Real Estate Commission Calculator
Looking to negotiate a lower commission for your agent? This Real Estate Commission Calculator can help.
You may be wondering how real estate agents get paid when they help someone buy or sell a house. Most make money through a commission based on a percentage of a home’s selling price. In most cases, the seller pays the realtor fees, but this is not set in stone.
Not many people know that they can lower the commission percentage by negotiating the agent’s rate or having the buyer pick up part of the fee. Use this Real Estate Commission Calculator to compare how much you can save by negotiating your agent’s rate.
Important Terms to Know
There are terms that are commonly used during conversations about real estate commissions or real estate agent fees. Read these definitions to learn more.
Before diving into non-discounted and discounted commission, let’s talk a little about how usually works. Like we mentioned above, a commission is how real estate agents get paid. This amount is most often calculated as a percentage of the home’s selling price.
The norm is that sellers pay 6% commission— but not all of that goes to the listing agent. In fact, the commission is often split four ways. The most common way to split agent fees is between:
- Listing agent: This is the agent that takes the listing and works with the seller.
- Listing broker: All agents must work under a real estate broker. The broker often gets half of what the agent brings in.
- Buyer’s agent: This is the agent representing the buyer’s interests.
- Buyer’s broker: Like the listing agent, a buyer’s agent must also work under a broker.
The details of the commission split will be outlined in the listing agreement. It’s essential to keep this in mind when negotiating prices. The agent usually doesn’t pocket all 6%.
When all is said and done, they may come away with between 1%-2%. While saving money is nice, it’s also important to pay agents a fair amount for the work they perform.
The selling price is pretty straightforward. It is the amount of money that you sell your house for. Since the agent commission is based on the sales price, the better price you get for your home, the more you can expect to pay in realtor fees.
If you haven’t yet determined the selling price or hired a real estate agent, there are several ways to come up with an estimate of what you should sell your home for:
- Obtain a comparative market analysis from a real estate agent. This option won’t be as detailed as hiring a professional appraiser, but asking a real estate agent for comparative market analysis (CMA) can give you a good estimate based on details of the home and the surrounding real estate market.
- Use the Federal Housing Finance Agency’s HPI calculator. The FHFA has a house price calculator to estimate home values. Note that the calculator does NOT project the actual value of any particular house. Instead, it projects what a given house purchased at a point in the time would be worth today if it appreciated the average appreciation rate of surrounding homes.
- Use other online resources. There are numerous estimators available online. A simple Google search will return results for tools from real estate websites that use public records, tax assessments, and algorithms to come up with a home value prediction.
- Hire an appraiser. As a homeowner, you can also request a professional appraiser. The appraiser will consider the property, house, improvements, market conditions, and comparable properties.
These four methods can help you come up with a reasonable estimate for your home’s selling price.
The non-discounted commission is the rate that you would pay under normal circumstances, without negotiation or discounts. Typically, this rate is 6% of the home’s selling price and is covered by the seller.
The discounted commission is a lower rate achieved by negotiating or simply finding an agent who will do it for less— often called “discount brokers.”
Using a discount broker
Discount brokers are brokerages and agents who specialize in accepting smaller listing commissions. However, this comes with a catch. They often don’t offer the full level of service you’d normally expect with a real estate agent.
You will likely sacrifice some things like professional photography, marketing and advertising, and open house planning and hosting. These tasks will be up to you. The broker will do things like put your house on the MLS and be involved in contract negotiations.
Ways to negotiate with your agent
If you are negotiating with your agent, here are a few things you can do to set it up for success:
- Give your agent a referral. Your agent may be inclined to give a discount if you bring in a friend or relative ready to buy or sell a home.
- Buy your new home with the agent. If you are also buying a home in the same area, you may be able to cut a few percent from selling if you agree to use them to buy your house. Since they will get money as your buyer’s agent, they might end up making more from the deal.
- Sell in the slow season. Real estate definitely has a slow season, but agents still need to make money year-round. You might be able to get a better deal when the agent has more time on their hands and needs business.
- Find a new agent. You may be able to negotiate better with a newer agent looking to gain experience and build out their network.
Negotiating with the buyer
Another way to pay less in realtor fees is to negotiate for the potential buyer to cover these costs. There’s no rule saying that the home’s seller must cover these, so a good way to save would be for the buyer to cover a percent or two.
More Calculator Resources
If you’re looking for more tools like this one to help your money matters in order, be sure to check out Amplify Credit Union’s financial calculators. You’ll find handy tools to help you with everything from home mortgages to savings to retirement.