Does the Seller Pay All Realtor Fees?

When a home is sold, a common question arises regarding who is responsible for paying the real estate agent fees. In most residential real estate transactions across the United States, the seller has traditionally covered the commission for both their own agent, the listing agent, and the agent representing the buyer. While this practice has been a long-standing norm, recent industry changes have introduced more flexibility and negotiation around who ultimately bears these costs.

Typical Realtor Commission Structures

Real estate commissions are calculated as a percentage of the home’s final sale price. Historically, the total commission has ranged from 5% to 6%, with recent national averages between 5.32% and 5.44%. This total commission is generally split between the listing agent’s and buyer’s agent’s brokerages, often in a near 50/50 arrangement.

Real estate agents are compensated by their brokerages from these funds, not directly by the seller. For example, if the total commission is 6%, the listing and buyer’s brokerages might each receive 3%. Individual agents then receive a portion based on their agreement with their brokerage. While sellers can still agree to pay the buyer’s agent fee, recent industry shifts mean it is no longer automatically mandated, leading to more direct negotiation between buyers and their agents.

Negotiating Commission Agreements

The formal agreement to pay real estate commission is established through a listing agreement, signed between the seller and their listing agent’s brokerage. This contract outlines the terms, including the agreed-upon total commission percentage, agreement duration, and specific services.

Real estate commission rates are not fixed by law or professional organizations; they are negotiable. Several factors can influence the commission rate, such as local market conditions, property value, agent experience, and the scope of services offered. Understanding all terms and conditions before signing is important for sellers to ensure the agreement aligns with their financial expectations and selling goals.

The Commission Payment at Closing

Real estate commissions are paid at the successful completion of the home sale, known as closing. This payment is not made directly by the seller writing a check to the agents. Instead, the agreed-upon commission amount is deducted directly from the seller’s proceeds from the sale.

A neutral third party, such as an escrow officer or an attorney, facilitates this payment process. They manage all financial transactions and ensure proper distribution of funds. The deductions, including real estate commissions, are itemized on the closing statement, which provides a detailed breakdown of all costs and proceeds for both buyer and seller.

Alternative Home Sale Models

While the traditional model involves the seller paying commissions, several alternative home sale models exist that can alter or eliminate these fees. One option is selling a home “For Sale By Owner” (FSBO). In an FSBO sale, the seller directly handles all aspects of the transaction, avoiding the listing agent’s commission. However, if a buyer is represented by an agent, the FSBO seller may still need to offer a commission to the buyer’s agent to attract offers.

Another alternative involves using flat-fee Multiple Listing Service (MLS) services. With this model, sellers pay a fixed fee to have their property listed on the MLS, gaining broad exposure without engaging a full-service listing agent. Sellers using these services may still offer a commission to the buyer’s agent to incentivize showings and offers.

Discount brokerages also offer reduced commission rates or different service packages compared to traditional full-service models, which can result in cost savings for sellers. For sellers prioritizing speed and convenience, direct buyer programs or cash buyers offer to purchase properties directly. These companies buy homes “as-is” and do not charge commission fees, though their offers may be below market value compared to a traditional sale.