How Much Does A Realtor Cost
Most Realtors rely 100% on commission and only get paid when, and if, a home is sold. You have the right to try and negotiate realtor fees, but they may be unwilling to budge depending on the success of their approach and their perceived worth.
Buyers
Hiring an agent to help you buy a home usually costs you nothing, directly. In Tennessee, and in most areas of the US, the seller pays realtor commissions. The commission affects the home sale price, so, in the end, the buyer is indirectly contributing to their agent's commission.
The representation contract will often require that your agent get a 3% commission. If the seller's agent doesn't pay 3%, it's your responsibility to pay your agent and make up the difference.
A clause like this keeps your agent from getting pushed out of the deal after weeks of work, which unfortunately happens, at times.
Sellers
When you sign a contract with an agent to sell your home (listing agent), you will negotiate a percentage of the sales price as payment. There are 3 different types of listing contracts that are legal in Tennessee:
Exclusive right to sell: this is the only type of agreement most brokers will allow their agents to sign with a seller. Under this agreement, the agent gets paid when the property sells, regardless of who found the buyer.
Exclusive agency: the agent gets paid as long as the seller does not find the buyer. If the seller finds the buyer, the agent doesn't get paid. It can get a little sketchy to try and figure out, and agree on, who actually found and brought the buyer in. When the agent markets the home publicly, it is difficult for the seller to prove that the buyer they found had never seen any of that marketing material and knew nothing of the listing until the homeowner told them about it. So, brokers don't usually allow their agents to enter into this agreement.
Open Listing: this is similar to exclusive agency, but the agent only gets paid if they personally find the buyer through their marketing and networking efforts. In exclusive agency they would get paid if anyone other than the seller brings the buyer.
The numbers
Tennessee real estate law does not allow a standard commission rate. It is always negotiable. Generally, the listing agent will ask for a 6% commission with the understanding that they will give half to the buyer's agent, should the buyer have one.
So, more often than not, each agent will walk away with 3% of the sales price. Here's the breakdown of a common scenario:
Sarah is an agent affiliated with ABC Realty.
Sarah helps her client buy a home for $300,000
ABC Realty receives $9,000
Sarah has a 70/30 split with ABC Realty, so she gets a check for $6300. This is the amount she will pay taxes on, minus expenses.
Depending on the split agreement the agent has with their broker, the broker could pay the agent as little as $4,500 of that commission up to $8100 or so. If the agent is on a team, they owe their team part of that payout, as well.
Agents can make good money, but it's very expensive just to be a realtor. There are also up-front expenses to work with every client and no guarantee of payment.
So, how much does a realtor cost? The final answer is: it depends. A realtor's commission is always negotiable and dependent on the situation, but this should give you an idea of what to expect. We explore a realtor's income and detail their expenses in this article.
Wondering what it looks like to buy or sell without an agent? This might interest you.
An exceptional agent earns every penny of their commission. Now, you just need to find an exceptional agent.