Real estate agent fees are how most agents are paid for the homes they sell. These commissions can vary from state to state and among brokerages. But who pays the commission in real estate—the buyer or the seller?
Who Pays the Commission of the Real Estate Agent?
If you’re buying a home, you’re probably off the hook for paying the commission of the real estate agents. The home seller usually picks up this payment. Typically, the seller pays the fee at the settlement table, where the fee is subtracted from the home sale proceeds.
Typically, the seller pays the agent fee to the listing broker, who, in turn, shares part of it with the agent who brings a buyer to the table, explains Adam Reliantra, a real estate agent in West Toluca Lake, CA.
Setting the Listing Price
When the sellers set a listing price for the home, they usually take the agent’s commission into account; it’s the cost of doing business.
How Much Is the Commission for a Realtor®?
The real estate agent commission is a percentage of the sale price. So, the specific amount depends on how much your home sells for, but it’s commonly 6% of the sale price. For example, if the home sells for $500,000, the real estate agent’s commission of 6% would be $30,000.
The commission is split between the buyer’s and seller’s agents. It’s a separate contract between the brokers and not something the buyer gets to negotiate as part of the offer (hold your negotiating for the closing costs).
Dual Agency: When One Agent Represents Two Parties
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 agencies illegal in real estate transactions to eliminate any question that the agent was neutral in representing the seller and the buyer outright. However, in the states that allow dual agency, agents are legally required to disclose that they’ll represent both sides to their clients.
What Do Closing Costs Cover?
When it comes to real estate commissions [a blogpost by FastExpert], a dual agent gets to keep everything because they do more work representing both sides.
Closing costs are the miscellaneous fees separate from the real estate agent fees that must be paid at closing. They cover things such as the following:
- Loan processing
- Title company fees
- Surveyor costs (if needed)
- Recording of the real estate deed
- Insurance
- Any taxes or homeowners association fees, which may need to be prorated if they’re already paid
The real estate closing costs will vary with each home sale/purchase and can range widely from 2% to 7% of the home’s purchase price. Typically, though, closing costs amount to about 3.5% of the sale price of a home, according to Leah Layman, a real estate agent in Augusta, GA.
Your agent will provide you with a buyer’s sheet that lays out the closing costs, and by federal law, you must receive a “good-faith” estimate of your closing costs from any lender you use in your real estate purchase.
Negotiating Closing Costs
Your negotiating skills (or your realtor’s) come into play when it comes to who pays the closing costs. There is no cut-and-dried rule about who pays the closing costs—the seller or the buyer—but buyers usually cover the brunt of the costs (3% to 4% of the home’s price) compared with sellers (1% to 3%).
“Most closing costs are negotiable,” Reliantra says. “Do not let the Realtors or vendors convince you otherwise.”
Attorney fees, commission rates, recording, and messenger fees can be negotiated.
Sometimes, the buyer will write into the contract that the seller will pay the buyer’s closing costs up to a certain percentage or amount.
“That’s why you need a good real estate agent to negotiate a contract for you,” Layman says.
If the closing costs are too steep and the sellers won’t chip in as much as buyers would like, the buyers can request that real estate closing costs be rolled into the mortgage.
So whether you’re the buyer or the seller, the listing price isn’t the only number you should focus on. Those fees outside the price of the house can add up, and you don’t want to be hit with any surprises late in the game.
Interested to know more about “Real Estate Agent Fees”? Chat with KM Realty Group LLC’s real estate team in Chicago, Illinois!
