When buying or selling a house, one of the most common questions, especially with first time home buyers is, “Who pays the realtor?”. Is it the responsibility of the buyer or the seller? In most cases, the seller envelopes the commission into the price of the house. In other words, the price of the home already has the commission factored in. So, when buying a home, who pays the realtor commission? When you learn the answer, you might be a bit relieved.
For Sarasota, FL and most of the United States, in a typical transaction the seller pays the real estate fees.
So, in a nutshell, real estate services are free to home buyers, so be sure to take advantage of it, especially if you are a first-time home buyer. Being there are many important steps in a real estate transaction, as soon as you are ready to pursue buying a home, find a good real estate agent. The duties of your real estate agent will go far beyond just finding you a home, and their expertise in the industry is valuable to your transaction.
How to Find a Good Real Estate Agent
Start your search for a real estate agent by asking friends and family for recommendations. Research the agent to see that they have the personality, skills, and expertise which meet your expectations. Ask them a lot of questions. A full-time realtor will look at homes every day, and as a result, they are very familiar with local market conditions, school systems, local commutes, and local housing topics of concern, for example, Chinese Drywall or newly proposed roadways. A good Realtor will also protect your financial interests.
Who Pays for Realtor Fees in a For Sale By Owner?
When a realtor assists you in finding a home, they look at all options. This might include a for sale by owner, also known as a FSBO. When advertising, some FSBO’s will state what commission they are willing to pay a real estate agent. If not, then your agent will contact the owner and negotiate an agreement. Next, the owner and agent will sign an Authorization to Show which outlines the commission. All parties should be informed of what is in the agreement prior to viewing the home.
In some cases, buyers will agree to pay the commission. In this scenario, the compensation can be factored into the cost of the house and paid from the proceeds at closing. In either situation, your Realtor is not paid until the property closes.
Who Pays the Realtor on Rental Transactions?
When real estate agents assist clients in looking for rentals, who pays the Realtor fees? In our area, Sarasota, FL, it is standard for the Landlord to pay the agent their compensation, but not all states work the same. For example, in New York City, the tenant pays the real estate commission. Since area standards differ, the first thing you should ask before house hunting is , “Who pays for the realtor fees?”
Now that we know who pays the fees in real estate transactions, let’s look at how a Realtor gets paid.
How do Real Estate Agents Get Paid?
An agent commission is not paid out until the property closes. If the property does not close the agent does not get paid. Below is the common real estate scenario on how agents get paid, but keep in mind that this does not hold true to every transaction.
1. The Seller Pays His Broker
The seller’s pay their listing brokerage the agreed upon commission at closing. The listing brokerage then pays the buyer’s agents brokerage their share of the commission. For example purposes, let’s say the commission is 6% and the listing and buyer’s agent split the commission. First, the 6% agreed upon commission is paid to the listing broker. Next, the listing brokerage pays 3% to the buyer’s brokerage.
2. The Broker Pays the Agent
Agents can only accept payment from their managing broker in which they work under. They cannot accept payment directly from the buyer or seller at closing. Once the brokerage receives their portion of the commission, they will pay the agent.
3. The Agent Must Compensate Their Broker
Contrary to what most might think, agents do not get paid the full 3%. An agent must compensate their broker in which they hang their license under, and on average, out of the 3%, the broker takes 40%. Depending on the agents agreement with their broker, this percentage will vary. Therefore, on a $200,000 home, the agent’s brokerage receives their 3% commission of $6,000. The broker retains $2400 and the agent gets $3600.
Debates About Real Estate Fees
One of the biggest contentions about real estate fees is that commission rates are too high. It is important to know that fees are negotiable. When buying a home, the fees are typically paid by the seller, so this part of the transaction is usually not negotiable with buyers. When selling a home, the listing agent and the seller will come to an agreement on commission, but be careful. Remember the old saying, you get what you pay for? While there are good and bad agents, this is a tough argument to win for either side.
As an example to this argument, let’s say a home is listed and sells in one day. In this case, yes, the agent makes a quick commission for preparing the home, listing the home, taking photos, and handling the transaction from contract to close. However, on the flip side, a home can take weeks, or even months to sell, especially when it comes to higher priced real estate. Agents can tally up many hours on marketing the home, holding open houses, showing the home, answering calls about the home, and monitoring comparables on the home. The longer the home is on the market, the more an agent will spend on marketing, advertising, and signage. If agents were paid by the hour, this could prove to be very expensive, so the commission system is a viable compromise.
That said, if your agent does agree to a lower commission, make sure you will receive the same level of service. Your agents motivation is based on what they will be paid in the end. Photos, video tours, post cards, signage, open house advertising, and marketing are costs the real estate agent absorbs. The broker they work under typically does not pay for this. If you lower their motivation, you take the chance of lowering the potential for your home to sell quickly for the best possible price.
Advice and Thoughts
Whether you are buying or selling a home, there are things that you should research in advance. One being, who pays commission. Furthermore, it makes sense to hire the best local realtor to assist you with the process. Selecting a real estate agent should not be based on what they charge for the commission. More importantly, choose them based on their expertise, skills, marketing, and personality. An outstanding realtor will go out of their way to make sure the marketing is exceptional. Good marketing and proper pricing are what will prevent your home from lingering on the market.
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The above Real Estate information on “Who Pays the Realtor Fees, the Buyer or Seller” was provided by Gina Ursini, a local residential real estate expert. Gina specializes in home buying, home selling, new home construction, and custom exterior and interior remodeling. Her comprehensive background encompassing design and home staging provides her clientele with a broader perspective for their residential real estate needs. Gina can be reached via email or by phone at 941-812-4894.
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