With rising mortgage rates and real estate prices, buying a home is more expensive than ever. But it’s not just buyers who suffer in the home buying process: Sellers also hand out tens of thousands of dollars for the transaction.
Americans report spending nearly $55,000 in selling expenses for a median-priced home, and 40% of that figure represents commissions paid to real estate agents. Other expenses include repairs, improvements, renovations, closing costs, concessions, moving costs, marketing and signage, according to a report published Monday by Smart Real Estatea platform that connects buyers and sellers with real estate agents.
The total cost surprised 64% of sellers and if they had known the true cost of selling their home, 89% of them would have made a different decision. The report is based on a survey of more than 1,000 Americans who sold a home between 2022 and 2024.
“Home values have increased at a rate that has outpaced wages year over year for too long. Yet despite this, the seller of a home is still expected to pay a 2-3% commission to both the listing agent and the seller’s agent,” Christopher M. Naghibi, executive vice president and head of the exploitation of First Foundation Bank, tells Fortune. Even though net commissions are increasing due to rising real estate prices, the amount of work for real estate agents has not necessarily increased. “This nuance escapes many sellers until they sell their first property, but it has been the practice for decades. » Naghibi is also a real estate broker and has his own brokerage house.
Indeed, some of the biggest costs associated with selling a home include listing agent and buyer commissions, which average between $10,000 and $11,000, according to the Clever Real Estate study. Other highest costs include repairs, improvements and renovations, which total $10,000 on average; closing costs, which cost the sellers $8,000; and buyer concessions, which cost approximately $7,200.
“Real estate commissions are the price you pay to have a professional handle your transaction, just like a lawyer if you’re being sued or a dentist if you have a toothache. »
Melinda Gunthera global advisor to Premier Sotheby’s International Realtytell Fortune. “If they don’t like the service they received, that’s one thing, but expecting someone to handle your sale for free and professionally isn’t realistic.”
How the NAR Regulation Could Change the Cost of Having a Real Estate Agent
Last March, the National Association of Realtors, one of the nation’s largest industry associations, reached a groundbreaking $418 million settlement on a alleged conspiracy to inflate real estate agents’ commissions. Although NAR still denies any wrongdoing in these cases, the organization said it would prevent broker compensation offers on MLS and require users to complete written representation agreements with buyers.
This means for owners and potential buyers that a change in the commission structure is possible. This could be particularly useful for sellers.
“By far the most expensive aspect of selling a home is paying the listing agent and sales agent commissions,” says Naghibi. “These two fees are paid by the seller.”
However, changes to commission structures could instead increase costs for buyers, Amanda Orson, founder of the off-market property marketplace, said. Galleontell Fortune.
“The NAR (regulation), which could result in changes to how commissions are structured, could potentially shift more of the cost burden to buyers,” Orson said. “This could reduce some costs for sellers, but will require buyers and sellers to be better informed and prepared for these financial dynamics.”
For this reason, Orson encourages buyers to understand the commission structure before signing a buyer’s agent contract. Orson’s company takes the agent out of the home buying equation, allowing buyers and sellers to connect directly for the transaction. She likens Galleon to Expediawhich “made booking travel easier” and Robinhood, which “made trading stocks easier,” by making it “easier for experienced buyers to navigate the home buying process independently, efficiently and profitably “, explains Orson.
It’s no surprise to real estate veterans that the market is heading in this direction. Over time, Naghibi has seen technology give consumers greater access to the tools needed to understand their local real estate market and list their own property.
“These were tasks that were historically a significant part of a real estate agent’s job,” Naghibi says. “A good real estate agent is incredibly valuable, but as home values increase, so do their respective commissions.”
