Realtor Fees-Who Pays Them?

Whenever you are wanting to buy or sell something, you typically want to know ahead of time the costs. There may be discounts, promotions, or even you want to know who pays for what. Even if it is a small transaction, people often do their research and preparation to know exactly where their money is going. As we have discussed in previous blogs, buying or selling a home is one of the biggest investments people often make in their lives. With this major transaction, you should be educated on where your money is going. 

One of the costs associated with the sale of a home is the realtor's commission. Realtors collect fees on the sale of a home because they play a crucial role in selling that home. You may think the realtor's duty is simply to put a for sale sign in the yard or open the door to allow you to tour a home, but their services go way beyond that. 

If you have sold or bought a home in the past, you most likely have a general idea on who pays the realtors. However, I often get asked by first time homebuyers if I charge an hourly rate, how much they owe me before we make an offer on a home, or when they have to pay for my commission. So let's first start with the key players. In most transactions, there is a buyer's agent who represent the buying party and a listing agent who represent the selling party. Once you are under contract, the buyer's agent is often referred to as the selling agent. Additionally, the buyer's agent and listing agent can sometimes be the same agent. If the agent and brokerage are representing both the buyer and the seller, this is called 'dual agency.'

Now that you have that background, who pays these agents? In most transactions, the realtors fees are paid by the seller and are included in their closing costs. Once a property closes, the listing agent and selling agent (Buyer’s agent) are typically paid as it states in the agreed upon documents. The commissions fees can range based on what was agreed upon, but the most common fee is 6% of the purchase price, which is often split between the 2 parties. If there is dual agency, the agent receives the full agreed upon commission split. 

For paying the real esstate agent, the title/escrow company typically issues the funds after closing and then pays directly to the managing broker or brokerage, since they also have to take a share of the total commission. 

Have questions about realtor fees or other costs associated with the sale of your home? I am here to help :)