When it comes time to purchase or sell a home, there are generally several questions regarding who is responsible for paying the real estate agent, such as what is the commission rate and what does that money go towards?
Who pays the realtor?
Standard practice is for the home’s seller to pay the real estate commission. Sometimes there are exceptions to this practice, which is why potential sellers should always have an open conversation with their agent when preparing to list a property.
What is commission rate?
Commission rates vary by brokerage. While some agencies and agents may offer lower commission rates, its important to understand the difference between full-service agents and fee-based/flat-fee agents. Full-service agents tend to charge slightly more in commission as they usually include:
- More in-depth knowledge of the market
- A team of associates
- A full marketing plan to promote the property
- Syndicated listing schedule for websites such as: Zillow.com, Realtor.com and other real estate sites across the country.
An agent’s fees should be outlined in the listing agreement when the agent is hired; however, its highly encouraged for sellers to ask questions about the fee. Also, its important to remember that real estate commissions, along with costs associated with buying and selling a home, are tax deductible.
What does a commission cover?
Money from a realtor’s commission can be cut numerous ways; however, below is a common breakdown, based on a $150,000 home sale with a six percent commission rate ($9,000) that is paid by the seller.
- 50 percent to the buyer’s agent ($4,500)
- 30 percent to the buyer’s agent’s brokerage ($1,350)
- 25 percent to taxes ($1,125)
- 20 percent to marketing expenses, signs, website postings, photography, lockboxes and travel ($900)
- 25 percent to the individual agent ($1,125)
The amount an agent brings home covers their time taking and editing photos, securing advertising, adding online listings and meeting with the seller to make the home ready for buyers.