Do Home Buyers Pay Realtor Fees? What to Know

Understanding real estate commissions is important when buying or selling a home. While there is a common perception that home buyers do not pay realtor fees, the reality is more nuanced. This article clarifies the financial dynamics of real estate agent compensation, detailing how these fees are structured and who ultimately bears the cost.

Understanding Real Estate Commissions

Real estate commissions are fees paid to agents in facilitating a property sale. These commissions are structured as a percentage of the home’s final sale price. This percentage is negotiated between the seller and their listing agent, and it covers services provided by both the seller’s agent and the buyer’s agent.

The total commission usually ranges between 5% and 6% of the sale price, although this can fluctuate based on market conditions, agent experience, and the scope of services provided. For instance, if a home sells for $400,000 with a 6% commission, the total fee would be $24,000. This amount is split between the listing agent and the buyer’s agent, with each receiving around 2.5% to 3% of the sale price.

The Seller’s Role in Commission Payment

Historically, the seller has been responsible for paying the entire real estate commission from the home sale proceeds. This payment occurs at closing, where the commission is deducted from the seller’s funds. The seller’s agent’s brokerage receives the full commission, and then a portion is offered to the buyer’s agent’s brokerage as a co-broke commission.

For example, if the total commission is 6%, the seller’s agent’s brokerage might receive 3%, and the buyer’s agent’s brokerage might receive the other 3%. Individual agents then receive their share from their respective brokerages based on their commission splits. Buyers traditionally do not directly write a check to either agent for their commission.

Indirect Buyer Impact on Commission

While buyers traditionally do not directly pay real estate agent commissions, the cost of these commissions still indirectly affects them. Sellers often factor the cost of the commission into the listing price of the home. This means that the commission is embedded within the property’s sale price.

By paying the agreed-upon purchase price, the buyer is indirectly contributing to the funds from which the commission is paid. A higher commission rate can lead to a higher listing price, which in turn means a greater overall cost for the buyer. This dynamic makes the commission an indirect cost for the buyer, as it is funded through the mortgage or cash used to purchase the home.

Buyer Agent Compensation Agreements

Recent changes emphasize buyer agent compensation agreements. Buyers are increasingly responsible for compensating their own agents, unless otherwise negotiated. These formal contracts outline how the agent will be paid for their services.

Agreements can specify a flat fee, an hourly rate, or a percentage of the purchase price paid directly by the buyer, especially if the seller does not offer sufficient compensation. These direct payment scenarios are becoming more common, and buyers may now be required to sign a written buyer agency contract before touring properties. These agreements aim to provide transparency regarding the agent’s compensation and services.