waiting for the phone to ring doing nothing,” Christman says. “But we’re all working 40+ hours a week.”

Myth 5: A dual agency will result in lower real estate commissions

Dual agency is when one agent represents both the buyer and the seller. While this is illegal in several states due to the conflict of interest in which it places agents, it can actually net agents much more money on a single transaction.

As mentioned, in the traditional set-up, the agent’s commission is split between the seller’s and buyer’s agents. But because there’s only one agent in the transaction, they can charge the same percentage commission, without having to split it with anybody else. It’ll usually cost you, the seller, the same amount of money.

Partner with a professional — put an expert on your side

To summarize, you can negotiate your real estate agent’s fees, but it’s important to remember what you’re paying for. Having a professional real estate agent represent your sale can mean more money in your pocket, even if the sticker price seems shocking.

“I can’t imagine anything more terrifying than not having an expert on your side just to guide you through the law, find good people that you trust to do inspections and repairs, all of it,” Christman says. “I can’t imagine not having someone to guide you who’s an expert through one of the biggest sales in your life.”

To connect with a proven seller’s agent in your market, try HomeLight’s Agent Match tool. Our data shows that the top 5% of real estate agents across the U.S. sell homes for as much as 10% more than the average agent.

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