Who Pays The Agent?
When considering the idea of buying a home, or selling your property, it's normal to wonder... Who pays for what?
So let's get down to the brass tax, because it's likely that you're wondering: Who pays the agent? So, let's get into it!
What We’ll Cover
How much are Realtor fees, usually?
In a lot of states there are standard set commission rates, but they're not always (or usually set in stone).
For instance, if you google the average commission that New Mexico Realtors earn, you'd find that the average is 6.21% - and that's considered a statewide average. However, it's pretty common to see a 6% commission, which is usually split between both agents.
Majority of Real Estate Agents/Realtors have a brokerage split of some kind, meaning their brokerage takes a portion of their commission. You might also be wondering what all is normally included in an agent's commission, as far as services rendered to you, the client. While some agents have different services and resources that they offer (we talk about that here) things like signs, flyers, marketing, listing the property on the area MLS, and even sometimes photos/videos are included. However, majority of the larger ticket items such as staging, repair work, or deep cleaning, will come out of the seller's pocket.
Can I negotiate the Realtor's Commission/fees?
Selling and buying real estate are expensive and sometimes difficult legal transactions. So the idea of paying 3-6% of the transaction is overwhelming, it's not nearly as expensive as court & attorney fees would be if anything went wrong. With that said, the commission percentage is usually negotiated, depending on each state's regulations, by the Realtor/Real Estate Agent & the seller. The seller can determine what percentage of the sale price the agent gets, and how they split that amount with the buyer's agent. That means the buyer has very little say in what the Real Estate Agent gets paid. That doesn't mean they have NO say, however.
In some transactions it is possible for the buyer to offer to pay the buyer's agent's commission in an attempt to win an offer, or for the agent to offer a "discount" on their commission to friends, family members or repeat clients. However these are discussions you must have face to face with your agent/Realtor and it isn't required of them to do any of these things. Remember, they rarely get to keep all of their commission, and usually a transaction takes anywhere from a couple of weeks (rare) to several months to come to fruition - meaning they are working for free until you get to the closing table.
While your agent may not be willing to reduce their commission, they might be able to include the larger ticket items such as staging, in their fees instead, which would ultimately save you some money.
Who Pays The Realtor?
In short, the seller typically does. It usually comes out of the gross proceeds from the sale of their property/land and is given to the agent by the title company (depending on state laws/regulations) in the form of a check after closing occurs. This is usually why the seller has a say in how much the commission will be, and how the agent splits it.
Rental agents get paid differently, usually by either the landlord or the tenant, and that amount ranges anywhere between 1 month's rent and 15% of the annual rent and the rules around that vary by city and state.
If you're not sure who is paying your Realtor, you can ask!
Are Realtors worth the cost?
You may have heard that buying or selling without a Real Estate Agent/Realtor will save you money, and it some cases it might, but according to this resource "only 11% of sellers actually succeed at selling FSBO. And if they do? Those FSBO homes sell for about 26% less on average than agented properties, which often negates any savings!"
This article shares an example to help put things into perspective: "If you could sell your house for $218,000 by doing FSBO, then an agent would probably be able to help you sell the same house for $242,000—meaning you’d earn $24,000 more by selling with an agent! Sure, you’d lose 6% of your total profit to agent commissions. But that still leaves you with nearly $10,000 more than what you would’ve gained by selling your home the FSBO route."
While some folks decide to buy and/or sell without a Real Estate professional, the sale amount isn't the only factor to take into consideration. If you sell without an agent you don't have direct (or free) access to the MLS - a service that gets a significantly higher number of eyes on your property, and vets it's information to provide accurate and live updates, you would have to pay out of pocket for all marketing, signage, printed materials, open house resources, and much more. You would also have to field all calls related to the transaction by yourself, and answer questions for yourself - usually without the appropriate knowledge or information. You open yourself up to a number of liabilities, unreliable timelines and it's much easier to violate the contract AND law when you do it yourself.
FSBO usually still have to pay the buyer's agent's commission, reduce their price too soon, too often, or by too much, create wary buyers, pay more in concessions and fees to their buyer, AND majority still wind up using a Realtor in the end. So while I'd love to say it's 100% worth it to work with a Real Estate agent or Realtor, it may not always be. The best advice I can offer you is to interview more than 1 agent and get a feel for how they interact with you, help you, and put your mind at ease. A good agent is one YOU connect with and feel relieved to work with. It's very subjective.
Are There Different Types Of Real Estate Agents?
Yes! A Real Estate Broker is different from a Realtor. A broker can be a Managing Broker (or Qualifying broker in some states), who manages and runs the brokerage & takes on a more managerial role. An Associate Broker is the salesman of the brokerage, typically they possess a Broker license but they don't operate in the Managing Broker's supervisory role. A Realtor is a Broker who became a member of the widely respected National Association of Realtors - subscribing to the extensive ethics and standards of the Association.
There are also Listing agents, Buyers agents, rental agents, and commercial agents. Each has a specialized focus on one (sometimes more than one) area of Real Estate and they aim to provide high end services in that area to their clients.
You will also come across discount agents, who operate for a lower commission, but also offer fewer or less optimal resources and services. You'll find agents claiming to be "luxury" who prefer to work with higher price point listings or in a certain area of town. Each agent has similar ethics and standards they are required to adhere to, and unique skills or services they offer.
I'm a Full Service Realtor, meaning I offer my clients access to every single skill, resource, and asset that I possess along with my membership to the NAR - promising higher standards and more comprehensive ethics. I proudly do everything I can to give my clients the absolute best buying and selling experience(s) and prioritize my clients.
Looking for a Full Service Realtor? Click here then click "Contact" in the top right corner and ask me how I can help you find one in your desired area!