What is the Real Estate Commission in Florida?

In Florida, the average commission is 6% but can be in the range of 5% to 7% and is split evenly between the buyer’s agent and seller’s agent. For example, if the final home selling price is $300,000, the total real estate commission is $18,000 ($300,000 * 6%).

How is the Real Estate Commission Split between the Buyer and Seller Agent?

It is important to know that your agent does not receive the entire 3% of the commission. Most agents these days work with brokerage firms or agencies which also take their cut of the sale. The percentage of division between the real estate agent and the brokerage depends on negotiations between them and can vary between 30% to 60% of the real estate commission earned. In most cases, it is 50%, hence the 3% real estate commission is split in half between the agent and the brokerage firm where each receives 1.5% of the home price.

The flow above chart demonstrates how the real estate commission is split between the various parties. A home selling for $300,000 will have a 6% commission resulting in a total of $18,000. This Commission is divided between the buyer’s agent and the seller’s agent with each receiving $9,000. Since the agents do not work alone and are part of a brokerage firm, the $9,000 on each side is further divided in half with each agent and firm receiving $4,500 or 1.5% of the total home price. Therefore, it is important to realise that even though the agent is paid 3%, they actually do not receive the entire commission, as it is divided between them and the brokerage firm.

Florida Real Estate Commission FAQ

Who Pays the Commission?

The total commission is paid by the seller of the house, the commission is taken out of the final sale price of the home. For example, if the final sale price is $300,000 and the 6% commission is equal to $18,000, the seller receives $282,000 ($300,000 - $18,000).

In most cases the seller will pay the real estate commission for both agents, however, there are scenarios where the seller may choose to list the house themselves rather than using a real estate broker.

As the Buyer of a Home, do I have to pay Real Estate Commission?

No, the buyer of the home does not have to pay commission in most cases as the entire payment fee is passed on to the seller of the home. Although it is important to realise that in most cases the seller of the home will include these fees in the listing price, hence, indirectly some of the real-estate agent fee is also paid by the buyer. There can be a situation where the seller may decide not to pay the buyer agent’s real estate commission, which may result in the buyer paying the agent based on their negotiated amount. In this situation the buyer agent will let you know if that is the case.

As a Seller can I Negotiate the Real Estate Agent Fee?

Yes! You can negotiate your real estate agent fee. Commission costs are the largest expense when selling a home so it's a good idea to shop around and do your research on several agents. This will allow you to pick an agent with the right experience at the best possible price allowing you to save some money when selling your home. Some brokers have more flexibility than others and may consider lowering their fees if they can get the listing.

As a buyer, can I negotiate the Real Estate Agent Fee?

In most cases, you cannot negotiate your commission because you are not bearing the cost of the agent’s fee as they are being paid by the seller.

What are Cash Back Rebates?

Some agents do offer cash back rebates on their commission in order to attract home buyers. For example, some agents will pay you up to 50% of their commission. If you purchased a house for $300,000 and your agents’ commission is 3%, they will earn $9,000. After closing, they will give you $4,500, which is 50% of their $9,000 commission, as a cashback rebate.

Why are commissions so high?

There are several reasons for high real estate commissions:

1. The commission is split between several parties which include the buyer and seller agents along with their respective brokerage firms. Therefore, the 6% commission you pay does not go to a single party but is divided between 4 entities.
2. Marketing costs have to be covered by the agent and that can get expensive, it has to be covered even if the house does not sell for an extended period of time.
3. There are several expenses in trying to attract a buyer such as professional photography, open houses, supplies, and more.

These factors tend to drive up the commission, however, all these factors work in your favor because better marketing leads to more buyers and a higher chance of selling the home at a better price. As real estate agents provide a service, it is negotiable and it is in your best interest to get the best price for the services you need. As the real estate agent market has become more competitive, several agents also offer discounts on their commission or cashback rebate.

As a seller why should I use a Real Estate Agent?

Real estate agents are extremely useful in the process of selling your home. There are several reasons to hire an agent:

1. The real estate agent will guide you through the entire home selling process: Agents do this process for a living and have experience in finding buyers and guiding home sellers, making them experts in the field. Pricing a home is one of the hardest tasks to do and using an agent who has experience doing this regularly will ensure you get the best listing price. There are situations where the seller can decide to sell the home themselves, it is known as For Sale by Owner (FSBO). If the seller does decide to do FSBO and gets the listing price wrong, then it will drastically reduce their chance of selling the house.
2. Network: Real Estate Agents often have access to large networks such as Major Listing Services (MLS) allowing them to be very fast in finding prospective buyers, thereby speeding up the process.
3. The real estate agent deals with the paperwork: There is a lot of paperwork involved in selling a home and this can include legal documents which can be hard to understand. In florida, a lawyer does not need to be hired for the legal paperwork and a real estate agent can close the deal, hence the agent can help you with the intricacies of the legal paperwork.
4. Negotiating Skills: The real estate agent has negotiation experience as it is part of their job on a regular basis. With the right negotiation tactics, your real estate agent can get you a better price on your home than expected.
5. Workload: The process of selling a home is not as easy as it seems, there are a lot of tasks involved such as taking quality photographs of your home, online and print marketing, open houses, and being available during inspections and appraisals. A person with a full-time job will find it very difficult to do all these tasks, which often results in longer wait times for the home to be sold because the right material does not reach prospective buyers.
6. Objective: The process of selling a home can be very emotional for certain individuals which often results in poor decisions such as overvaluing the house. Your real estate agent can guide as an objective third party who has your best interest in mind making them a valuable resource in the decision-making process.

There are certain advantages of doing For Sale by Owner (FSBO) such as:

1. You avoid the real estate commission fee: If you decide to FSBO then you can save on the seller’s real estate commission fee which is 3% in most cases. You will still have to pay the buyers real estate commission.
2. Control: You have full control over the home sale and can decide every part of the process, such as the sale price, marketing tactics, and how you would proceed with the sale.

As a Buyer why should I use a Real Estate Agent?

There are two broad reasons to use an agent, the first one being theirexpertise and secondly, the fees are covered by the seller of the house as part of the seller's closing costs.Here are some reasons why a buyer should use a real estate agent in Florida:

1. Agents are experts in their field and may provide information on a house that you may miss such as construction, furnace issues, leaks, insects, etc.
2. Hiring inspectors, appraisers, mortgage loan brokers, and keeping good relations with the sellers through the agent is all done by your real estate agent.
3. Real estate agents also do the intricate paperwork that is required in a home purchase and can be a burden for a lot of people especially if they do not understand some of the real estate jargon.
4. Agents can help you find a house that you like faster because they already have a strong network in place and knowledge about the various neighborhood’s speeding up the process. They can also perform a market analysis of the homes and help determine affordable homes that fit your budget.
5. Agents are better negotiators as they have a lot of experience and can help you get a better deal on your new house.

All these benefits are available to the buyer and in most cases, the seller of the home covers the fees, so you get all these perks for free!

What is a One Percent Real Estate Agent?

In some cases, the selling or listing agents offer a reduced commission fee by offering discounts to their clients. A one percent real estate agent is someone who charges only 1% commission to sell your home. The seller agent will get 1%, and the buyer agent will typically receive their standard 3% commission rate, equalling a combined real estate commission rate of 4%. Only certain real estate agents offer this 1% real estate commission, so be sure to check if your agents offer this discount!

Do I have to pay taxes on the Real Estate Agent Commission?

No, the real estate agent and brokerage will have to pay tax on the commission they have earned rather than the seller.

Who sets the commission rate?

There are no legal requirements for commission rates. Commission rates can be set by the agent and the brokerage, however, in order to stay competitive, most agents follow the average commission for the area, such as in Florida it is 6%. Some agents who are more experienced may have higher commission rates and other agents may offer discounts or rebates. Therefore, it is best to do your research and negotiate to get the best deal for your needs!

What are the different Types of Real Estate Commissions?

The commission can be paid in two different forms depending on your real estate agent:

• Percentage of the final selling price - this means as the final home price rises, the fee paid to the agent also rises. This is a good method of compensation because it incentivises the agent to sell the home at a higher price to receive a larger commission. For example, if a home is sold for $600,000 and the real estate agent has a 3% commission, then the seller pays $18,000, whereas if the agent managed to negotiate with the buyer and got a better price such as $625,000, then the agent would receive $18,750.
• Fixed or flat fee - In this case the agent is paid a certain commission irrespective of the final home price. For example, if the agent fee is $10,000, it does not matter if the final home price is $600,000 or $625,000. In most cases a flat fee is used if the home being sold is below a certain threshold, thus making sure that the agent receives enough to cover all costs.

Can I save with a Flat-Fee Commission?

Flat-fee commission sounds pretty great because you pay a fixed rate and hence your agent fee does not depend on the size of the purchase. In most cases, the flat-fee commission is lower than the usual percentage-based commission. However, this lower cost can come at the sacrifice of the quantity and quality of services offered by the agent, such that you may have to do some of the legwork yourself. Therefore, it is important to realise that the money saved will have to be sacrificed in the form of time and effort to cover the work the agent does not perform with a flat-fee commission.

Who Pays the Commission on Pre-Construction homes?

The builder will pay the real estate commission fee because in most cases the builders depend on agents to find them buyers.

What does it mean to Double-End a Real Estate Commission?

When one agent represents both the buyer and seller, it is known as double ending a real estate deal. Since there is only one agent, they receive the entire commission along with their brokerage firm. This occurs when the buyer directly reaches out to the seller’s agent without consulting an agent of their own, for example, if they saw a listing on a website. However, this results in a conflict of interest for the single-agent on the deal as he is representing both the buying and selling party. The conflict arises because the seller wants to sell the house at the highest possible price whereas the buyer wants to buy at the lowest possible price, how can one agent satisfy both these contradicting requirements? Therefore, In Florida this form of dual agency real estate is illegal and cannot be practiced.

Who regulates the Real Estate Licenses in Florida?

The Florida Real Estate Commission (FREC) was created to protect the public through education and regulation of real estate licensees. The FREC governs the conduct of licensees and has the power to investigate and discipline licensees who violate the law

What are some other Fees while Selling a House?

Closing costs can range from 2% to 4% of final selling price on average. There are many additional closing costs involved in selling a home including lawyer fees, title insurance, balance on mortgage, settlement fees, as well as transfer taxes.