I am often asked the question: how much commission do I have to pay to sell my house? This is an important question to ask yourself especially when calculating the cost of selling a home. Unfortunately, there is no concrete answer.
The amount of commissions and fees charged will vary from state to state, but, there are a few principles to keep in mind.
The commission is negotiable and is not regulated
Real estate brokerage commissions are not regulated. There is no “standard-fee”. All commissions and fees are negotiable.
There are some brokerages that will charge a rate of 6% or higher, and not negotiate that rate. There is nothing wrong with a provider of a service to set a price schedule and stick to it. Some brokers work very hard and are very good at what they do. You, as the consumer, are free to shop around and decide if you think it’s worth it to pay that much money. It’s up to you to do your due diligence before hiring an agent.
Commissions are usually expressed in a percentage of the gross sales price of the property
If the listing broker is charging a 6% real estate commission that means you will pay 6% of the gross sales price of the home. Here’s an example
$250,000 – (gross sales price)
The above format is typical for residential real estate transactions. The way commissions are charged for things like commercial properties, industrial, raw land, farms, may be different. Remember to always read your listing agreement.
The broker commission is by far the biggest expense when selling a house so it is important that you understand this concept.
Typical commissions in the Raleigh NC area
In North Carolina most real estate brokerages charge between 4% and 7%. The most common number I have encountered is 6%.
Brokers of investment properties have a tendency to charge a little more because of the work involved. I’ve seen fees as high as 7% on an investment property.
Be sure to read through the listing agreement and see if there are any “hidden fee’s”. Some brokerages will charge additional fees. Some realty companies will charge documentation fees of a few hundred dollars regardless of whether or not the house is sold. Get all the details upfront and thoroughly read the agreement before you sign it.
There are some brokerages that will charge a discounted flat fee regardless of the purchase price. Some will even do a “limited service” agreement where the seller pays a small fee, and the home is entered into the MLS. The listing broker will not provide assistance or consulting after the listing is entered, hence the term limited service.
It’s important to note that to get the listing into the MLS a commission needs to be offered to a buyer’s agent.
How is the commission split between both buyer & seller agent
Usually about half of the commission charged by the listing agent is what is offered to an agent that bring a buyer. A rate of 2% – 3% is common in the Raleigh NC area..
The listing broker does not keep all the commission that they receive. There is a split between the broker of the firm and the firm itself. Let’s say the same house that is listed for $250,000 sells and a $15,000 total commission is paid.
However, each agent must then split their part of the commission with the brokerage firm. So, if there were 2 agents involved then each may get $7500 each.
The agents will then have to split that money with their brokerages. The amount of the in-house split varies by company. Many times in can be a 50/50 split so…
Listing Agent – $3750
Brokerage Firm A – $3750
Buyer’s Agent – $3750
Brokerage Firm B – $3750
So, how much commission do I have to pay when I sell my house? The answer is $0! You’re not obligated to pay any fees to an agent. You can always sell your home by owner or sell to an investor.
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