One of the most frequently pondered topics in real estate is that of agent commissions. Who pays realtor fees? Why are these fees charged? Are they negotiable? Admittedly, the details of agent fees can be a bit murky. Let’s take a moment to clear things up!

How real estate agents get paid, and who really pays them

The agents who represent the seller and buyer split a commission fee (typically 5-6% of the purchase price of the home according to Forbes) at the close of escrow. The concept of who pays the commission can be a tricky one to explain, which is why it’s no surprise some agents attempt to simplify things by telling the buyer that the seller covers the fees. That, however, isn’t entirely true.

While the payment is technically disbursed by the seller, the funds come from the money the buyer pays to the seller. It’s actually not uncommon for sellers to account for paying these commissions by factoring them into the initial listing price. Buyers essentially foot the bill for these fees when it comes time to close.

According to agent Elizabeth Weintraub, “It can be argued, quite rightfully so, that the buyer always pays the commission. Why? Because it’s typically part of the sales price. If the seller did not sign an agreement to pay a commission, the sales price might have been lowered.”

What do these fees cover?

While many of today’s buyers often prefer to house hunt on their own, others decide to work with an agent to find a home. For those who choose to work with a traditional buying agent, they’ll find that their agents spend most of their time pulling home listings, driving to tour homes and doing pricing analysis to help them make strong offers.

Once the buyer’s offer is accepted and enters escrow, the agent will spend their time helping coordinate inspections and appraisals, negotiating repairs costs, handling all of the closing paperwork and some light accounting (the agent is responsible for maintaining the financial account used to pay inspectors and appraisers).

Are agent fees negotiable?

You might be surprised to learn that not only are agent commission fees up for negotiation, but many agents also expect their clients to do so. Per Elizabeth Weintraub, some transactions lend themselves to negotiating more than others. Dual agency sales or sales in which one agent represents both the seller and buyer is one such transaction.

Elizabeth explains, “It’s sometimes a common tactic used by sellers in certain parts of the country to ask a listing agent if they will agree to lower their commission if they end up representing both the seller and the buyer.” Additionally, if you’re selling multiple properties at one time, you might be able to negotiate a reduction in the agent’s fee in exchange for the right to exclusively list the properties. High volume agents or those who have a “lock” on a particular market might be less open to negotiating their fees.

Some agents are actually willing to provide their buyer with a commission rebate at closing. The key in any situation, however, is simply to ask.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.