What Is The Real Estate Commission In Texas?
Jan 23, 2023
If you’re thinking about buying or selling a home in the state of Texas, then you probably know that there are several different fees and closing costs involved.
For example, if you're thinking about buying a home in Texas, then you'll need to consider the down payment, earnest money deposit, home inspection fees and closing costs.
If you’re selling in Texas, then you might want to invest in some home improvements, a termite inspection, house cleaning or landscaping to help improve your home's appeal.
In either case whether you are selling or buying, you'll want to be aware of one of the potentially largest costs involved: the real estate commission in Texas.
How Real Estate Agents Make Money In Texas
According to the National Association of Realtors, 89% of sellers in the US used a real estate agent to help them sell their homes last year.
The vast majority of those real estate agents make a commission by charging their clients a percentage rate or flat fee for selling a property.
Just how much those clients were charged depends on the real estate agent themselves or their brokerage. Some Realtors may charge more as a reflection of their experience level or because they specialize in serving a very niche clientele or a specific community.
The average total real estate commission in Texas is 5.75%
So, if a home sells for $500,000, and the agents charge 5.75%, then the total commission expense at the time of closing would be $28,750.
Again, some experienced real estate agents may be able to justify charging anywhere from 6-7% or more for their services.
However, because home values have spiked in recent years, low-commission real estate agents are growing in popularity with homeowners that want to save on Realtor fees.
By using a "discount" agent, you can list your home for as low as 1% without sacrificing results.
Real Estate Agents Don't Keep 100% of the Commission
In the example above, if the total commission paid at closing is $20,000, the listing agent typically is not keeping all of it.
First, if the buyer hired a buyer's agent (which is very common), the total commission is split between both the listing agent and the buyer's agent. Using the earlier example, if the commission was split in half, the seller’s agent would keep $10,000 and the buyer's agent would get $10,000.
Second, if the agent works for a brokerage – and most do – the agent will typically have to share a portion of the commission with their broker for holding their license. Just how much they have to kick back to the broker usually depends on the brokerage and it's individual rates or fees.
In some cases, those who sell more homes every year are usually allowed to keep a larger percentage of their commissions. On the other hand, newer real estate agents can sometimes have to give up 50% or more of their commission to the broker.
In other scenarios, several independent or boutique brokers charge their agents a flat fee per sale or even just a flat monthly fee. In addition, newer innovators have emerged with a 100 percent commission model, where you control the brand identity and the way the business operates - including agent hires and commission splits.
The Real Estate Commission in Texas
Now that you understand how real estate agents get paid, let’s talk about what kinds of commissions you can expect them to charge in Texas. The average real estate commission in Texas is slightly less than 6%.
You can greatly reduce your real estate commission in Texas by choosing a broker that offers a reduced commission structure. For example, SimpleShowing charges a 1% listing fee at closing which saves you $8,900 on average when you sell your home. This service provides an experienced real estate agent, professional photography, an MLS listing, plus negotiation and contract management.
SimpleShowing is currently offers services Dallas, San Antonio, Austin and Houston markets. To get started, request a free home valuation.
Who Pays a Real Estate Agent's Commission in Texas?
On occasion in some real estate transactions, one agent will work for both the buyer and the seller in Texas. Other times, the homeowner may handle the sale of their house – referred to as FSBO or "for sale by owner".
However, most of the time, sellers and buyers both have their own real estate agents in Texas. Each agent is tasked with looking out for their respective client’s best interests while also working together toward the common goal of finalizing the sale of the home.
You already know that a seller’s agent charges his or her client a commission once the home is sold.
However, many homebuyers in Texas hear this and assume that means they don’t have to pay their agent. Many agents even market themselves by explaining to potential clients that their services are free. As it turns out, that’s not completely true.
Instead, it’s probably more accurate to say that both the buyer and the seller end up paying the real estate agents, albeit in a fairly roundabout way.
Put yourself in the shoes of the seller’s agent for a minute.
If you knew you had to split your commission with someone else before you had to then pass along another large percentage to your broker, what would you do?
Like most other agents, you’d factor that cost into your total price.
So, while technically the seller pays the real estate agent’s commission in Texas, the buyer is contributing their fair share, as well. It’s just baked into the price they’re paying for the home.
How to Reduce Commission Expense as a Seller
On paper, the real estate commission in Texas can appear fairly straightforward, but you now know that there’s a lot that goes on behind the scenes.
Even though it might seem high, some agents will say they have to charge at least 6% just to make a decent living. Or do they?
At SimpleShowing, we are pioneering a new way of helping homeowners save a lot of money when they hire experienced agents to sell their homes.