Listing Fees: What Are They and How Will They Affect You?

by Carson BuckDecember 26, 2016

Everything You Need to Know About Listing Fees

If you’re looking to sell or buy a home in today’s market, it’s likely you started in the world of online realty, perusing apps and home listing sites. But inevitably, most buyers and sellers end up turning to a Realtor to help them buy or sell the home of their dreams. So why not turn to a Realtor first? The short answer in many cases, is listing fees.

Realty commissions, or listing fees, are an added cost to factor in when buying or selling home. Before you sell your home, it’s important to learn about listing fees and how they will impact you as you list your home on the market. Let’s dig in.

listing fee basics

Listing Fee Basics

On average, a Realtor charges the seller a 6% commission fee that is based on the home’s selling price. In exchange for this fee, homeowners rely on the Realtor to drive up the home’s price and to help the home sell quickly. Does the 6% fee seem steep to you? In some places, depending on the local market, the listing fee can climb as high as 10%! But there are options for sellers who are unable to part with that portion of the sale.

In a real estate market, you can find low-fee or flat-fee commission brokers as well. What’s the difference? Reduced listing fees may not cover the traditional home marketing and sales services.

Inspection and closing processes may not be included by a flat fee broker, so be sure to identify two things: 1) how high of a listing fee you’re willing to pay when you sell your home, and 2) what services you expect from a Realtor. Do you expect just a sale, or marketing and legal aid as well? Once you’ve outlined your listing fee basics, you can begin the listing process.

listing fee basics

Where Does the Home Listing Fee Go?

Curious where the money is going once you pay the Realtor a listing fee? You may be surprised to learn that the fee doesn’t go directly to the real estate agent. In fact, it’s divided between the buyer’s agent and the seller’s agent.

While the breakdown can vary, typically the agents will split the fee 50/50. Additionally, much of the fee goes to the agents’ companies to cover advertising and overhead costs. In the end, an agent may end up taking away only 1.5% of the selling price for commission and personal salary.

A Fee Is Not a Guarantee

One important thing to keep in mind: enlisting a Realtor’s help isn’t a promise that your home will sell. Despite their experience, a Realtor cannot guarantee a sale, and they certainly cannot guarantee the price it will be sold at.

At this point, it’s important to ask yourself if a listing fee is worth it. B. Douglas Berheim, a Stanford economist, and Jonathan Meer, a Stanford grad researcher, presented a case study that argues:

“Sales commissions for residential real estate brokers historically average nearly 6% of a home’s closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.”

A listing fee is not a guarantee that your home will sell, so it’s important to weigh the costs and benefits. If it’s important to you to sell your home quickly, a Realtor is an asset. And if you do decide to go this route, try one of our tips below for saving costs, without losing benefits, on listing fees.

listing fee basics

Tips for Reducing Listing Fee Costs

Barter for half. Your six percent commission price tag may be divvied up among multiple parties, but it is only paid by one: you. Negotiate with your agent for a 3% total commission. That way, the agents for both buyer and seller are splitting one fee, instead of you doling out the fee twice to each side.

Take your time. Don’t settle for the first agent you meet, and be sure to shop around. Interview multiple agents to get a sense of how each agent sells and markets property so that you can find someone who meets your criteria and your timeline.

Hold out for a higher sell. If you can’t lower the listing fee, raising the price of the home will increase the amount of money you receive from the sale. Experts at Freakonomics share that holding out for as little as another week can add another $10,000 to your asking price. This added price cushion helps sellers cover the cost of a fee.


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About The Author
Carson Buck
Carson is a real estate agent based out of the Phoenix area. In this day and age of online research, Carson loves interpreting data and market research in order to make sure his clients have the best possible chance of finding and successfully buying the home they love. He is passionate about seeing that the buying process is as smooth as possible, and claims that there is no better feeling than handing over the keys to a new home.

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