If you're thinking about diving into the world of real estate, or if you're already working as a real estate agent, you might be wondering who pays the broker fees in each state. It's an important question to ask, as these costs can vary significantly from one state to the next. It’s also best to know the answer to let your client know if they’re the one who needs to pay for these fees.
In this article, we'll take a closer look at what broker fees are, how much they can set a client back, and where that money comes from.
How Are Real Estate Agents Paid?
A real estate agent’s fee comes from the commission they collect when they help clients buy or sell a property. The commission is usually a percentage of the final sale price of a property. These fees are split between the listing agent (the agent representing the seller) and the buyer's agent (the agent representing the buyer), with each agent receiving a portion of the commission based on their agreement with their brokerage.
What Are Referral Fees?
Besides their typical commission, agents can also be paid a referral fee. A real estate referral fee is a payment made to someone who refers a client to a real estate agent or brokerage. It's a common practice in the industry to compensate people for connecting clients with agents who can help them with their real estate needs. Think of it as a way of expressing gratitude for the connection.
Who Pays The Referral Fee in Real Estate?
Typically, the receiving agent or brokerage pays the referral fee after they successfully close the transaction that came from the referral. However, the payment of the referral fee in real estate depends on the specific agreement between the parties involved. This amount will be explicitly specified within a real estate referral agreement.
Who Pays Broker Fees In Each State?
It might be tempting to search for questions online like "Who pays the broker commission in Texas?", "Who pays the broker fees in North Carolina?" or "Who pays the broker commission in Florida?" depending on the state you're in. But the truth is, in almost all residential real estate transactions, the seller usually pays the realtor fees. These fees are typically deducted from the sale proceeds at closing before the seller receives their net profits. Just like commission rates and referral fees, this is always negotiated. In some rare occurrences, the seller can get the buyer to cover any fees, especially if it's a seller's market.
How Much Are Agent Fees In Each State?
The commission rate and the cost of the house in a real estate transaction directly affect the total amount of a real estate agent’s fee. This means that working with a real estate agent will cost more in areas where houses are more expensive.
The formula to figure out the realtor fees would be:
Home Price x Commission Rate/100 = Broker Fees
Don’t worry. We already did all of the math for you. By looking at the average commission rates and home prices across the country, we can determine the average realtor fees in each state. Let's start by going in alphabetical order, starting with Alabama.
State |
Average Commission Rate |
Average Home Price |
Average Realtor Fees |
Alabama |
5.44% |
$206,044 |
$11,209 |
Alaska |
4.99% |
$345,363 |
$17,234 |
Arizona |
5.43% |
$409,038 |
$22,211 |
Arkansas |
5.44% |
$178,744 |
$9,724 |
California |
4.91% |
$728,134 |
$35,751 |
Colorado |
5.52% |
$539,640 |
$29,788 |
Connecticut |
5.12% |
$358,906 |
$18,376 |
Delaware |
5.44% |
$358,686 |
$19,513 |
D.C. |
4.96% |
$627,158 |
$31,107 |
Florida |
5.40% |
$383,063 |
$20,685 |
Georgia |
5.76% |
$306,278 |
$17,642 |
Hawaii |
4.99% |
$834,583 |
$41,646 |
Idaho |
5.36% |
$435,374 |
$23,336 |
Illinois |
5.24% |
$236,049 |
$12,369 |
Indiana |
5.67% |
$222,592 |
$12,621 |
Iowa |
5.67% |
$200,038 |
$11,342 |
Kansas |
5.67% |
$210,742 |
$11,949 |
Kentucky |
5.44% |
$190,037 |
$10,338 |
Louisiana |
5.44% |
$182,959 |
$9,953 |
Maine |
5.12% |
$351,375 |
$17,990 |
Maryland |
5.11% |
$387,872 |
$19,820 |
Massachusetts |
4.84% |
$558,313 |
$27,022 |
Michigan |
5.64% |
$218,684 |
$12,334 |
Minnesota |
5.41% |
$315,122 |
$17,048 |
Mississippi |
5.44% |
$162,292 |
$8,829 |
Missouri |
5.73% |
$227,347 |
$13,027 |
Montana |
5.36% |
$427,886 |
$22,935 |
Nebraska |
5.67% |
$243,012 |
$13,779 |
Nevada |
5.02% |
$412,244 |
$20,695 |
New Hampshire |
5.12% |
$429,421 |
$21,986 |
New Jersey |
5.13% |
$451,559 |
$23,165 |
New Mexico |
5.59% |
$279,763 |
$15,639 |
New York |
4.97% |
$411,304 |
$20,442 |
North Carolina |
5.60% |
$309,861 |
$17,352 |
North Dakota |
5.67% |
$242,261 |
$13,736 |
Ohio |
5.81% |
$205,800 |
$11,957 |
Oklahoma |
5.59% |
$188,453 |
$10,535 |
Oregon |
4.99% |
$485,475 |
$24,225 |
Pennsylvania |
5.53% |
$243,859 |
$13,485 |
Rhode Island |
5.12% |
$413,948 |
$21,194 |
South Carolina |
5.63% |
$273,977 |
$15,425 |
South Dakota |
5.67% |
$284,308 |
$16,120 |
Tennessee |
5.44% |
$291,354 |
$15,850 |
Texas |
5.59% |
$294,336 |
$16,453 |
Utah |
5.36% |
$506,072 |
$27,125 |
Vermont |
5.12% |
$332,149 |
$17,006 |
Virginia |
5.23% |
$360,873 |
$18,874 |
Washington |
5.29% |
$562,936 |
$29,779 |
West Virginia |
5.44% |
$146,578 |
$7,974 |
Wisconsin |
5.67% |
$262,652 |
$14,892 |
Wyoming |
5.36% |
$325,091 |
$17,425 |
Broker Fees By State: Highlights
As you can see from the chart, the amount of broker fees can vary widely depending on what state you're located in. For example, Colorado's broker fees are nearly triple those in Arkansas. Meanwhile, the broker fees in Oregon and New Jersey differ by only $1,000 despite being on different sides of the country. The state with the lowest average broker fees in the country would be West Virginia, with $7,974, while the highest would be Hawaii, coming in at a whopping $41,646. Remember, these are only averages. These numbers can be higher or lower depending on the specific city you are in and the commission rate that is agreed upon.
Considering how much broker fees are is crucial for real estate agents looking to succeed in their careers. Discussing this information with their clients beforehand how much it might cosst to work with a real estate agent. Overall, it's money well spent when they realize what an experienced and knowledgeable agent they have working for them.
Are you getting ready to take your real estate exam? Sign up for VanEd's online exam prep course today! This course is designed for those who have already finished their pre-licensing course but want more practice before taking the state real estate licensing exam. Let’s prepare you to pass the test on your first try!
Written and Published by: VanEd