How High Are Typical Realtor Fees And How Are They Split Between Agents and Brokers?
For many home buyers, completing a house sale is impossible without the expertise of a realtor.
Real estate agents and brokers, referred to as realtors, help facilitate real estate transactions. Unfortunately, these services aren’t free and the realtors' fees attached to their services can take a chunk out of your sale.
With that said, let's consider how much your typical realtor would charge you, and how the fees are split between agents and brokers.
What Are Realtor Fees?
In most cases, the seller of the house disburses the payments to their realtor, who then shares the profits with the one brought by the buyer. Even while realtor costs can be high, a home buyer may consider them an investment because a skilled broker's work pays off amply.
How High Are Typical Realtor Fees?
Most realtors receive their fees through commissions and fees with regular salaries. These fees are often not paid upfront but are in the home's price. Once the sale is complete, the realtor's fees will be deducted and paid.
Realtors' fees can vary depending on the firm, expertise, and home area, but generally, they are 5-6% of the total home price. Take, for example, a $150,000 home that may attract realtor fees of about $7500 on a 5% commission.
However, clients can always negotiate a lower realtor commission rate. To prepare for a sale/purchase, you can calculate realtor fees on your desired house beforehand. Usually, the 5-6% fee is split to reimburse the buyer's agent commission and seller's agent commission, leaving them with roughly 2.5% each.
The 5% fee brings the average annual earnings of a realtor to $85,000 per year in the United States and can be as high as 1 million dollars depending on skill and location.
How Are The Fees Split Between Agents and Brokers?
There is a distinct difference between a real estate agent and a broker. The former connects while the latter supervises, hires, and takes up more technical work.
If referrals are involved, the realtor's fees are often split into about three places or more. As mentioned earlier, the first split happens when the buyer and seller's agent split the 5-6% equally. Once each agent gets their commission for helping customers buy, sell, or rent a home, they further split the money with their broker.
The agent and broker determine the split at the start of the real estate agent’s job. Agents may discuss rates with their brokers, which may be the standard split ratio of the money in their business.
Without negotiation, realtor fees may be split in half, leaving the agent and broker with about 1.5% each from the initial 3%.
Sometimes, the split may be 60-40 or 70-30. In these unequal cases, the agent tends to earn more, depending on the agreement. A real estate agent may also reimburse their broker monthly and not with every house sold.
Even without doing much work to complete a sale, a broker receives a cut to cover the costs involved in operating a real estate agency. They invest money to train agents and recruit other individuals to make the work seamless.
In addition, there are payments made towards operating their business, such as rent, equipment, advertising, signage, phone lines, and other expenses related to running their firm.