December 8

Watch and Win!


Home sellers are commonly responsible for paying both their own real estate agent’s commission and the commission for the agent representing the buyer. The commission is usually divided between the brokers, typically ranging from 5% to 6% depending on the market.

For instance, in a $500,000 home sale with a 6% commission, the seller would pay their broker $30,000 upon settlement. This amount is then split between the buyer’s broker and the seller’s broker, resulting in each side earning $15,000 from the sale. However, there are further splits within each side, as participating brokers share their cuts with the agents involved in the deal. As a result, an agent’s actual pay is lower than their side’s share of the total commission.

While real estate agents may claim that commissions are negotiable, there are industry dynamics that often prevent sellers from offering less than the typical 6%. The compensation for agents is included in the listing on a regional database called a multiple listing service (MLS). Some MLSs have restrictions that prohibit a seller’s agent from listing a property without offering compensation to the buyer’s agent.

Sellers may have concerns that agents will steer them away from homes that would result in lower commissions. Unfortunately, this fear is not unfounded.

Version 1: According to a recent academic study conducted on properties listed on Redfin, it was discovered that agents who provided commissions below the market rate for a specific area experienced reduced traffic and faced significantly longer selling periods.

“The individuals most affected by this are sellers who offer commissions at the going rate, as they are concerned about potential steering,” explained Jordan Barry, a professor of law and taxation at the University of Southern California and one of the study’s co-authors. “For the majority of homeowners, their house represents their largest asset. Surrendering 6% of the sale price in commissions places a genuine burden on them.”

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