Real estate agent commissions are usually paid by the seller at the closing of the transaction as detailed in the listing agreement. Closing is when the title to a property is transferred from one person to another, and is often arranged by a title company (more on that later). The listing agreement is what sets out all of a seller’s instructions for selling their home, including price, desired closing date, repair requests, and more. It also details what percentage of the purchase price will go to your real estate agent for their services rendered (usually 4-6%).
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When Buyers Pay Commissions
There are some instances when buyers pay real estate commissions.
- When a listing agent sells a buyer’s home: A listing agent may end up selling their own listing to one of their buyer clients. This is more common than you might think. In this case, the agent will usually collect both the buyer and the seller side of the commission (known as “double ending” a deal).
- In a tight market: Sometimes when a market is very hot, it makes sense for sellers to offer to pay commissions on both sides of a sale. This can make your listing more appealing to buyers who might otherwise be hesitant about paying 3% in commission fees.
- When buying with cash: If you’re paying cash for a property, there’s no mortgage lender involved in the transaction, which means no lender-paid commissions. In these cases, it wouldn’t be uncommon for buyers to offer to pay their agents’ commission fees if they find an agent willing to work with them for free or for some other reduced fee structure
When Both Parties Pay Commissions
Though it’s the buyer’s agent’s job to negotiate on your behalf to get you the best price, you may still agree to reimburse that agent for their hard work. The reason is simple: a lower home price benefits you even more than it benefits the seller.
In addition, some buyers feel they are getting more out of the representation from their buyer’s agent and thus want to pay the commission. A good agent is there with you throughout every step of the buying process, answering questions, offering advice, and addressing concerns.
When Sellers Pay Commissions
In most transactions, the real estate agent commission is paid by the seller. The one thing that’s absolutely necessary to know when buying a house is who pays the real estate agent’s commission. It’s bad enough when you’re dealing with a salesperson, but if you’re a buyer you have to be especially careful.
Before we bought our house, I was worried that the real estate agent would smooth-talk us into paying more than the house was worth just to get us off his or her back. I didn’t want to pay any more than it was worth, but I also knew that we shouldn’t make it easy for an unscrupulous agent to rip us off either.
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