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Do you know how much an average real estate agent commission is? Or who pays real estate agent fees and closing costs?
If you’re scratching your head, you’re not alone: More than half of Americans don’t know what the average real estate agent commission is in their area, according to a report by the Consumer Federation of America. Plus, the commission and fees can vary from state to state and among brokerages.
Though most homebuyers and sellers might not be able to tell you what these fees are, they’re fairly critical to the real estate agent working for you. These fees are how most real estate agents are paid.
So in real estate, who is responsible for paying commissions and fees: the homebuyer or the home seller? How much, on average, should you expect it to cost, and what other fees are you responsible for when you buy or sell a house?
Who pays the real estate agent commission?
Technically, agents are representatives of the broker. An agent can only receive payment from their broker. Therefore, brokers receive the commissions from the seller and in turn pay their agents for the transaction.
If you’re buying a home, you’re likely off the hook for paying the real estate agent commission because the home seller is almost always responsible. The fee is paid by the seller at the settlement table, where the fee is subtracted from the proceeds of the home sale. However, it is not FREE for buyers. Too often, buyers are told it is, when in fact most agreements have a responsibility of the buyer to pay for buyer agent services. The agreements also mention that any commissions shared by sellers may reduce the liability of the buyer. BUYER BEWARE! Each transaction will outline how your agent is paid and you should see a disclosure of compensation prior to signing any offers.
When the sellers set a listing price for the home, they usually take the real estate agent’s commission into account—and consider it the cost of doing business.
Typically, the buyer’s broker and the seller’s broker split the commission, which is often a percentage of a home’s price. So if a home sells for $200,000 at a 6% commission, the seller’s broker and buyer’s broker might split that $12,000, and then pay out the agents.
Do you have to pay a real estate agent commission?
Though you could technically forgo the fee by selling or buying a home without an agent, it’s important to note that agents are the experts in this scenario, working on your behalf while ensuring the process is as stress-free as possible. For example, the agent will start by helping you price your home, then marketing it (on the multiple listing service, social media, and other venues), negotiating with homebuyers, and seeing the home sale through closing.
A recent survey found that the typical “for sale by owner” home sold for much less than an agent-assisted home sale, according to the National Association of Realtors®. It’s no wonder an overwhelming majority of home sellers use an agent to sell their house.
Also keep in mind that real estate deals often take weeks, if not months—though most agents won’t see a dollar of it until a property closes.
Can you negotiate real estate agent commission fees?
Commission standards can vary from state to state and among brokerages. There are no federal or state laws that set commission rates—meaning the commission is negotiable.
Here’s the problem, though: You can ask your agent to reduce his or her commission, but the odds are unlikely. If the agent agrees, however, this might affect the level of effort the agent puts into helping you buy or sell your home. Briefly, agents work for you until your home is sold and do not collect any money until it is closed. They pay for all marketing efforts out of their pockets and endure countless hours and miles to procure buyers, coordinate offers and show homes (in the event you are buying a new one). Sometimes transactions end under various circumstances, resulting in an agent never being compensated for the efforts they have made.
Another option you can explore is a transactional agreement, in which the listing agent will help you set an asking price, facilitate communication between you and the buyer, write the contract, and move the process along to closing for a flat fee or lower commission—but you won’t receive anywhere close to the agent’s full services. Not all agents offer transactional agreements, so you might have to shop around to find one.
Dual agency: When one agent represents two parties
It’s not a common situation in real estate, but if the agent you’ve hired to represent you also represents the seller of the house you’re buying, it’s called dual agency. Dual agents, also known as transaction brokers, represent the interests of both the buyer and the seller.
Certain states—Florida, Colorado, and Kansas—have made dual agency illegal in a real estate transaction to outright eliminate any question that the agent was neutral in representing the seller and the buyer. But in the states that allow dual agency, agents are required by law to disclose that they’ll be representing both sides to their clients.
Critics who advise against dual agency worry about potential conflicts of interest—the chance that the interests of both the buyer and seller will not be met. And to their credit, we understand how this could be a problem.
When it comes to real estate commission, a dual agent gets to keep everything because he or she is doing more work by representing both sides.
Sources
realtor.com https://www.realtor.com/advice/finance/realtor-fees-closing-costs/?distinct_id=s8YCn8b4V&user_email=brian.leneweaver%40cbrealty.com
