Realtor fees | Down payment | Closing costs
Realtor fees — also known as commission — are part of almost every real estate transaction. However, buyers don’t typically pay them.
Instead, realtor fees are usually wrapped up in the seller’s closing costs. Rather than pocketing all the money from a home sale, a portion is distributed to the realtors involved in the transaction.
Even though buyers don't have to pay realtor fees, they’re still on the hook for some major out-of-pocket expenses — the down payment, and in some cases, earnest money. They’ll also usually have closing costs they have to cover.
💰 MORE: Learn how to get a home buyer rebate that saves you thousands!
What do realtor fees cover?
Usually, real estate brokers charge a percentage of the profit from a home sale.
This commission covers services rendered, such as:
- Helping the buyer locate a home by using the MLS
- Scheduling times with the seller for walkthroughs
- Processing all the paperwork
The total commission — 5-6% of the sale price, on average — is split between the buyer and seller’s agents. It is common for agents to split commission evenly, so each would get 2.5-3%.
Buyer’s agents are more motivated to show homes to their clients if they can earn commission from the deal. As a result, you can think of realtor fees as a marketing expense for the seller.
» MORE: What is realtor commission?
Reminder: Realtor fees are ALWAYS negotiable
In November 2023, several states sued the National Association of Realtors (NAR), Homeservices of America, and Keller Williams Realty for allegedly misleading sellers into paying high realtor fees.
One lawsuit found these organizations liable for $1.8 billion in damages. Although the verdict made national headlines, there likely won't be an immediate impact on real estate commissions.
The standard 6% commission rate paid to realtors is completely negotiable. Sellers are free to negotiate a lower listing agent's commission rate, and can also offer to pay a lower buyer's agent fee if they wish to do so.
At Clever, we've already pre-negotiated commission rates with our partner agents. You never pay more than 4.5% to sell your house, and you get to interview as many agents as you like until you find the perfect fit.
Buyers need cash for a down payment and earnest money
Although buyers don’t usually pay realtor fees, purchasing a home still comes with significant upfront expenses.
The biggest cost is the down payment, which ranges from 3% up to 20% of the home's purchase price.
Some buyers also put down earnest money before closing — usually 1-5% of the price, though norms vary by location.
Note that earnest money isn’t an added expense — it’s more like a deposit and will be applied to the buyer’s costs if the deal goes through.
Buyers typically offer earnest money to assure the seller that they’re serious about purchasing the home.
» MORE: How to afford a million-dollar home
Buyers pay closing costs
Though buyers don’t usually pay commission, they are responsible for closing costs.
Your closing costs will depend on where you live, the type of loan you take out, and your interest rate.
A good rule of thumb is to save 2-5% of the purchase price for closing costs.
» MORE: The complete guide to home buying
Are closing costs negotiable?
It’s not uncommon to negotiate closing costs with the seller. In some cases, the seller will agree to pay some or all of the closing costs.
Closing costs are one of the most common seller concessions and can help buyers reduce the upfront cost of purchasing a home.
In other cases, the buyer might make a high-priced offer because the seller is willing to cover their closing costs.
Finally, it’s also possible to tack the closing costs onto your loan. For example, let’s say you purchase a home for $250,000 and pay 3% (or $7,500) in closing costs. You could ask to get approved for a $257,500 loan to cover your closing costs.
» MORE: What are seller concessions?
