Buying or selling a house in Houston is as exciting as it is overwhelming. In both cases, you are dealing with a lot of money and likely a big move. Before you can move on to the exciting part, there are costs to consider, and it’s important that you account for them earlier on. Here we are going to focus mostly on the cost of real estate commission in Houston also known as, agent fee.
Interestingly, the real estate agent commission is often forgotten by most people even though it is one of the highest costs of selling a home. So, what is the average real estate commission in Houston? In this guide, we’ll take you through everything you need to know and answer some of the most frequently asked questions.
- An Overview of the Real Estate Commission in Houston
- How Many Real Estate Agents Are in the Houston Greater Area?
- What Is the Real Estate Agent Fee in Houston?
- How Much Do Real Estate Agents Make in Houston?
- Key Takeaways
Selling your home using a real estate agent is much more convenient than doing it on your own and takes away some of the stress. This is why it’s not surprising that around 89% of homeowners used agents to sell their homes in 2020, according to data from the National Association of Realtors.
Most real estate agents in the Houston area charge their clients on a commission basis. The seller is generally the one responsible for paying this fee. The real estate commission is included in the final sale costs during closing. The amount that your agent charges is highly dependent on their brokerage, the area they work, and their level of experience.
For instance, there are agents that will charge you a high commission based on their successful track record or experience level, the type of clientele that they serve, or the kind of market that they are in.
The average real estate commission in Texas ranges between 5.7% to 6% of your home’s price.
So, let’s assume that your home is selling for $400,000, and your agent charges you a 6% commission. At closing, they will collect $24,000. This may seem like a significant amount, especially when you include the closing fees. Keep in mind that the seller gets to set the selling price and ultimately approve the final offer. This means that they can ask for a higher price to offset the cost of working with a good agent who can likely sell for what they are asking for.
The agents also rarely keep 100% of their commission as it is often split with the listing agent or the buyer’s agent. Additionally, if they work for a brokerage, they have to pay the broker part of the fees.
Houston is one of the most populous areas in Texas. In fact, there are over 2.3 million residents, and this number is constantly growing. This means that jobs are increasing, there are plenty of entertainment spots, and housing prices have historically been good. However, over the last few years, home prices have gone up, increasing by 18% the last year.
Still, the area is attractive to a lot of people and Houston is attracting more residents to the area. This means it is pretty easy to sell your home in Houston. This also means that there are more and more real estate agents getting into the business. Making sure you are getting the best is becoming even more important.
Currently, there are more than 33,000 real estate agents in Houston. Some of which are among the best in the state. The top agents can help you get your home on the market 1.4 X faster and for more. Based on recent data, the top 5% of the real estate agents in the area sell houses for around $60,247 more than the average agent does.
Needless to say, it’s important that you get a reputable agent whether you’re selling an investment property or your childhood home.
The real estate agent you choose determines how long your property stays in the market. It also influences the price at which you sell it. This is why it’s critical that you take your time during the selection process so that you can make an informed decision. Here are effective tips to help you choose the right real estate agent.
- Conduct extensive research: There are thousands of Houston real estate agents, so don’t just hire the first agent you come across. Instead, we recommend that you take the same approach you would when buying a property. Ask around for recommendations and pay close attention to how they work.
- Choose a local agent: Keep in mind that the agent you choose will represent your property and you. Therefore, it’s important that you go for a real estate agent that knows your area. But they also need to know you and what your priorities are. This will give you a cutting edge when buyers start asking questions. The agent should also know other properties in your area that have sold recently. As well as other homes that are for sale, which are technically your competition. This way, they can effectively assess your home in relation to similar properties. They can also come up with a strategy to make yours seem appealing to buyers.
- Go to some open house inspections: This is the best way to see your shortlisted real estate agents in action. The house doesn’t have to be similar to yours. This is just an opportunity for you to interact with the agent and see how they deal with potential buyers and represent open houses. You should also get some contacts while at it. Some of the things you should pay close attention to include:
- How they interact and communicate with potential buyers. Based on their communication style, would you buy from them?
- Professional courtesy: Did they welcome everyone at the door? How well did they answer the questions that the potential buyers asked? Did they proactively highlight the top features of the home?
- Whether they followed up with you after the open house: If they didn’t reach out to you, then this is a red flag.
You should also consider the advertising strategy they used to get potential buyers to the open house.
- Choose an agent you’re comfortable with: This is one of the most important yet most overlooked factors. You need to be comfortable with your agent! Don’t forget that you’ll be sharing everything with them, including the areas of your home that could use improvements. So it’s critical that you are able to have honest communications with them.
- Market knowledge: Go for a real estate agent that can easily give you an overview of the market in your area and neighboring towns. They should be fully knowledgeable about demographics, school districts, transport, etc…basically, the factors that buyers deem important when choosing their next home.
Most importantly, look at their track record. How many houses have they sold within the last 6 months? Pay close attention to the hard facts, including the average time their houses stay in the market and sales prices.
Knowing Houston’s average real estate agent fee protects you from overpaying your agent. The good news is that these fees are not standard. They are negotiable, and it all boils down to the commission rate that you and your agent agree on. Texas, and Houston in particular, has also been experiencing a population boom. This puts you in a stronger position to negotiate the commission.
You should, however, note that most agents charge an average commission of 5.7%, which is the state average. That said, you’ll also come across agents that charge higher or less depending on several factors, such as experience and the number of houses successfully sold.
As we discussed, agents are paid on commission. This commission is based on the sale price of the home. Each agent, the seller’s and the buyer’s, are paid for by the seller. The seller pays a total amount of the sale price as a general “agent fee”. This is divided between the two agents.
Paying for the buyer’s agent often feels counterintuitive. After all, why do you have to pay the person representing your buyer when you have to pay your agent as well? The best way to look at it is as a marketing cost. The commission will incentivize other agents to show their clients your home, reducing the time it stays in the market. In a sense, they worked for your to help you sell your house. And since you can factor that cost into the sale price, you shouldn’t be out any additional money.
Factors That Impact the Real Estate Fee in Houston
Real estate commissions aren’t set in stone, and there are several factors that increase or reduce the fees depending on your home’s exact location and other specific circumstances. Knowing these factors increases your bargaining power and lets you know whether you’re getting a good deal from your agent.
The most influential factors include;
- Whether you’re a repeat client: The agent will likely reduce your commission if you have used them before.
- Value of property: If your home has a high property value, the agent may lower their commission to avoid eating too much into your sale.
- Client competition: The higher the competition for your home, the lower the commissions that agents are willing to accept to win you over.
- Buyer demand: If the number of buyers in your home is high, you can renegotiate the commission because there’s a high chance that your home won’t stay in the market for long.
- Condition of the house: If your house is well maintained, then the agent can accept a lower commission. This means healthy landscaping, clean flooring, well-maintained roof, etc.
- You also buy with the agent: If you also use the same agent to buy your next home, it will reduce your commission as they’ll technically be getting a double commission. The same is true if you send more business their way.
The local real estate market conditions also impact the agent fees. For instance, when it is a seller’s market an agent may take a lower commission assuming that the home will sell fast with little work. On the other hand, if you’re in a buyer’s market your listing will likely stay on the market for longer, and the agent may charge a higher commission.
On average, a realtor in Houston makes a little over $73,000 annually or $7,729 for every home that they sell. Real estate agents typically don’t keep 100% of the commission from your home’s sale. Depending on a pre-agreed rate, they have to split it with the buyer’s agent. These commission terms are usually paid out in the listing agreement.
Houston is growing rapidly, and thousands of buyers are attracted to the area every day. This means that agents have more listings and are earning more.
If you’re selling your Houston home or investment property, here’s what you need to know:
- The real estate commission covers most of your expenses. This includes everything your agent needs to sell the house from listing to closing, such as online marketing, negotiating offers, showing the home, photography, hosting open houses, etc.
- Paying a real estate commission in Houston is worth it. Not only can you include the cost of your agent in your listing price, getting a good agent will help you sell your home quickly and for what you want. Don’t try to hire a budget agent to save money because you always end up getting what you paid for.
- Take your time choosing the right real estate agent. This highly determines how long your listing stays in the market and how much it sells for.
Currently, Houston sellers are in a strong negotiating position because they are in a seller’s market. This is because there are more buyers than sellers, so your agent’s commission will be significantly lower if you sell now. Are you looking to buy or sell a property with top real estate agents? We’d love to help! Check out the trusted agents in your area today!