Who Pays the Real Estate Agents Commission
The truth about real estate commissions. Many buyers, buyer agents say to their buyer’s agent what am I paying you for, right? What am I paying you for, what are you doing for me, right? Let’s just break down how the real estate commission works, on just an example and an average and simple numbers, okay.
The buyer agent actually gets paid from the sellers. When a seller lists their home at let’s just say four percent, two percent stays with the listing agent, two percent goes to the buyer agent. So money is not actually coming out of the buyer’s pocket to pay for the buyer agent services. Now commissions are only paid when the deal is closed and recorded, which means they really put their money where their mouth is.
I’m going to take you through the entire steps to buy this home and facilitate the sale, only to get paid if and when it closes. If the deal dies at the very last minute, you don’t owe the buyer agent a dime. Now there are some agencies out there that will ask for some money up front. It’s not typically the norm, it doesn’t really happen in the New England area that much. Some people will have you sign a buyer agency agreement, which basically means you’re going to have to buy with me.
So even if this deal falls apart, you’re still kind of obligated to continue to work with me, so I know that I’m not putting in my free time. But at the end of the day, a buyer does not pay the buyer agent, the seller does. Now, do you finance that? Well, it’s part of the sale price. So if the home sells for 350, then the seller’s proceeds are going to be their closing costs minus the four percent. So yes, you could get technically two percent off the sale price if you bought it for sale by owner, or didn’t use a buyer agent.
But typically in that situation, the listing agent would then turn to a dual agent and keep both sides of the commission. So the buyers sometimes say what I need a buyer agent for? What are you doing for me? I don’t want to it, does that cost me? At the end of the day, it does not technically cost you, because it’s rolled into the sale price of the home. Now the flip side to that is sellers may say what do I need to pay an agent for? Well, that’s a little different of an argument.
You could certainly put your house on the market for sale by owner, or an entry on listing by yourself, you certainly can. But in most cases, the buyer agent is going to want some type of commission offered to bring the buyers through, and we of course aren’t working for free. The seller can sell for free, but the buyer agent doesn’t want to come put in the effort, and is frankly not going to put in the effort if there’s no commission involved.
And then of course you don’t want to buy, it’s not recommended that you buy from a for sale by owner, because the agent is going to facilitate on your behalf, and basically advocate for you. And that’s really where the commission’s come in, okay. So it’s a typical misconception that you pay the buyer agents. Buyers don’t get paid by the buyer, they get paid by the seller. A seller pays a full percent, and it’s split up 50/50 as indicated in the MLS.
But more importantly, a buyer agent shouldn’t really worry about the commission, because it comes on the seller side and they build that into their list price. So when the listing agent sits down and says okay, I think the home is worth 350, that’s understood that the closing costs and the commissions are going to be built into that selling price. Hope you enjoyed the commission breakdown, Evan Russell, Russell realty minute.