Who Pays Real Estate Agent Commission Fees

Agent commissions are one of the most commonly debated topics in real estate. Who is responsible for paying real estate agent commissions? What is the purpose of these fees? The specifics of agent fees can be a little hazy. Let's take a few moments to sort things out!

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

At the close of escrow, the agents representing the seller and buyer divide a commission fee (usually 5-6 percent of the home's purchase price, according to Forbes). The concept of who pays the commission might be difficult to explain, which is why some agents try to make things easier by telling the buyer that the expenses are covered by the seller. However, this isn't completely true.

While the funds come from the money the buyer pays to the sale, the payment is officially disbursed by the seller. It's pretty uncommon for sellers to add these commissions into the initial listing price to account for them. When it comes time to close, buyers are essentially footing the price for these expenses.

“It might be claimed, quite legitimately, that the buyer always pays the commission,” says agent Elizabeth Weintraub. Why? Because it's usually included in the purchase price. The purchase price might have been reduced if the seller had not agreed to pay a commission.”

What do these fees cover?

While many today's buyers choose to go property hunting on their own, others prefer to deal with a real estate agent. Those who opt to engage with a typical buying agency will discover that their agents spend the majority of their time gathering property listings, driving to tour homes, and conducting pricing analyses in order to assist them in making strong offers.

After the buyer's offer is accepted and escrow opens, the agent's time will be spent coordinating inspections and appraisals, negotiating repair costs, completing the closing paperwork, and doing some minor bookkeeping (the agent is responsible for maintaining the financial account used to pay inspectors and appraisers).

Are agent fees negotiable?

You might be startled to hear that not only are agent commission prices negotiable, but that many agents expect their clients to do so as well. Some deals, according to Elizabeth Weintraub, lend themselves to negotiation more than others. One such transaction is a dual agency sale, in which one agent represents both the seller and the buyer.

“In certain regions of the country, it's occasionally a typical approach used by sellers to ask a listing agent if they will agree to cut their commission if they wind up representing both the seller and the buyer,” Additionally, if you're selling numerous properties at once, you might be able to negotiate a lower agent's fee in exchange for the right to market the properties exclusively. High volume agents or those with a "lock" on a market may be less willing to negotiate their rates.

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.