How Do Real Estate Agents Get Paid and By Whom

Buying or selling a home is a big financial investment. Using a Real Estate Agent will help you get the most for your money. Some people may try to “go it alone” to save the agent fees.  Ultimately these people will usually wind up spending more money and time by going it alone. So, how does an agent get paid? Read on…

 

For both buyers and sellers, the help of a knowledgeable broker is valuable, but who pays for the services of the real estate agent? If you’re about to start your home-buying journey, you’re likely thinking about hiring a real estate agent. Buyers and sellers are responsible for paying for different fees, so it’s important to know best practices for a typical home sale.

Here’s what you need to know about real estate agent commission and how much cash you can expect to contribute.

Who pays the real estate agent?

Standard practice is that the seller pays the real estate commission of both the listing agent and the buyer’s agent, according to Ruth Johnson, a Realtor® in Austin, TX. But she also points out that “while sellers pay the fees, they usually wrap them into the price of the home.” In that sense, you could say the buyer pays the fees. “It totally depends on how you look at the situation,” she says. Fair point!

How much are real estate agent fees?

A common commission for real estate agents is 6% of the purchase price of the property. The fee is paid at closing by the seller, unless some other arrangement has been made.

All of the details about a real estate agent’s fee should be in the agreement you sign when you hire an agent—don’t be afraid to ask questions if there’s anything you don’t understand.

Generally, things like photography, the cost of listing the property, and the cost of any printed materials or signs are included in the fee, along with the real estate agent’s services, of course. If you have to do major staging or repair work, those costs will come out of your pocket.

Can you negotiate real estate agent fees?

A seller can negotiate the terms of the listing agreement—which contains the real estate agent fees—with the brokerage or agent.

If a buyer is in a tough seller’s market or bidding war, offering to pay some or all of the real estate agent’s fees can be a way to stand out from other offers. In fact, even though the buyer usually pays most of the closing costs, they are up for negotiation, too. That’s one of the many things a good agent will do for a buyer—make sure you get the sweetest deal possible.

Who pays the rental agent’s commission?

Rental agents work differently from purchase agents. It’s up to the landlord and the tenant to decide who pays the rental agent’s fee. Broker fees for finding you a rental generally fall between one month’s rent and 15% of the annual rent of the property.

In some situations, the landlord pays the broker to help him find a desirable tenant. But in other areas, like big cities with large rental populations, the renter will be required to pay the broker fee, even if the landlord hired the broker.

Customs vary widely by location, so always make sure you clarify who is going to pay for what, and how much it’s going to cost, before you agree to work with a rental agent.