Who Pays the Real Estate Agent

Most home buyers and sellers work with a real estate agent, and the agent charges a commission. How much is the commission, and who pays it? The answer in both cases is: the terms are set in the listing contract the seller signs.

Typically the buyer and the seller each have their own agent, and the commission is split down the middle between the two agents. (Read more about the types of real estate representation.)

SELLER’S PAY THE REALTOR COMMISSIONS. Thus, if you are a buyer there is no reason you should not be working with a Realtor! A real estate agent will help you understand everything you need to know about the home buying process and save you time and money.

They are there to represent and negotiate for your interests and to help you find the right home, the right financing, to ensure you get the best terms possible and that your transaction closes smoothly and on time. The agent fee (i.e. commission) is a pre-arranged amount (usually a percentage of the sales price – 6-7%) that the seller has agreed to pay the listing agent for their service at closing and under the terms listed in the listing agreement.. The listing broker then offers part of the commission — typically 3% — to the agent who represents the buyer. That means it’s provided by the listing broker/agent and is not an additional expense to the seller, nor is it added onto the amount the buyer pays. Thus it is actually the seller’s agent that pays the buyer broker and again buyers do not pay commissions. (the same goes for new homes / new construction and if the buyer isn’t represented by a buyers agent, the builder will not reduce the cost of the home and rather they will simply roll these additional proceeds into their marketing of their other properties – this makes sense as real estate agents are the number one source of buyers for builders and it’s not in their best interest to estrange this group.)

Two important points about commissions:

1. Commissions come out of the sale proceeds. The fees aren’t added to the home’s purchase price. So, if a house sells for $200,000 and the commission is 6% ($12,000), the net proceeds (barring other closing costs) are $188,000.

The seller pays the commission, and the seller of a home listed with a real estate agent agrees to pay this commission when they sign the listing agreement and prior to the agent marketing the home.

2. Commissions are paid to brokers, not directly to agents. Every agent must work for a broker; they can’t act independently and are not paid directly. If the transaction includes both a buyer’s agent and a seller’s agent, each will be paid by their respective brokerage.

Brokers set the commission they charge for houses sold through their brokerage. Traditionally, the commission is 6-7% of the sales price, but again, that amount is negotiable.

Brokers keep a portion of that fee. The agent’s share, called the commission split, could be as low as 30 percent of the commission for new agents or as much as 75% (or more) for veteran or highly successful agents.

The Seller’s Agent’s Commission Generally, brokerages demand the exclusive right to sell a house for a certain number of months. During that period, the contract usually states that the seller’s broker (also known as the listing broker) will receive the full commission if a contract for the sale of the house is signed, regardless of the circumstances of the sale. The justification for this is that the listing agent’s brokerage spends time and money advertising, listing the property, preparing the house for showing and otherwise promoting the sale.

The Buyer’s Agent’s Commission The buyer’s agent (also known as the selling agent) works with home seekers. Common practice is that the seller’s broker shares the commission with the buyer’s broker, but it’s not always an equal split. For example, a seller might agree to pay 7% total commission, to be divided as 4% to the listing broker and 3% to the selling broker. There are no rules on the split. If the same brokerage represents both buyer and seller, that brokerage receives the full commission, and the buyer’s and seller’s agents will get a cut according to their agreement with the broker.

An Example of Real Estate Agent Commissions Home owners ask agent Mike of ABC Brokerage to sell their house for $200,000. They agree on a 7% commission.

Steve, a buyer’s agent at XYZ Brokerage, brings his clients to see the house. They agree to purchase the home for $196,000.

The total commission will be $13,720, taken out of the sales price at the closing. So, the net proceeds from the sale are $182,280. The brokerages have agreed to divide the commission with 4% going to the listing agent and 3 percent to the buyer’s agent, respectively $7,291 to the listing agent and $5,468 to the buyer’s agent.

Mike, a highly successful agent for ABC, receives 75% of the brokerage’s $7,291 commission, or $5,468 to which $2,430 is directed towards the marketing expenses he incurred advertising the home. Steve, a new agent, receives 30% of XYZ’s $5,468 commission, or $1,640.

Here’s an article from Realtor.com on the subject Buyer Agents: Working for You Free of Charge

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please give us a call and we’d be happy to assist you!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickeringto, 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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