NWI real estate commissions can be confusing. This post from the team at Quadwalls will help you better understand real estate agent commissions and the average commission rates of real estate agents when selling a home. We provide information on the costs of selling your home with a real estate agent, information on real estate agents with low commissions, how to find a real estate agent with low commissions, tips for successfully negotiating lower real estate commissions, and more. Let's take a closer look at this important subject.
What are real estate commissions?
A real estate agent's commission is the fee that an agent charges to market and sell a property to a seller. In most cases, a real estate agent's commission is stated as a percentage of the sales price, although some agents offer a flat fee.
Northwest Indiana Real Estate Agent Commissions 2024
There are no standards for real estate brokerage commissions or rates. Antitrust and fair competition laws and regulations prohibit real estate agents from colluding to set a standard real estate brokerage commission.
However, there are fees that are commonly used across the region: The average commission for real estate agents across the U.S. ranges from 4% to 7% of the home's sales price. In Indiana, the average real estate commission in 2024 totals 5.56%, which includes the average offering fee (2.73%) and the buyer's agent fee (2.82%).
At Quadwalls Real Estate, we believe the average is too high, so rest assured that we are keeping real estate commissions low in Indiana.
What is the Quadwalls Commission?
If you are looking for a real estate agent with low commissions in Indiana, contact us. The Northwest Indiana real estate agents of the Quadwalls Real Estate Team offer the lowest advertising fees in Indiana. The image below shows our fees based on the original list price of your home. Quadwalls offers the lowest real estate agent fees in Indiana. Click here to learn more about our full-featured home selling services and low real estate commissions.
What Sellers Need to Know About Real Estate Commissions
The answer to how much a real estate commission is will depend on the facts of each case. It's important to know if your real estate agent charged a percentage of the sales price rather than a flat fee.
Real estate commissions are negotiable. There is no set rate for real estate commissions. Home sellers are encouraged to ask their real estate agents for a lower commission. Real estate commissions are often split with other agents. Your property may be listed on the MLS. As a condition of this, you are required to pay compensation to all cooperating brokers or real estate agents who are members of the MLS if they bring you a buyer for your property. Therefore, a portion of the agreed upon real estate commission may be split with other agents. Real estate commissions are usually paid by the seller. It is the seller who puts the property on the market and uses a network of real estate agents to sell the home. For this reason, real estate commissions are usually paid by the seller.
Who pays the real estate commission?
Typically, it is the seller who pays the real estate agent commission or fee. This is due to the fact that the seller is the person who presents the property on the market. Let’s break this down in detail.
A seller wants to sell a property. The seller hires a real estate agent, often called a listing agent. The listing agent and seller agree on a real estate commission. In this example, we'll use 5% as a typical real estate commission.
The listing agent may then list the property on the MLS. The listing agent may offer a portion of the real estate commission to the cooperating real estate agent or broker. For example, the listing agent may offer 2.5% of a 5% commission to the cooperating broker. The cooperating broker or agent is the real estate agent who represents the buyer.
In conclusion, when a seller hires a real estate agent, it is the catalyst event that allows the real estate agent's network to be used to introduce the property to the market. In most cases, it is the seller who pays the real estate agent's commission.
Are real estate agent fees included in settlement costs?
Real estate agent fees are not included in closing costs. Real estate agent fees and fees are fees for non-closing professional services. Closing costs are limited to the transaction costs and fees for completing the purchase. Therefore, real estate agent fees cannot be included in closing costs.
Closing costs are typically limited to the following:
Loan origination costs. Most lenders charge a fee for issuing a loan. You will probably see a loan origination fee or processing fee, as well as additional line items fees associated with creating a mortgage. Title company fees. Title company fees are settlement costs. This includes settlement fees and title insurance contract fees. Land survey report. If a land survey was required to sell the property, this is usually considered a settlement cost. Deed registration and other government filing fees. Each state and local government has a registration fee. This is for recording the transfer of the property and the mortgage against the property. First year of homeowners insurance. If you purchase real estate with a mortgage, the lender will require you to insure the property. Since insurance is a condition of obtaining the loan, the first year's premium paid at settlement is usually considered a settlement cost. Escrow liens. Escrow liens are payments for future property taxes and homeowners insurance escrow payments. Depending on when your next payment is due, your lender may ask to collect 2-5 months of each fee at settlement. In that case, these costs are typically considered settlement costs.
How do real estate commissions work in Indiana?
It's important to know how much commission a real estate agent actually makes.
Split with the buyer's agent
Selling agents will likely offer a portion of their commission to other agents on the buyer's side, which is often required if the selling agent submits the property to the MLS. Buyer's side agents need motivation and incentives to bring in buyers and help them purchase your home.
Split with Managing Broker
A real estate agent's managing broker may receive anywhere from 10% to 50% of the real estate commission. Most real estate agents work for a brokerage firm that is headed by a managing broker. The managing broker receives their commission first.
Marketing Costs
Real estate agents start spending money on promoting your home even before it goes on the market. Photography, videography, print materials, signage, etc. all cost money. Yes, real estate agents spend money to sell your home. And if the home doesn't sell, this money is wasted. Real estate agent commissions are usually dependent on how well the home sells.
Self-Employment Tax
The typical real estate agent is self-employed. Self-employed people must pay self-employment tax. As of 2024, the self-employment tax is 15.3% of net profits. This covers both the difference between the amount the employer withholds from the employee's income and the amount the employer would have paid if the real estate agent had an employer.
Revenue
Finally, you're left with your agent income, although there are some additional deductions at this stage that we'll calculate another day. Other expenses include state and federal taxes, as well as business expenses that aren't directly related to listing properties but are necessary to run a business as a real estate agent.
Examples of commissions earned by real estate agents
This is a practical way to lower real estate brokerage fees across all parties.
Howard Homeseller has a home to sell for $400,000. He hires Lisa Listing Agent to sell the property. Lisa Listing Agent charges a 5% commission which equals $20,000. Lisa Listing Agent lists the home on her MLS and offers 2.5% of the real estate commission to the agent who brings the buyer. Now Lisa Listing Agent has reduced her commission share to $10,000. Lisa Listing Agent gets everything she needs to market the property properly. This includes $200 for photos, $200 for an edited video tour, $100 for a sign to put up on the property, and $100 for printed brochures and flyers. Lisa Listing Agent sells the property for $400,000 and earns her $10,000 share of the 5% commission. She submits a check to the managing broker, who deducts 20% of the commission, leaving her with $8,000. Lisa subtracts her self-employed income tax rate of 15.3%, which leaves Lisa List Agent with an income of $6,776. Lisa List Agent then subtracts marketing expenses specific to this home sale of $600, which leaves her with $6,116. Assuming it took 40 hours to sell the home (a reasonable figure), Lisa List Agent made $154.40 per hour. While this may sound like a high hourly rate, keep in mind that Lisa List Agent has other expenses and income tax payments associated with being a real estate agent. The $20,000 commission you agreed to pay has been reduced to just over $6,000 paid to the agent you hired to sell the home.
How do you calculate a real estate agent's commission?
The first step in calculating your real estate agent commission is to determine how you want to express your commission. While some real estate agents charge a flat fee, it is much more common to charge as a percentage of the sales price.
To find out how much your real estate commission will be, simply multiply the listing commission rate by the expected sales price. This will give you your real estate agent's commission in dollars.
When calculating your real estate agent's commission, make sure you understand what you're calculating. There are three numbers to consider when determining your real estate agent's commission: Which one is more important depends on whether you're a buyer or seller.
The three numbers are:
The gross real estate commission is the total real estate commission that a real estate agent offers to other real estate agents who introduce buyers to the property, and the remainder is the amount the selling agent receives if the property is sold to a buyer represented by a cooperating broker.
How to save money on real estate agent fees
Indiana home sellers have many ways to lower their real estate commissions.
Make sure your agent is willing to negotiate. Before a real estate agent comes to your home, ask if the agent's real estate commission is negotiable. Let the agent you interview know there is competition. Real estate is a competitive industry. Newer agents may work slower or take lower commissions just to secure the job. Let the agent know you are shopping around. Let the agent know you have the opportunity to help them buy a home. If you are planning to buy a home at the same time as selling a home, let the agent know. If the agent sees the opportunity for more work soon, they may be willing to lower your real estate commission. Make your home easy to sell and your real estate agent will lower their commission. We all love an easy day at work, right? If you have a great home that is in good condition and looks great, you seem easy to work with, and you are willing to sell your home at a reasonable price from day one, there is a good chance you can negotiate a lower REALTOR® commission.
Conclusion
A real estate commission is a fee that a real estate agent charges when selling a property. Commissions are negotiable. However, keep in mind that it's unlikely that a seller will collect the full commission. Real estate agents must split their commission with the buyer's agent, pay the managing broker, and pay expenses and taxes.
You can find lower real estate commissions if you shop around. The best way to negotiate lower real estate commissions is to find sellers who are easy to sell to, price fairly, and seem easy to transact with. Home sellers in Northwest Indiana can contact Quadwalls.com to get lower real estate commissions. Or, visit our home selling page to learn all about our full-featured home selling services and low real estate commissions.
About Quadwalls.com
Quadwalls.com is a real estate website founded in Valparaiso, Indiana by Northwest Indiana Realtors. Quadwalls.com and its Quadwalls Connected Agents are committed to helping home buyers and sellers make good decisions and save money when buying and selling real estate.