Who Pays Real Estate Commission?

who pays real estate commission

It’s a question that’s asked frequently by both home sellers and buyers, “Who pays the realtor when the house sale closes”

For all those stumbling into the real estate game, you might not have even realized that you need to budget for their commission fee.

Rather than rattle off more questions, let’s clear up some details about who pays the real estate agent commission and how they get their payment for services rendered.

Who pays the real estate agents and how it works. 

Real estate agents are paid by a process of commissions. These fees are negotiable, which means they can vary depending on various factors. 

As a rule of thumb, most realtors work off a commission of 5-6%. And that percentage is off the total sale price of the home. This happens at the close of escrow. 

Who is responsible for addressing this bill is a bit more difficult as most real estate agents will say that it's solely the seller’s obligation to pay them. But this isn’t precisely true. Especially if both the seller and the buyer have an agent involved. 

If you have wondered, “How does a realtor get paid when you buy a house?” well, the proceeds of the sale are often - not always though - split evenly between two agents. 

Realtor commissions for buyers and sellers work as follows. 

Both the buyer and the seller have an estate agent and agree to a deal on the house. When the home is sold, the commission fee of 6% is taken for the agents’ work. You could argue that this fee should be taken from the lump sum out of the buyer’s pocket or the seller’s profits.  It’s important to remember this fee comes from the cost of the house, so the actual cost of the house is 6% less than the purchase price. 

If the seller has taken this into consideration when setting their price for selling their home, then it’s not a problem. But this is a rare occurrence.

As you can tell, who pays the realtor commission varies depending on the sale and the specifics of the deal. 

Now that we’ve clarified who pays the real estate commission, let’s talk about what those fees cover. 

But, as we mentioned if there are two agents involved it can become a little more tricky. 

The contracts that the buyer and seller have signed with their corresponding agents will determine the fees. This percentage rate is often split equally between the realtors, but once again this can differ as it depends on the contract they’ve signed. 

If this is the case, you might want a real estate lawyer to look at the contract to ensure all parties are happy with the agreed outcome. 

So, what do these fees cover?

What do the fees cover? 

While it might be surprising, licensed real estate agents must work for a broker. These brokers often cut a cut of the real estate fees to cover certain costs, such as: 

  • Advertising,
  • Signage rental, 
  • Office space,
  • And any other nominal fees.

These costs don’t include other expenses that the agent needs to cover while driving between homes and doing pricing analysis. 

When the buyer’s offer is accepted and the deal enters escrow, the real estate agent then spends time assisting with coordinating inspections, appraisals, negotiating repair costs with contractors, as well as handling all the paperwork associated with closing the deal. And if you need them to, they will assist with accounting for all these costs. 

But the largest issue between estate agents and their clients is the realtor fees for buyers and sellers. Luckily, this can be addressed through some negotiating. 

Can I Negotiate Agent Fees?

It shouldn’t come as a surprise but sellers’ and buyers’ agent fees are the number one issue for those entering into the real estate market. 

This can be down to a number of reasons, one such is the belief that the agent isn’t working hard enough to warrant their full commission. But the good news is that the 5-6% commission is a suggestion, not a regulated government standard. 

In short, this means you can negotiate with your realtor about their fees. This is common mostly among agencies that represent both the buyer and seller, so there’s no need to split the commission between two companies.

But can this reduction in fees help one of the parties out? 

Can Buyers Ask For A Reduced Fee? 

In recent years, there have been some experimental programs in the real estate industry. With economic conditions getting tougher, some buyers have approached agents, and in turn, their brokers, to reduce their fees to incentivize their offer. 

This means buyers would be paying less overall for the house. 

It might seem out of sorts, as buyers normally are not concerned by who pays real estate commission. But when it helps you purchase a house, then we’re sure you’ll be ready for some transparency with the buying agent fees. 

Also, by asking for a reduction in your realtor fees, sellers can sell their house fast.   

Can Sellers Ask For A Reduction In Agent Fees? 

Just like the buyers, sellers are also entitled to ask for a reduction in fees from their agent. And it’s far more common for home sellers. 

By lowering the commission, sellers can reduce their overall price on the home, and make it more enticing for prospective buyers. 

And the lower the price, the more likely you’ll be able to tap into getting a buyer for your home

This being said, is there an alternative to the usual real estate agent fee?

Flat Fees Alternative 

While the majority of realtors work off commissions there are listing agents who will entertain the idea of working for a flat fee. An agent working for a flat fee will deliver what is called a Minimum Service

As the name implies, this is where the seller gets limited service from the brokers, their property is only listed on multiple property sites - and that’s it. 

Many real estate professionals have stated that this leaves them in an ethical quandary. While the seller does benefit in terms of cutting costs, the drawback is that your home’s listing won’t be updated, there’s no active sourcing of potential buyers, and you end up with an agent not interested in selling your home.

Some will say that agents working for a commission will be more proactive and more motivated to sell your home. And when you consider that some properties can be on the real estate market for months, a flat fee will definitely mean it'll be there for longer. 

And if you’re looking for quick capital, you want to sell your home as swiftly as possible. 

Is there another option for selling your property? There are two. 

Sell Your House Without a Realtor

We’ve spoken about selling your home without a realtor before on our website. This method means that you won’t need to pay anyone commission fees. 

While realtors can offer a wealth of knowledge, most of their insights can be found online. And if you do have a prospective buyer you won’t need to go through all the work of listing your home. 

Other benefits include:

  • Selling your home on your own terms
  • No spam marketing calls / emails / texts
  • And being allowed to sell the home “As Is”

But it is a lot of work with regards to paperwork. But if you use the next option you receive all these benefits and more! 

Sell to House Buyers of America 

At House Buyers of America, we buy houses for cash and no matter what the market is doing, we’re interested in buying houses. 

We buy houses in Maryland, Virginia house buyers, and the Washington DC area. Our team helps streamline all the processes to ensure that you sell your home as quickly as possible. For those worried about the offer, we can guarantee that all our offers are fair. 

And, with House Buyers of America, we’ll take your home “As Is”, so no need to spend extra capital on your house to sell it. 

Receiving that cash offer only takes a few minutes, after which you can arrange a time that suits you for us to come by and finalize the paperwork, and you’ll have the money in your account in days. 

Call us today at 855-659-3289 or use our online form to get started! We’ll get you a cash offer within 10 minutes and walk you through the process of selling your house for cash

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