How Real Estate Commissions Work: What Sellers Need to Know

Understanding how real estate commissions work is key for sellers preparing to list their home. While most sellers know they’ll pay a commission, the specifics—how much, where it goes, and how new changes may affect the process—can sometimes feel unclear. This guide will help you understand what to expect and how to get the most value when selling your home.

What Are Real Estate Commissions?

A real estate commission is a fee paid to real estate agents for their services in selling a home. Traditionally, this fee is based on a percentage of the final sale price. For example, on a $500,000 home with a 5% commission, the total fee would amount to $25,000.

Historically, commissions have ranged between 5% and 6%, but they are always negotiable.

Who Pays the Commission?

• Sellers Typically Pay: In most cases, sellers pay the commission from the proceeds of the sale at closing.
• Split Between Agents: The total commission is then split between the seller’s agent (listing agent) and the buyer’s agent.

Here’s a typical breakdown:

1. Listing Agent: Represents the seller and markets the property.
2. Listing Broker: The agent’s supervising broker.
3. Buyer’s Agent: Represents the buyer.
4. Buyer’s Agent Broker: The buyer’s agent’s supervising broker.

For instance, on a 6% commission split evenly between both sides:

• Listing Side: 3% → Split between the listing agent and broker.
• Buyer’s Side: 3% → Split between the buyer’s agent and broker.

How Commissions Are Changing in 2024

Thanks to a legal settlement involving the National Association of Realtors (NAR), the way commissions are structured is evolving. Here’s what sellers need to know:

1. Buyers May Now Negotiate Their Agent's Commission:
   Starting in August 2024, buyers will directly negotiate what they’ll pay their agents. This change makes commissions more transparent and could lower the cost for sellers.
2. Impact on Sellers:
• Sellers are no longer required to pay the buyer’s agent commission.
• Instead, buyers may pay their own agents, or the seller and buyer can negotiate who covers that fee during the purchase agreement.
3. Why This Matters:
   Previously, sellers would often include a set buyer’s agent commission in the MLS listing to attract agents and buyers. Under the new rules, this practice will change, potentially reducing overall commission costs for sellers.

Example:
If a seller previously paid a 5% commission on a $400,000 home ($20,000), the new rules may allow the seller to pay only their listing agent—significantly reducing costs.

How Commissions Deliver Value

Sellers sometimes wonder if agent commissions are worth the cost. Here’s what you’re paying for:

1. Pricing Expertise
• Agents analyze market data to price your home competitively, ensuring it attracts buyers without leaving money on the table.
2. Professional Marketing
• High-quality photos, virtual tours, social media exposure, and MLS listings are all tools agents use to get your home in front of more buyers.
3. Negotiation Skills
• Agents act as your advocate, negotiating the best possible price and terms.
4. Navigating Complex Paperwork
• From offers to inspections to closing, agents guide you through every step of the transaction.
5. Saving You Time and Stress
• Selling a home involves significant time and effort. Agents simplify the process so you can focus on your next move.

Are Commissions Negotiable?

Yes! Sellers can negotiate the commission rate with their listing agent. It’s important to remember, though, that a lower commission may come with reduced services, like limited marketing.

Tip: Work with an agent who clearly outlines the services they provide and explains how they’ll maximize your home’s value.

Key Takeaways for Sellers

1. You Pay for Expertise: Real estate agents bring experience, strategy, and market insight to help you sell your home quickly and for top dollar.
2. Commission Costs Are Changing: Under new rules, sellers are no longer required to pay the buyer’s agent. This could mean lower costs.
3. Transparency Is Increasing: Buyers and sellers now have more clarity around commission costs, leading to fairer negotiations.

Ready to Sell? Let’s Maximize Your Home’s Value

Navigating the evolving real estate market can feel overwhelming, but you don’t have to do it alone. At The Laffins Team, we’re here to guide you through every step of the selling process, ensuring you understand commission costs and receive the best value for your home.

📞 Call us today at (530) 809-4594
📧 Email: info@laffins.com
🌐 Visit us: www.laffinsrealestate.com

Let’s get your home sold for top dollar—efficiently and stress-free!