Who Sets Real Estate Commission Rates?

Who Sets Real Estate Commission Rates?

Commissions are among the most debatable factors in real estate, which begs the question, who sets real estate commission rates? For this reason, it’s crucial to understand who determines commission charges so that you know how much to pay and score the best value service for your property.

Who Sets Real Estate Commission Rates?

While there is no formal regulation about who should set commission rates, it’s widely accepted in the real estate industry for realtors or brokerage firms to have the ability to determine commissions for each transaction. In some cases, sellers can set the rate if an agent is open to negotiation.

However, since rates may vary depending on the real estate company or broker, you can consider choosing flat fee realtors to save money from percentage-based commissions. This kind of model provides all the services you need to buy or sell a house without paying for high agent commissions.

Setting Rates Depending on the Kind of Real Estate Service

Legally sellers have the right to negotiate any real estate commission. Real estate agents may be more or less flexible on these compensation terms depending on the type of services they are offering and how their company or team is set up.

A house for sale with two car ports

Full-Service Commission

Some companies have full-service brokers, yet they ask for high commission rates. Firms have varying standards and strategies in what they deem as full-service, although there are some who would charge premium rates for more services.

Real estate firms set a commission split for all transactions. For example, some companies offer gross commission splits, where agents would divide a percentage of their gross commission with the firm. In contrast, others put a commission cap for realtors to receive full commission after a certain period or threshold. These internal splits can play a role in how much, if at all, a real estate agent is willing to adjust their commission.

Full-Service Flat Fee

A flat fee company like CA Flat Fee sets the commission rates for their agents, saving you money since you won’t have to pay the standard commission charge based on the final sale price. Instead of a percentage commission, the broker or firm would set a fixed rate for the entire transaction.

It is the perfect route for those who want the convenience of selling a property without managing every aspect of the process. This model serves as a one-stop-shop for sellers who need help in paperwork, inspection, negotiations, marketing, and anything else necessary to close a deal for a fixed fee. The most important thing to ask about with companies like this is what services they do not offer and what additional fees are included for additional services. CA Flat Fee provides all services for the same low flat fee.

Discount Broker

If you want more control over the commission rate, you can work with online discount brokers. Since discount brokers can set the commission rates themselves, they won’t charge you a full 6% rate. Instead, they can go as low as 1% to 2%. 

However, they tend to use these lower rates as a marketing tactic for attracting new clients. While the upfront fees may appear to cost less, there’s a possibility that you might spend more in the future due to limited services.

Standard Real Estate Commission Rate

There’s no legal standard commission charge, yet brokers commonly set a 6% commission rate. Keep in mind that commissions depend on a house’s gross value. Thus, you need to calculate the rate according to the property value before taxes and other fees.

Commission-based agents don’t get paid until the closing process, which means they usually shoulder the expenses for marketing and listing your property. This is part of the reason agents want to ensure they do not operate on too thin of a profit margin if they do not sell enough homes to have consistent and sufficient income to front these marketing costs.

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How Commission Rates Work

The number of home sales has been steadily increasing since 2011, with 6.5 million homes sold in America in 2020. This steady growth has brought many new companies to the market offering the various services involved in the sale process, with each person receiving a commission set by the seller’s broker or real estate company.

  • Broker: Brokers can operate individually or through a firm due to their license and further education. In effect, they can set real estate commissions themselves.
  • Agent: Agents are legally licensed individuals who can help buy or sell a property, although they must work under a licensed broker. Hence, brokers can set commission splits wherein they earn more than agents due to their greater experience and services.
  • Listing agent: You can hire a listing agent to help list your property on the market for selling.
  • Buyer’s agent: Acts as a representative for the buyer to search and purchase a property.
Realtor and client shaking hands

Determining Commission Rates

About 89% of sellers work with real estate agents to sell their homes. With such a rate, you can see the essential role realtors have in the selling process. However, this also means brokers and real estate firms have the power to demand their commission rates.

Before starting the selling process, you need to finalize a listing agreement in writing, or if you’re a buyer, it would be a buyer-broker agreement. Either way, the contract should explicitly state the percentage the agent would get from a property’s sale price.

The standard commission percentage in the State of California is between 5% and 6%. This would mean that on a $700,000 home the seller would pay around $35,000 to $42,000 in commissions. The total commission would then be split between the selling agent and the buying agent. This amount or split is factored into the initial listing contract.

Related Questions

Why Are Realtor Commission Fees High?

Real estate commission rates are high because realtors still need to split the amount. They also have to spend upfront fees for marketing your property and negotiating with clients. Remember, you’re paying for several parts of a transaction.

Can I Negotiate a Real Estate Commission?

Yes, you can negotiate a real estate commission, and some agents will accept negotiated rates. However, it is generally not received well by agents as they typically market their services at the most competitive rates they can.  

Who Pays for the Real Estate Fees?

In general, sellers pay the real estate fees. However, sellers typically include the amount in a property’s sale price, so, in a sense, the buyer also pays for the costs indirectly. Although rare, buyers may suffer from paying fees if the seller fails to provide an agent commission.


While real estate professionals rely on commissions for a living, the rate varies depending on the property value, location, and firm. This is why whether you’re a buyer or seller, it’s vital to know who sets real estate commission rates to help secure the best deal for your property.

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What Commission Does 72Sold Charge?

What Commission Does 72Sold Charge?

72Sold is an Arizona-based firm that promises to sell homes within 72 hours or 8 days. It is an attractive alternative for homeowners who want to quicken the home-selling process. According to 72Sold, homeowners don’t have to compromise on the selling price.  The homeowners often wonder if the 72Sold’s commission is much higher. In this article, you will learn about the commission that 72Sold charges to sell the home within 8 days.  72Sold’s Commission Structure The commission charged by 72Sold is comparable to what the traditional agents charge. The commission range is between 5% to 6% of the home’s final price. This rate covers both the listing agent’s fees and the buyer’s agent’s fee. This commission is split between these two parties. They get around 2.5% to 3% each.  Traditional Agents vs 72Sold Commission The commissions charged by the traditional agents are similar to 72Sold. Besides that the traditional agents may take some extra fees. They usually charge additional marketing costs for professional photography and staging. Also, the traditional agents may take  administrative fees that increase the overall cost. Flat Fee Agents vs 72Sold Commission Flat fee agents like Ca Flat Fee charge a fixed rate rather than a percentage of  the selling price. But the overall cost of flat fee agents can be similar to the commission structure of 72Sold. The flat fee agents take some additional charges for marketing and open houses. You should evaluate if the quick sell is justified to trade off against the fixed rate of flat fee agents. Hidden Fees  You have to pay the closing costs and some hidden fees regardless of the agent you select. The closing costs are escrow fees, transfer costs, and insurance. You also need to prepare your home to make your home appealing to the potential buyers. For that, you have to bear the repair and maintenance costs.  Alternatives to 72Sold Though 72Sold offers a faster selling process within 8 days, this commitment can’t be guaranteed. The homeowners can opt for other trusted options like traditional agents, flat fee agents, and discount real estate brokers. Homeowners can also sell the home on their own (FSBO).  The discount brokers charge 1% to 2% of the selling price. Homeowners who are cost-sensitive may find this alternative reasonable. But the discount brokers may offer fewer services and the level of service may vary.  Is 72Sold Worth It? Homeowners whose house is located in a demanding market may find the 72Sold as a perfect option. As they offer to sell homes within 8 days at a higher price, they attract many sellers. However, you will have to pay similar fees to the traditional agents and other alternatives. You may also miss opportunities to grab a higher price. You can surely boost up your earnings by comparing the real estate agents to choose the best one.  Conclusion  Homeowners who are looking for a faster home-selling option may opt for 72Sold to sell their house. They can also consider other options like the flat fee agents and traditional real estate agents.  For example- the flat fee agents can guarantee the highest possible sale price at a fixed commission rate. By evaluating the prominent platforms, sellers can pick the right option according to their priorities. 

How to Buy a House in California? 

How to Buy a House in California? 

In America, many people dream of buying a house in California- the Golden State. California offers the diversity of big cities like Los Angeles. Then again you can also enjoy the tranquility of Santa Barbara. But buying a house in California can be confusing, especially for first-time homebuyers. According to the California Association of Realtors (CAR), California’s median home price is expected to be $860,300 in 2024. So, you should know the appropriate process before deciding to invest. This article will guide you through the steps to buy a house in California.  5 Steps to Buy a House in California Financial Preparation At the very first step, assessing your financial situation is essential. Only then you can create a realistic budget. Home affordability calculators will assess your income, expenses, and debts and evaluate your mortgage payment ability. Houses in California are indeed expensive. But the cost varies with the location.  How Much Do You Need for a Down Payment in CA? 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Buyers should select mortgage options according to their eligibility and needs. Some of the mortgage options are:  Conventional home loans VA loans FHA loans Jumbo loans USDA loans House Hunting in the Right Neighborhood Finding the best house in your desired location requires some effort. First, you need to gain knowledge about the diverse housing market and consider an appropriate location. The living cost in California is quite high. So, your budget is a vital issue in selecting a location. But the living cost is a bit lower in many areas.  For example: the cost of living in Sacramento is less than in Los Angeles.  Now, it’s time to search for your dream home. A real estate agent will guide you through the search process. Their expertise in the local real estate market will help you to compare the offers. Thus, you can pick the best house according to your budget.   You can find properties with your desired needs on the property search sites. Check the listing websites with the latest and comprehensive information. Plan your visit carefully when you are visiting open houses. It’s always better to prepare necessary questions beforehand. Look beyond the staging and take your agent with you. Then check the neighborhood well.  Make an Offer and Negotiate to Buy CA Home The next step to buy a house in California is making the offer. The offer price, contingencies, and proposed closing date are written in the proposal. Your real estate agent will help to negotiate efficiently. The offer price should be competitive but realistic.  The offer may include an earnest money deposit. It is usually 2% of the purchase price. It is paid to make the house off-market before closing as an incentive to the seller. The earnest money is adjusted with the down payment later.  Closing  You can proceed with closing when the offer is accepted by both parties. Make sure to get done with the home inspection appraisal process. 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Selling Your House with a Mortgage in USA

Selling Your House with a Mortgage in USA

They say that buying a house is one of the most stressful experiences in life you’ll ever encounter, and while that may indeed be the case, there isn’t enough talk about the hardships associated with selling a house, especially one with a mortgage.   Despite the endless paperwork associated with selling a mortgaged property, we’ve lately seen a sharp increase in the amounts of homeowners selling their homes, despite them still being mortgaged.   Those looking to sell house with mortgage USA may wonder where they stand legally, and indeed, how easy selling a house with an outstanding loan actually is. Can you sell a house with a mortgage, and if so, just how easy is it? Well, the truth is that, despite there being several steps to sell a house with a mortgage, doing so is surprisingly easy, and very common.   Here is a quick overview for those looking to sell a house with a mortgage USA, and several key facts to understand.   Can You Sell a House with a Mortgage?   The simple answer is yes you can.   If you’re looking to sell a mortgaged property, you are perfectly within your rights to do so. In fact, doing so is extremely common.   Statistically, the average US homeowner stays in their home for 13 years. Typically they pay off their outstanding mortgage on the property by selling it. Providing you have enough equity to pay off the mortgage in full when the deal closes, there’s nothing stopping you from selling a house with an outstanding loan, I.E a mortgage.   Benefits of Selling a Mortgaged House   Despite being perfectly legal and common, some of us may be wondering whether it’s the right decision to selling a house with a mortgage.   Here are a few benefits associated with selling a house with a mortgage.   You can use profit from selling a mortgaged house to put toward your next property. If you are downsizing, you can keep the profits once your previous mortgage has been paid off. If you’re upsizing, you can use profit from selling a mortgaged house to put toward a down payment.   What Happens to My Mortgage When I Sell My House?   In a typical home sale, unless the real estate market is going through a very bad patch, you should be able to sell your property for more than you owe on your mortgage.   By paying off your mortgage over the years, you will have accrued equity in your home. This can then be cashed in on once you sell up.   When a house sale closes, between the mortgage loan and the down payment, the buyer will provide the funds at the settlement that are equal to the sale price of your home. You can then use these funds to pay off any equity loans, closing costs such as agent fees ETC, and of course, the outstanding mortgage balance.   Can I Sell my House If I Owe More Than It’s Worth? (Underwater Mortgage)   Selling underwater mortgage house issues are also fairly common in the real estate world. 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This will, however, negatively impact your credit score.   How Much Equity Do I Need to Sell My House?   In truth, there is no clearcut answer to this question because it depends on a number of factors and circumstances.   A general rule of thumb, however, is that you should aim for around 15% if you wish to upsize, or 10% if you’re simply looking to relocate and purchase a similar-sized property.   What Are the Closing Costs for Selling a House with a Mortgage?   As far as closing costs when selling with a mortgage, again, there is no clear and concise answer to what they will be because each sale will be different. As a general guide, expect closing costs of between 2% and 6% of the total mortgage loan amount.   How Long Does It Take to Sell a House with a Mortgage?   How long is a piece of string? The simple fact of the matter is that we can’t give you a precise answer to this question because there isn’t one. You could list a mortgaged house for sale and find that it sells in less than 7 days, or it could take months, or even remain on the market for years.   Statistically however, as of March 2023, it took on average 54 days to find a buyer. Does this mean that your house will sell in that duration of time? Absolutely not. It could sell much quicker, or it could take much longer. It should be noted that, as soon as the Fed begins implementing the projected three interest rate cuts later in 2024, property sales should start speeding up.