In a typical home sale, agents for buyers and sellers each take a commission of roughly 2.5% to 3%, for a total cost of 5% to 6%, paid out of the seller's proceeds.
It is nature for sellers to save money by negotiate a lower commission with their agent. But, does sellers really save money that way?
According to MLS data, for all 3-bedroom units sold this year in Montefino, a large townhome complex in Diamond Bar, shows properties that offer 6% commission were sold an average price of 7% higher than the 4% ones. Sellers actually net $17,820 (4.4%) more by paying 6% commission instead of 4%.
| Commission Rate |
Median
Sales Price |
Commission Paid |
Seller's
Net After Commission |
| 4% | $425,000 | $17,000 | $408,000 |
| 5% | $442,000 | $22,100 | $419,900 |
| 6% | $453,000 | $27,180 | $425,820 |
A study in 2005 by National Association of Realtors echos the same finding. According to the study, the median 2005 sales price for a home that was sold by an agent was $230,000, about 16 percent more than the $198,200 median price for a For Sale By Owner home which offers little or no sales commission.
If you have 2 job offers with exactly same assignment, one pays $5000 and another pays $6000, which one will you pick? The one that offers higher compensation will be more attractive for most job seekers.
Therefore, houses that pay higher compensation will entice more showings and cooperation from other real estate agents. Since 90% of home sold are by another agent representing the buyer, higher commission becomes an important factor in getting top price for the house. This is why sellers end up netting more if they pay a higher commission.
In contrary of the common logic of save more by paying less, in real estate, sellers do get more by paying more commission.
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