The process of buying or selling a house involves some serious money.
However, this can greatly vary depending on what type of property you are trying to list on the market.
This also depends on the year built, location, and the going market rate of your home.
If you are in the process of selling your home it’s important to know who pays the commission.
Read on for more information about who pays the commission when selling a house.
What is a Commission in the Real Estate Industry?
A commission is a fee that is paid to a salesperson or broker for their services. In the real estate industry, agents and brokers can collect commissions from both sides of a transaction – buyer and seller.
The commission is not set! (Read that again) What this means is that each transaction will be different.
So if you have a Real Estate Agent who comes to you and say that this is considered the standard fee in Texas. Kindly let them know that the commission is not a set fee in Texas.
If you live outside of Texas you can check with the local Real Estate Board to find out what its states about Real Estate Commission.
Commissions depend on the state and city of your home location and can range.
What Portion Of Commission Does The Seller Pay
So you ask the question what portion does the seller pay in the transaction? The answer to this question can depend on the market and the seller’s situation.
What typically happens is upon having a meeting with a Realtor. The Realtor and the Seller will agree upon a List Price of the House.
Once the Seller and The Listing Agent agree to List the house for a price. The Seller and the Listing Agent will come to terms on how much commission the Seller will pay to the Listing Agent.
For Example, you have a seller who is selling their house in Plano Texas for $540,000. They signed a listing agreement with The Michael Group agency.
They used Calvin Wright as their Real Estate Agent. The seller agreed to sign a listing agreement for 5%. The co-op fee is 2.5%. How much would the Buyer pay in commission?
This would depend on what’s in the Buyer’s Representative Agreement. If the buyer agreed to pay their Realtor 3%.
The Listing Agent has a co-op fee of 2.5% then how much would the buyer pay?
The buyer would pay .50% of the fee to the Realtor based on the Buyer’s Representative Agreement that they signed with their Realtor.
In a transaction typically the co-op is based on the Listing Agreement. So the fee that goes to a buyer’s agent is normally based on what’s in the agreement.
What Portion Of Commission does Buyer Pay?
This is always a question you will ask your Agent when you sign a Buyer’s Representative Agreement with them.
The buyer asks the Agent so how do you get paid a commission? The answer is normally “the seller will pay me a commission.”
Is this the correct answer? No! The real estate commission is based on the Listing Agreement in the agreement there is a co-op fee.
This fee is negotiable and is set by the Listing Agent.
So if for some reason you look at a property and the co-op fee is 2.5% and you sign a Buyer’s Representative agreement for 3% then you owe .50% to your Real Estate Agent who represented you.
If for some reason you see a home and your Realtor showed you the home and the fee is 2.0% and you sign a Buyer’s Representative Agreement with your Agent of 4%, the seller co-op fee will pay 2% of the amount owed. You will need to pay the other 2% to your Real Estate Agent for representing you in the transaction.
So remember the seller does pay some co-op broker fee but if for some reason this fee is lower than what is on your Buyer Representative Agreement then you will have to pay the fee amount for Representation.
I know you might be saying why would I pay my agent this fee? The answer is the cost of doing business with the Realtor.
Think about it! If you go into a courtroom and hire an attorney the attorney is going to charge you a percent for representing you on your case.
The same thing goes in the Real Estate industry, you are paying for Representation.
When Does the Buyer or Seller Pay the Commission in a Real Estate Transaction?
The commission is usually paid by the seller, but there are some exceptions. For example, if there is a buyer’s agent involved in the transaction, then the commission is typically split between them and the seller’s agent. The commission can also be paid by either party if they choose to use a buyer’s agent that was not selected or approved by the other side.
So when does the buyer or seller pay the commission in a Real Estate Transaction? This is normally paid when the real estate transaction has been fully completed.
Payment of commissions happens after the following:
1. Active Option period completion
2. Inspection period
3. Negotiation of repairs
4. Appraisal has been order
Finally, lender documents are present at the title company
All parties have signed
The file has closed and the escrow agent has given notification that the file is funded.
So the Real Estate Agents who are part of the transaction don’t receive payment until the above has happened. That means if the file doesn’t close the Real Estate Agents do not get paid.
There is some exception to the above scenario. If for some reason you sign a Listing Agreement or Buyer’s Representative agreement that has a termination fee.
The termination fee is due immediately upon terminating the Listing Agreement or Buyers Representation agreement.
The other fee that sometimes gets charged in the Buyers Agreement is a fee to get started showing homes.
The Real Estate agent might charge a fee to get started showing you homes. Sometimes some agents will credit this fee at closing.
Why do some Real Estate Agents charge more than others for their services?
One of the most important considerations in buying or selling a home is the agent who handles the process. The agent you choose can make or break your experience.
Some agents might charge more due to the broker splits that they might have with their broker.
In Real Estate the broker commission can sometimes get broken down, even more, when Real Estate Agents have to pay their broker.
This fee can vary from a flat fee to a 20% fee due to the broker or even 25% to 35% fees that are due to the broker.
So, some Real Estate agents charge more to cover these extra fees that are taken from the commission amount.
For example, you have X Realty Firm who has a Real Estate Agent who works for their firm. The broker of X Realty has an 80% to 30% commission split with their Real Estate Agent.
The Real Estate Agent was able to sell a home fast in Richardson Texas for $450,000.
The Listing Agreement states that the overall commission is 5% with 2.5 % going to the co-op broker.
How much did the Agent make who Listed the home in Richardson Texas?
The amount is broken down as the following:
Commission: $11,250.00
The broker Fee is 25%. This amount is: $2,812.50
The Listing Agent would receive: $8,437.50
If for some reason the fee would fall below 2% the fee structure would change.
So it’s a matter of checking with different agents to find out how much they will charge to list the property for sale.
In real estate everything is negotiable
Conclusion
The cost of listing a property will vary depending on the location, your time frame, and other factors.
When you are dealing with Real Estate Agents remember that fees are negotiable and you want to make sure that you get the best representation when it’s time for you to make that decision to sell your home fast.
You may have a lot of questions about what portion the seller and buyer pays in real estate commission.
We hope this article has helped answer some of these questions for you!
If you still don’t know where to find an agent, feel free to give me a call or email so we can chat more about your goals.
I would love to help make sure you can get started on selling your home quickly.
Let me know if this article helped you by liking, and sharing it!