Imagine this – you’ve sold your sell your home, you’re counting your profits, and then you’re hit with the realtor fees. Ouch, right? It can be a punch to the gut when you see up to 5-6% of your home’s sale price sliced off for realtor commissions.
But wait! Before you lose hope, let’s pull back the curtain on these fees, which, just like your favorite mystery novel, have twists and turns.
Did you know they vary by state, county, and even transaction to transaction? Or that they’re influenced by the price and location of your home, the prestige it carries, and even the brokerage your agent belongs to? Oh, and let’s not forget the market temperature – is it favoring buyers or sellers when you strike the deal?
Buckle up, because we’re about to take a deep dive into the world of realtor fees and explore how you, the savvy seller, can keep as much money in your pocket as possible.
1. What is the realtor fee?
A realtor fee, also often referred to as a real estate commission, is the cost of using a realtor to sell or buy a home. This fee is typically a percentage of the home’s sale price and is usually split between the seller’s agent and the buyer’s agent. The total commission is commonly around 5-6% of the sale price, although this can vary depending on the location and specific agreement between the homeowner and the realtor.
For example, if a home sells for $300,000 and the total commission is 6%, the realtor fee would be $18,000. This amount is typically divided equally between the seller’s agent and the buyer’s agent.
Realtor fees cover the services provided by the agents during the home selling process, including marketing the property, coordinating showings and open houses, negotiating the sales price, and handling the paperwork and closing details. It’s important to note that the realtor fee is typically paid by the seller at the time of closing.
2. How does the realtor fee work in Georgia?
As a homeowner in Georgia looking to sell your home, your first step is to find a dependable listing agent.
Once you have an agent on board, they are the ones who guide you through the selling maze. But before signing the listing agreement, you and your agent agree on a commission – a slice of the final selling price that will be shared between the listing and buyer’s agents. Then, like a hidden surprise, this commission is neatly baked into the home’s asking price.
Let’s paint a picture: A Atlanta home listed for $380,000 with a 6% commission translates to $22,800 going towards the commission, leaving the seller with potential earnings of $357,300 before closing costs. This $22,8000 commission is then split between the listing and buyer’s agents.
Once the agreement is signed and the commission set, your listing agent hits the ground running. First, they broadcast your property on the Multiple Listing Service (MLS) and other platforms, casting a wide net for prospective buyers. Next, buyer’s agents, ever on the lookout for their clients’ dream homes, spot your listing and reach out to your agent.
Let’s say a buyer’s agent in Springfield stumbles upon your property – it’s a perfect match for their client. They arrange a visit, enter negotiations, and engage in some offer-counteroffer tango to close the deal. If everything falls neatly into place and the buyer agrees to the price, the commission is divided between the agents.
It’s important to remember that while the typical commission in Illinois hovers around 5-6% (the average being 5.67%), this rate is flexible and can always be negotiated.
3. How much is the commission?
The realtor commission could differ significantly for a property worth $700,000 and a property worth around $300,000 as the commission is dependent on the final home price. For example, the median sale price for an American home is around $354,165. Therefore, the average realtor commission in the US is 5.37% of the home price, totaling $19,019.
Commission = Average home price x Commission percentage
= $354,165 x 5.37%
= $19,019
Now, this is a massive expense by any standard. However, with realtor commissions taking up most of the selling expenses, it makes sense to look at how you can either avoid it entirely or bring it down somehow. This article will tell you everything you want to know about keeping realty commissions under control and even ways to get away without paying the commission.
3.1 How much is the realtor commission in Georgia?
Georgia’s average real estate commission is 5.76%, and the average home price here is $316,705. So one would have to shell out $18,242 as a realtor commission to sell a home in the state.
Commission = Average home price x Average commission rate
= $316,705 x 5.76%
= $18,242
Though the home price is below the national average, Georgia’s real estate market is relatively healthy now, hence the higher average commission rate compared to the US average. In addition, Georgia has some desirable neighborhoods, justifying the increased housing demand here.
3.2 How does the realtor fee in Georgia compare with other states?
Realtor fee percentage in Georgia is at the higher end of the spectrum if one considers realtor fees in other states and the national average. So let’s compare the commission rate in different states.
| State | Realtor fee (%) |
| Georgia | 5.76% |
| Florida | 5.40% |
| Texas | 5.59% |
| Virginia | 5.23% |
| Hawaii | 5.20% |
| Michigan | 6.00% |
| Connecticut | 5.41% |
| New York | 5.11% |
| National average | 5.37% |
3.3 How much can realtor fees vary?
Realtor fees can vary quite a lot depending on the home price. For example, paying a 6% commission for a million-dollar home costs $60,000. On the other hand, for a home costing $300,000, the commission would work out to $18,000. Let’s look at how much the commission works out for a range of home prices. Let’s calculate this for different commission rates.
| Home price range | 5% Realtor fee | 5.76% Realtor fee | 6% Realtor fee |
| $225,000 to $275,000 | $11,250 – $13,750 | $12,960 – $15,840 | $13,500 – $16,500 |
| $300,000 to $350,000 | $15,000 – $17,500 | $17,280 – $20,160 | $18,000 – $21,000 |
| $375,000 to $425,000 | $18,750 – $21,250 | $21,600 – $24,480 | $22,500 – $25,500 |
| $450,000 to $500,000 | $22,500 – $25,000 | $25,920 – $28,800 | $27,000 – $30,000 |
| $525,000 to $575,000 | $26,250 – $28,750 | $30,240 – $33,120 | $31,500 – $34,500 |
3.4 How much does realtor fee vary in the counties of Georgia?
The realtor fee will also vary in the different Georgia counties depending on each county’s home price. Let’s check the average home price in the top 20 counties in Georgia and how much the commission amounts to if we assume a commission rate of 5.76%.
| County | Typical home price | Realtor fee as 5% | Realtor fee as 5.25% | Realtor fee as 5.76% | Realtor fee as 6% |
| Oconee | $477,212 | $23,861 | $25,054 | $27,487 | $28,633 |
| Forsyth | $217,441 | $10,872 | $11,416 | $12,525 | $13,046 |
| Cobb | $323,758 | $16,188 | $16,997 | $18,648 | $19,425 |
| Fayette | $440,347 | $22,017 | $23,118 | $25,364 | $26,421 |
| Fulton | $430,538 | $21,527 | $22,603 | $24,799 | $25,832 |
| Gwinnett | $395,983 | $19,799 | $20,789 | $22,809 | $23,759 |
| Columbia | $292,307 | $14,615 | $15,346 | $16,837 | $17,538 |
| Cherokee | $428,056 | $21,403 | $22,473 | $24,656 | $25,683 |
| Houston | $195,126 | $9,756 | $10,244 | $11,239 | $11,708 |
| Clarke | $284,359 | $14,218 | $14,929 | $16,379 | $17,062 |
| DeKalb | $330,081 | $16,504 | $17,329 | $19,013 | $19,805 |
| Glynn | $297,582 | $14,879 | $15,623 | $17,141 | $17,855 |
| Chatham | $274,243 | $13,712 | $14,398 | $15,796 | $16,455 |
| Lowndes | $175,020 | $8,751 | $9,189 | $10,081 | $10,501 |
| Harris | $313,410 | $15,671 | $16,454 | $18,052 | $18,805 |
| Coweta | $353,126 | $17,656 | $18,539 | $20,340 | $21,188 |
| Douglas | $305,801 | $15,290 | $16,055 | $17,614 | $18,348 |
| Carroll | $265,819 | $13,291 | $13,955 | $15,311 | $15,949 |
| Camden | $244,226 | $12,211 | $12,822 | $14,067 | $14,654 |
| Lee | $228,951 | $11,448 | $12,020 | $13,188 | $13,737 |
3.5 Realtor commission calculator for Georgia
Just to help you along the way, here’s a ready calculator for whatever rate of realtor commission has been finalized for your deal. Just enter the home price and the commission rate, and you can get the commission break-up here.
4. How much is the realtor’s commission for rentals in Georgia?
This is usually one month’s rent payable before the tenant moves in. The landlord’s agent may share the commission with the tenant’s agent, also called the tenant’s rep or leasing agent.
There are a few other methods of paying commission too. Let’s look at these here.
4.1 Percentage of the yearly rent
If the lease is for one year, the commission may also be calculated as a percentage of the yearly rent. For example, if the monthly rent is $1,000, the annual rent is $12,000. If the commission is fixed as 10% of the annual rent, it costs $1,200.
Commission = Annual rent X 10%
= $12,000 X 10%
= $1,200
4.2 Extended lease
If the landlord and tenant agree to extend a lease, the agreement will usually specify how much commission goes to the agent. This could be the same amount paid when signing the lease or a smaller amount as mutually agreed by the parties.
4.3 Property management companies
Since landlords sometimes don’t have the time to manage the property, collect the rent on time or conduct other maintenance work, they often let property management companies handle this. A property management company will do all of the above, look for tenants, and take care of letting the property out. They charge the landlord around 10% of the yearly rent for these services. They do not charge any commission to the tenant.
5. What are commission splits?
In Georgia, as in other states, agents cannot accept commission from the seller. Instead, they must work under a broker with a higher license to receive commissions. The commission is directly paid to the broker, who then pays the agent. In addition, the broker or brokerage will advise and guide the agent in the real estate business and sometimes even provide the infrastructure from which they can operate. In return, the broker charges the agent a flat fee or a commission percentage, deducts this amount from the commission, and pays the rest to the agent. This is called a commission split.
Commission splits can be equal or in the agent’s favor if the latter is experienced. It depends on how a commission split has been negotiated between the agent and the broker. The seller and buyer agents will work under their respective brokers in a transaction. So the commission will be split four ways.
For example, if the commission is $20,000 and split equally among the four, each agent/broker will get $5,000.
Agent/broker’s share = Total commission ➗ 4
= $20,000 ➗ 4
= $5,000
Let’s look at some other commission splits in the agent’s favor.
| Total commission | Split | Buyer/Seller agent’s share | Buyer/Seller broker’s share |
| $20,000 | 50:50 | $10,000 ($5,000 each) | $10,000 ($5,000 each) |
| $20,000 | 60:40 | $12,000 ($6,000 each) | $8,000 ($4,000 each) |
| $20,000 | 70:30 | $14,000 ($7,000 each) | $6,000 ($3,000 each) |
| $20,000 | 80:20 | $16,000 ($8,600 each) | $4,000 ($2,000 each) |
5.1 How is the commission paid for referrals
Sometimes agents receive business through a referral source in exchange for a part of the commission. The agent can pay such a source only if the latter is a licensed agent. The referring agent also needs approval from their broker to receive this cut. It is illegal to pay a non-licensed person for referrals in Georgia.
6. Can an agent share the commission with a seller in Georgia?
Yes, the agent is allowed to share (or return) a portion of the commission with the seller in Georgia. Although this is banned in some states, it is perfectly legal in Georgia and at least 39 other states. The listing agent can also lower the commission instead of returning it to the seller. However, this may affect the buyer agent’s commission since most often it is shared equally between the listing agent and the buyer agent.
7. Who pays the realtor commission in Georgia?
The seller pays the commission in Georgia, as in the rest of the country. This is because the commission is included in the price of the home and is only paid at closing.
However, since the buyer pays the home price (including the commission), it can be argued that technically it is the buyer who pays the commission.
7.1 Who pays the rental commission in Georgia?
The landlord pays the rental commission in Georgia unless otherwise agreed by the parties. In areas where the tenant usually pays the commission (such as New York City, Los Angeles, or Boston), the landlord may add the words “OP” or “No Fee” to the rental listing when inviting tenants through ads. Both these mean that the landlord will pay the commission. OP means the owner pays.
8. Is realtor fee tax-deductible?
No, the realtor fee is not tax-deductible in Georgia. However, the IRS treats the realtor fee as an expense directly related to the sale and allows the seller to reduce the price of the home when reporting a capital gain or profit on the sale.
The price arrived at by deducting all expenses related to the sale is called the sale basis. This is the price the IRS will consider.
Capital gain is calculated as the sale basis minus the home’s purchase price.
Case 1
For example, if the home were purchased for $300,000, and sold for $400,000 without any expenses, then the profit or capital gain would be $100,000. So, in this case, the sale basis will be $400,000.
Capital gain = Sale basis – Purchase price
= $400,000 – $300,000
= $100,000
Case 2
In the above example, if there were a realtor fee of $30,000, then the sale basis would be $370,000.
Sale basis = Home price – realtor fee
= $400,000 – $30,000
= $370,000
Capital gain = Sale basis – Purchase price
= $370,000 – $300,000
= $70,000
In Case 2, the seller would be paying a capital gain tax on a profit of $70,000 compared to a tax on a capital gain of $100,000 in Case 1 when there are no realtor fees.
9. What services should a listing agent in Georgia provide you?
The services a real estate agent provides in Georgia are the same as those offered by agents in other states. However, make sure the agent is aware of what works in your particular area. For example, there could be a lack of good homes for sale in your area that will automatically put your offer on a premium scale, in which case you can get a better price or sell the home quicker, depending on the situation. In such cases, where the agent ensures you get a higher price or save time, you can be more open to a higher commission. What you are paying the agent could be peanuts compared to how much more you are getting for the home with the agent’s help.
When negotiating a lower commission with an agent, you need to be aware of the services a full-service listing agent provides. This is because some agents may simultaneously lower the commission and the services they provide without your knowledge.
9.1 Here are the services provided by a listing agent. You can insist on the following services when negotiating.
9.1.1 Setting the ideal home price
Evaluating the market and setting the right home price is one of the essential services a listing agent provides. This is because if the price is too high, it may be ignored by buyer agents or buyers and could take forever to sell. If the price is too low, you could lose thousands of dollars in the bargain. The agent will do a lot of research before advising you on the correct home price. They will look at similar homes sold in your area and pull out data to see how many homes are currently on the market and the asking price, etc., to understand the right price.
9.1.2 Home staging and improvements
The agent will also advise the seller on improving their chances of getting a better price by making minor improvements and repairs. This is done, so buyers don’t get nasty surprises during the showings. Preparing the home for showings and for clicking photographs is called staging. The agent may also hire the services of a professional stager to get the best look for your house.
9.1.3 Photographs and description
The agent may hire a professional photographer to get the best images of your home. These images attract prospective buyers to your home when they are put up on various media. The agent may also hire a copywriter to write an excellent home description. All these things come in handy for the next step, listing the home.
9.1.4 Listing on the MLS database
Multiple listing services or MLS is a database of homes up for sale. Agents, realtors, and brokers can only access this database. So once your home is listed on the MLS, you can be sure that all the buyers’ agents will see your ad. The agent will put up the images and the description on the MLS, and websites like Zillow and Realtor will also pull this information and showcase it on their platforms, ensuring a broad reach.
9.1.5 Promoting the home on traditional and digital media
The agent will also use social media, real estate service websites, and broker websites to market your home to the widest possible audience. They will also use traditional media such as local newspapers and magazines or make fliers to spread the word.
9.1.6 Manage home showings
Once prospective buyers are interested in your home, they must visit and see the house themselves. The agent will schedule these visits, ensure they are present at these showings, and explain the house’s unique selling points to prospective buyers.
9.1.7 Update the seller regularly
The agent will continuously update the seller on the deal’s status, how many people are coming to see the house, and what the buyers’ feedback is. The agent will also use the feedback to advise the seller if anything needs to be done to sell the home quickly. For example, repairing leaking faucets or creaking flooring may need minor repairs.
9.1.8 Vetting offers
The agent will vet all the offers that come in. They will check if the buyer is genuine, whether they have the resources to pay the seller on time, and whether they are pre-approved by a lender. The agent will also conduct the initial negotiations if the offer price is lower than the one quoted by the seller. After that, they will try their best to get the price required by the seller.
9.1.9 Being present for inspections
The agent will ensure they are present during home inspections and clarify any doubts on behalf of the owner. In addition, the agent will ensure that they are entirely familiar with the house’s history regarding any modifications/repairs done to increase the home’s value.
9.1.10 Drawing up the contract
The agent will also draw up the final contract and ensure that all other paperwork is in place to close the deal. Any legal requirements will be intimated to the seller by the agent well in advance so that these can be fulfilled. The agent will make sure they are present for the signing of the contract and explain any complex terms to the seller if required.
9.2 What are sellers looking for in their agents?
A survey was conducted on how sellers rated their agents and what they thought were the most valuable services provided to them by their agents.
There were 80% and more of sellers saying that finding a buyer, doing the paperwork, clicking the photographs, helping in the negotiation process, and guidance through the entire selling process were the most valuable services provided by the agent. Take a look at the other things sellers found useful. You could insist that your listing agent gives you all these services.
Source: Zillow
10. Why do agents charge such high commissions?
If the seller is wondering why agents charge so much as commission, here’s some information that may help you see the other side of the coin.
As mentioned, agents have to split the commission with their broker and any referral agent who has helped them get the business. When signing up with a seller, the agent is taking a risk – agents spend on marketing the house before they get paid. They spend out-of-pocket to search for and meet prospective buyers. As explained earlier, they spend on photography, copywriting, listing, etc. Some agents even spend expensive marketing brochures and drone photography for your house. They also spend on finding new clients. Many of these expenses are not apparent to the seller. That is the reason why commissions are high. If you, as a seller, feel that you do not need some of the expensive services, you could request the agent to keep the promotion to traditional channels, thus reducing their cost. In this case, they will be more willing to reduce their commission for you.
11. Should you negotiate real Estate Commissions in Georgia?
A real estate agent’s commission is not fixed, so it should always be negotiated. Commission amounts to a considerable chunk of selling expenses, and even if you save 1% of the home priced at $300,000, that means saving a handsome $3,000.
Negotiating with agents is a tough job because they are hardcore negotiators. So you must ensure you have all your facts and negotiation skills handy when you talk to them. Read on for some ideas.
11.1 Tips for negotiating real estate commission in Georgia
11.1.1 How much leverage do you have?
When attempting to negotiate commission, the first thing to check is how much leverage you have. For example, check how much similar homes have sold for in your area. Is there a high demand for houses like yours? How much does your agent earn based on your home price? All these answers will help you gauge how much you can negotiate.
11.1.2 Do your research
You will need to research the market and check the going commission rate in your area. Every county and locality will have a different rate depending on the state of the market. If you know what is the average commission in your area, you will be able to offer the agent a reasonable deal.
11.1.3 Talk to many agents before you sign up
Make sure you talk to multiple agents to get a fair idea of how they operate and what is a reasonable commission. Talking to many agents will alert you if an agent is not being honest with you. Plus, when agents know that you are keeping your options open, they will try to get your business by competing with the other agents. In this case, it will be easier for you to get a lower commission.
11.1.4 Listen to the agent
When you talk to agents, ask them what they want from you. If you want a discount, you should be willing to give something in return. For example, they may ask you to paint the house, or do some simple modifications or maintenance that will make a big difference when prospective buyers come for an inspection. Following their advice will also assure them that you will go out of your way to make the sale easier. This will soften them up to positively take your request for a lower commission.
11.1.5 Don’t reduce the buyer agent’s fees
Many sellers try to reduce the seller’s and buyer agent’s commissions. This is a big mistake. Never try to bring down the buyer agent’s commission. There are two reasons for this. First, if you reduce the buyer agent’s commission, they may not even shortlist your house to show their client since there is not much in it for them. Secondly, your listing agent knows this and will be disinterested in selling your home because it will become tough for them to find buyers. Therefore, only negotiate on the listing agent’s commission.
11.1.6 Be willing to walk away
Don’t get emotional when selecting an agent. If the agent is unwilling to come to terms with your demands, and you are sure that your requests are reasonable, walk away. You will find plenty of agents vying for your business. Remember that according to NAR (National Association of Realtors), there are 1.56 million realtors registered with them, and more than 3 million real estate agents hold active licenses in the United States.
11.2 When to negotiate real estate commissions
Now that you know how to negotiate, you need to know when to negotiate too. This can mean the difference between success and failure. There are situations when you will have a higher chance of success– you only need to keep your ears and eyes open to catch them. Here are some situations that will help you quickly reduce the commission charge without much effort.
11.2.1 When hiring a new agent
Working with a new agent may be a good idea to reduce the commission drastically. This is because newer agents try to break into the industry by doing their first few deals. Few sellers are willing to entrust their business, fearing they might not do a good job. However, if you find an enthusiastic agent ready to go out of their way to ensure a sale, you can promise to give them your business if they will reduce the commission in exchange. These agents will be more willing to accept your offer because when your house is sold, it will add to their resumes and claim to be experienced agents. This will also help them ask for a higher commission on their following deals.
11.2.2 When selling and buying with the same agent
Immediately after selling the house if you plan to buy another one, you can promise to route both contracts through the same agent. This will mean double business for the agent, and they will find it difficult to refuse your request since they will earn more from you in the future.
11.2.3 When there are plenty of buyers
It’s a seller’s market when there are plenty of buyers. In this situation, houses will sell quickly, and the agent will not have to work too hard to push the sale through. This will considerably reduce the agent’s expenses. In such a situation, agents will be willing to reduce the commission and quickly close the deal to move on to the next deal. They will try to play on volume rather than be adamant about the commission.
11.2.4 Yours is a premium property
The agent is already getting a high commission if yours is a high-priced home. The agent must do the same amount of work, whether a high-priced or low-priced property. So they will be more amenable to reducing the commission to get you on board. Also, selling a premium property is a feather in the cap for agents since they can increase their income in the future by selling such properties based on their experience. It’s a win-win situation here.
12. How to reduce commission without negotiating
What if you can’t negotiate or are not inclined to negotiating? Well there’s still hope. There are ways to reduce the commission if you are willing to put the time and effort without much or no negotiation at all. Let’s look at these options here.
12.1 Agent matching services
These services offer to match you with a top agent in your area for free. Yes, you heard that right. Services such as Clever Real Estate, UpNest, Ideal Real Estate, and a spate of others will give you a list of agents in your area who best suit your needs. You only have to enter a few details about your requirements, and you can directly speak to the agents on the list and pick the best. These services carefully pick agents based on set criteria, and some pre-negotiate a lower commission, so you don’t have to do any further haggling. If you are dissatisfied with the first list of agents, you can request a new list. There’s no obligation to sign up with an agent once you register with them, and you can walk away without paying any fee. Their services are quick and can save you a lot of time compared to if you go hunting for agents on your own.
12.2 For Sale By Owner (FSBO)
If you are entirely averse to offering any commission, you can consider going the FSBO route. FSBO is when a seller does not hire a listing agent and decides to act as their own agent. This is usually done to save on the approximately 3% commission that is paid to the agent. However, you need to be an experienced seller with plenty of time on your hands if you want to sell via FSBO. This is because the home selling process is quite complex, requiring a lot of paperwork and knowledge of local and state laws. Plus, you will need to do up the house and make it ready for showings, promote it on websites, social media, and offline media, meet and negotiate with prospective buyers, attend the showings and inspections, etc.
Even though you will save on the listing agent’s commission, you will have to pay the buyer agent’s commission—unless you find a buyer without an agent. If you are lucky enough to get such a buyer, you can save up to 6% of the price of the home since you won’t have to pay any commission at all.
Although that is a huge incentive not to hire an agent, here are a few points to remember if you sell a home independently. According to NAR, FSBO sales accounted for only 7% of US homes sold in 2020. Also, the average sale price for FSBO homes was much lower at $260,000, while that for agent-assisted home sales was $318,000. That’s a huge difference of $58,000, and is an excellent argument to hire an agent. If you can get anything close to $58,000 more by hiring an agent makes the commission offered to the listing agent look like peanuts. So think very carefully about going the FSBO route.
Also, remember that any mistakes while conducting the deal could prove to be costly, so only use this route if you are sure you can handle all the aspects of the transaction well.
12.2.1 Flat-fee MLS
One difficult task for an FSBO seller is to list the property on the MLS (Multiple Listing Service ), a database that agents use to list and search for homes. Only licensed agents, brokers, and realtors are allowed to access the MLS. Once listed on the MLS, all the buying agents can see and shortlist your house. In addition, other websites like Zillow and Realtor also pull this data from the MLS and showcase it on their websites. This helps you reach a wider audience.
But don’t be discouraged, as there’s a silver lining. Today there are flat-fee MLS listing companies that will list the property for you for a nominal flat fee of around $100 to $300. This will help you get the desired visibility for your home, and you don’t have to pay the entire commission you pay a listing agent. However, that is the only service they will provide; the rest is up to you. So if you still need more help, here’s one more option.
12.2.2 Fee-for-service
Many agents and service providers also offer a la carte realty services. They will offer you a list of services usually provided by a traditional agent and charge you per service. For example, if you only require the contract to be drawn up, they will do this for you for a fraction of the commission charged by agents. Or you may need them to look at all the paperwork while you take care of the remaining aspects of the deal. Check with them for their charges per service and go for only those you require. Fee-for-service can save sellers thousands of dollars.
12.3 Discount realtors
Another option you can look at if you don’t want to pay the full commission is discount realtors. These are brokerages that have a team of agents working with them. They take on multiple clients simultaneously and streamline the entire sales process. They concentrate on earning revenue by playing on volume. They will provide all the services of a traditional real estate agent, so you don’t have to worry whether they offer you fewer services.
However, the problem is that sometimes discount realtors take on too many clients and cannot provide the best service because their agents are overburdened. Some of these agents may also be inexperienced, and you may have to talk to a new agent every time you connect with them as they may not be able to dedicate the same person to your transaction.
12.4 IBuyers
iBuyers are relatively new entrants into the real estate market. They build their business by relying heavily on technology to connect buyers and sellers. iBuyers look to quickly buy homes slightly below the market price to make an instant profit by selling to their clientele of buyers. They will look for homes in good condition that don’t require significant repairs so they can quickly offload the houses to their buyers.
They will make you an offer speedily, take care of the required documentation, and offer you a fair price in the bargain. They will charge you around 5% of the home price for their service. The good thing is that you don’t have to do any haggling with agents, wait for months to conclude the deal or bother about the transaction falling through at the last moment.
Offerpad, Zillow Offers, RedfinNow, Opendoor, Orchard, HomeLight, UpNest, and Homie are some of the top iBuyer companies you can approach if you are in a hurry to sell.
12.5 Selling to investors
One more option you can consider is selling the house to investors. However, you should do this only if you are desperate or in a hurry to sell the house and are willing to take whatever price you can get. Investors will offer a price 40-50% below the market rate. Basically, they are willing to pay you quickly so that you can use the funds immediately and don’t need to wait months to close the deal through the regular route. In addition, they will generally buy the home in its existing condition, and you don’t have to spend on doing up the place.
13. Can you write off realtor commissions in Georgia?
No, the realtor commission is not tax-deductible. At least not the way you would deduct mortgage interest. However, the IRS considers commission an expense related to the home’s sale. Therefore, it allows you to remove it from the house price while calculating the capital gain, to arrive at the Sale basis.
13.1 What is capital gain?
Capital gain is the profit you will make from the sale of your house. For example, if you purchased the home for $200,000 and sold it for $300,000, you have made $100,000.
Case 1
Capital gain = Selling price – Purchase price
= $300,000 – $200,000
= $100,000
In this case, since there is no realtor fee, the sale basis would be the same as the home price, which is $300,000. So the seller would have to pay a capital gains tax on $100,000.
Case 2
Now consider that the seller paid a realtor fee of $18,000.
In this case the sale basis would be $282,000.
Sale basis = Home price – Realtor fee
= $300,000 – $18,000
= $282,000
So the capital gain would be,
Capital gain = Sale basis – Purchase price
= $282,000 – $200,000
= $82,000
The seller would pay a capital gain tax on a profit of only $82,000. This is how paying a realtor fee would reduce your final capital gain tax.
If you are paying capital gains tax, remember that you get a tax exemption up to $250,000 if you are filing taxes on your own, but if you are filing taxes jointly with your spouse, you get a tax exemption of up to $500,000.
The sole criteria to avail of the above exemptions are that the house you have sold should have been your primary residence, and you should have lived in the house for two of the five years preceding the sale. Again, check with your accountant for more details.
14. FAQS
14.1 What is dual agency? What happens to the commission in this case?
When a single agent represents the buyer and seller in a transaction, this is called dual agency. Dual agency is usually done to save on commission. The agent earning the buyer and seller agent’s commissions is typically willing to reduce the overall fee. However, the agent can’t work in the interest of both the buyer and seller simultaneously since one wants the lowest price and the other the highest price. That is the reason the dual agency is banned in some states. Alaska, Florida, Colorado, Kansas, Maryland, Texas, Wyoming, and Vermont have made dual agency illegal. In the rest of the states, dual agency is carefully monitored, and the agent must take written approval from the buyer and the seller. The agent also must inform all the parties involved in the transaction, including the lender, about the dual agency.
Dual agency works when the buyer and seller are familiar with each other and trust one another not to renege on the deal. However, if there is a dispute, the agent will find it impossible to represent both parties. For example, if the house is being sold to a relative or a close friend, they can hire an agent to merely facilitate the transaction. This means the agent will only be drawing up the contract and doing all the legal and paperwork to ensure a smooth property transfer.
Even NAR has taken a neutral stance towards dual agency, neither approving nor rejecting it, because proponents claim that it increases the efficiency of the deal rather than hinders it.
14.2 What happens to the commission if the buyer doesn’t have an agent?
If the buyer doesn’t have an agent, the listing agent has no one to share the commission with and can keep their share and the buyer agent’s share. This is because the total commission has been agreed to between the seller and the listing agent while signing the contract. Although the commission technically includes the buyer agent’s fee, how much this will amount is at the listing agent’s discretion.
If the buyer insists on a discount, the seller and listing agent can decide on the next course of action. If both agree to reduce the home price, this could be a win-win situation for all. Otherwise, the listing agent could act as the buyer’s agent, becoming a dual agency. The listing agent could then rebate a part of the commission to the buyer – a win-win situation for all.
14.3 What is BAC in a house sale transaction?
BAC is an acronym for buyer agent’s commission. When the seller and the listing agent decide on the total commission on the deal, the listing agent advertises the house on the MLS, stating the BAC. If a buyer agent contacts the listing agent regarding the property, this BAC becomes a contract between the listing and the buyer agent.
15. Conclusion
Selling a house is a stressful activity, especially considering the process’s complexity. Moreover, home prices are rising, and even slight negotiations can mean thousands of dollars saved or lost. One must make decisions after much research in such a situation.
Merely keeping the low commission as a criterion for selecting an agent might not be the best strategy here. A good agent could save you much more than the commission you are paying them. It is essential to select a good agent who you can work with and who will work in your interest. You could go via the FSBO route if you can carry out the transaction without the agent’s help and get the best price.
Or, if you know some aspects of the selling process and need more confidence about drawing up the contract, you could opt for a fee-for-service agent who will do the needful at a nominal cost. Select the correct option keeping your situation in mind. The decision is finally yours.