The average real estate agent makes about $47,880 every year.
But where do they get that money? Does the seller pay for the realtor or the buyer?
Often times, it’s a little bit of both.
Not sure how that works?
Keep reading below to learn more about realtor fees, closing costs, and who is supposed to pay for what.
What Are Realtor Fees?
There are a few different types of realtor fees you need to be aware of when buying or selling a home. These fees break down into two separate categories: realtor commission and closing costs.
What’s the difference?
Here’s a closer look at each one below.
Realtor Commission
When a real estate agent helps you sell—or buy—a home, they get a small amount of the sale price. This amount is calculated in a percentage known as the real estate commission.
Here’s how it work.
Most realtors will charge a small percentage of the value of the property, usually 6%.
But keep in mind, there is no set percentage every realtor must use. Instead, the percentage can vary. Some realtors could charge as low as 3% (here’s more information on low commission real estate agents) while others will push it up closer to 8%. It all depends on where you’re selling and who you’re working with.
So if your house sells for $200,000, your realtor will take $12,000 of that amount.
Closing Costs
Closing costs are miscellaneous fees that aren’t a part of the realtor commission. When you buy or sell a house, you have to pay for these fees when the deal closes.
These fees cover the following:
- Title company fees
- Surveyor costs
- Loan processing
- Home insurance
- Real Estate Deed Recording
- Homeowners associate fees (or any other taxes)
All these fees together can cost about 3.5% of the sale price.
But again, this depends on your specific circumstances. The closing costs can range anywhere from 2 to 7% with some extra wiggle room on both ends.
Who Pays for All This?
All these percentages are stacking up to be a lot of money, so who’s supposed to pay for it?
Well, there’s no easy answer to this question.
In some cases, the seller will pay for most of it. In other cases, the buyer will shell out more money than the seller. It depends on the house, the negotiating skills of your realtor, and the exact deal you come up with.
But the realtor commission and the closing costs are commonly broken up between the seller and the buyer.
Here’s how.
The Seller
In most home sales, the seller will take care of the realtor commission. This means they will pay both their realtor’s commission and the buyer’s realtor’s commission (if they have a realtor).
But the seller doesn’t have to pay a 6% commission for both realtors. Instead, the 6% commission will get split between the two realtors.
Here’s how.
After a seller sells their home, they’ll give 3% of the commission to their realtor. They’ll then give the other 3% to the listing broker. The listing broker will pass that 3% along to the buyer’s realtor.
The Buyer
Since the seller pays for the realtor commissions, the buyer often pays most of the closing costs.
But that doesn’t mean they pay for all of them.
Sometimes, the seller will pay for a small amount of the closing costs too. The amount each party covers can change significantly depending on the agreement. There are times where the buyer will pay for 100% of the closing costs.
Times When the Payment Can Be Different
While the seller will often pay for the realtor commission and the buyer will often pay a large chunk of the closing costs, the bill doesn’t always split that way.
There are times the seller’s and buyer’s payment responsibilities can look completely different.
How?
There are a number of things that can change the payment method around, but two of the most common are negotiation and attractive offers.
The Power of Negotiation
If your realtor is good at negotiation, you can come up with an agreement that is miles away from the common payment methods.
For example, the seller and the buyer could swap places. In other words, the buyer could pay for the realtor commissions and the seller can pay for the closing costs.
Depending on the agreement, both the buyer and seller might split the commission and closing costs equally.
Negotiation can mold the bill into whatever shape the buyer is willing to go along with.
The Buyer Wants a More Attractive Offer
If there’s a lot of interested in your home or a bidding war has broken out, the buyer might offer to pay for all the closing costs or some of the realtor commission fees to make their bid more attractive.
The seller might be more willing to take their offer if the buyer decides to pay for more of the fees.
Who Pays the Realtor – The Buyer or the Seller?
So who pays the realtor when you’re buying or selling a house?
It depends on the situation.
However, most of the time, the seller will pay the realtor commission. Because of this, the seller is the one who pays the real estate agent.
But that doesn’t mean the buyer doesn’t have to pay anything. They’ll cover most, if not all, of the closing costs. In some cases, they may even help with the realtor commission as well.
It can change from house to house.
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