who pays real estate commissions

Home Selling

Who Pays Real Estate Commissions?

June 18, 2018 | by Andrew Schmeerbauch

who pays real estate commissions

One of the most significant problems people have with real estate agents is that the fees are a little too steep and that the services they deliver are not worth the extra charges. Winning either side of that argument can be tough. All we know is that one thing is for sure. Cost aside, the help of a knowledgeable broker is valuable for both buyers and sellers.

If you’re engaged in a real estate agreement, you’ll need to sort out many fees, including the commission. Who is even responsible for handing over this large chunk of change? Luckily, it’s not going to turn into an awkward who-gets-the-tab type of situation. Buyers and sellers are responsible for paying for different fees, so it’s important to know the best practices for a typical home sale. We’re here to tell you how real estate commissions work and who needs to pay the rockstar-of-an-agents who helped push the deal through.

How Much Are the Fees?

A standard commission for real estate agent is six percent of the purchase price of the property, although that number can dip to 5.1 (unless you decide to work with a flat-fee agent). The seller typically pays the commission and other fees at closing. However, there is room for the agent to make other arrangements or exceptions. All of the details about real estate agent fees should be in agreement you sign when you hire an agent. The costs typically include property photos, listing the property on MLS, and the real estate agent’s stellar services, of course! Don’t be afraid to speak up-- ask questions if there is anything you do not understand!

A seller can work out an agreement with the brokerage or agent for the terms of the listing. If a buyer is in a fierce and fiery seller’s market or bidding war, offering to pay some of all of the real estate agent’s fees can be a way to stand out from others offers.

What is the Compensation?who pays real estate agent commission

The compensations vary. The contract the buyer and sellers have with their agents are drawn up before the time the buyer makes an offer. The percentage is often evenly split between the buyer’s and seller’s agents, although some contracts stipulate one agent will receive a more significant portion of the commission than the other. Top, cutting-edge agents could potentially receive 100 percent and pay the brokerage a desk fee. New agents get between thirty and forty percent of total commission earned by the brokerage. Everybody else falls somewhere in between. In addition to the desk fee, other deductions include advertising, sign rentals, and office expenses.

Seller Pays the Buyer’s Commission

It’s standard that the seller pays for the commission of both the buyers and listing agents. The agent working for a brokerage represents the buyer. The fee paid to the broker upon a sale of a property is most commonly paid for by the seller. Some agreements contain clauses that will compensate the brokerage for the fee unless the amount due is less than the amount paid by the seller. For example, a cooperating listing might offer to pay a broker a smaller portion of the sales price and the brokerage might operate at fees that are a higher percentage.

Buyers Pay Directly

Precisely who pays a real estate agent’s commission is where things get a little tricky. Assuming that both the buyer and the seller have an agent, you can argue that the seller pays it or that the buyer pays it. Under most listing agreements, the seller is not in any way required to compensate the listing broker for even a dollar more than the listing side of the commission. Sales prices often reflect the amount the buyer is paying. Sellers can also credit the buyer commission of the buyer to credit the brokerage. The fee is sometimes--not always--split evenly between the two agents.

The Bottom Line

Who is paying the commission? The answer is more direct than you might have expected. The seller typically takes into account the cost of commission when deciding on a sale price. So while the seller is the one forking over the money to the agents, the buyer is technically paying for it in the cost of the home.

Real estate transactions can be littered with fees. So is saving money on realtor commissions by using Clever. Whether you’re selling or buying, Clever’s flat-fee full-service agents save you money. Call us today at   1-833-2-CLEVER or fill out our online form to get started.

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