Real estate agent fees are how most agents are paid for the homes they sell. This commission can vary from state to state and among brokerages. But in real estate, who is responsible for paying commission—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 fee is paid by the seller at the settlement table, where the fee is subtracted from the proceeds of the home sale.
The agent fee is typically paid by the seller 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.
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 commission of 6% would be $30,000.
The commission is split between the buyer’s agent and the seller’s agent. 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
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.
What do closing costs cover?
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
- Any taxes or homeowners association fees, which may need to be prorated if they’re already paid
The amount of 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 what’s called a “good-faith” estimate of your closing costs from any lender you use in your real estate purchase.
As for who pays the closing costs, that’s where your negotiating skills (or your Realtor’s) come into play. There is no cut-and-dried rule about who—the seller or the buyer—pays the closing costs, 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 costs, and messenger fees can all be negotiated down.
Sometimes the buyer will have written 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.