Does the Seller Pay Both Commissions?

Real estate commissions are a significant consideration when selling a home. A common question is who pays these fees. Understanding the standard structure, influencing factors, and negotiation possibilities can simplify this aspect of a home sale.

The Standard Real Estate Commission Structure

The seller generally pays the entire real estate commission. This single payment, usually a percentage of the final sale price, is then divided between the seller’s agent and the buyer’s agent. The commission is paid at the close of sale, deducted from the proceeds.

The listing agent, also known as the seller’s agent, works directly for the homeowner, focusing on marketing the property, attracting potential buyers, and managing the selling process. The buyer’s agent, sometimes referred to as the selling agent, represents the interests of the buyer, helping them find suitable properties and negotiate purchase terms.

Commission sharing involves a co-brokerage agreement, where the listing broker offers a portion to the buyer’s broker. This offer is made through the Multiple Listing Service (MLS), a database where real estate professionals list properties. While the seller’s funds cover both agents’ fees, it is handled as one consolidated payment from the seller at closing, which the listing brokerage then distributes. This structure ensures buyer’s agents are compensated, even though their clients do not directly pay their fees.

Commission Rates and Influencing Factors

Real estate commission rates are not fixed by law and vary, ranging from 4% to 7% of the property’s sale price. The national average commission has been around 5.3% to 5.5% in recent periods, often split relatively evenly between the listing and buyer’s agents. These rates are subject to negotiation and are influenced by several market-driven factors.

Local market conditions play a role, with rates potentially differing in areas experiencing a seller’s market (high demand, low inventory) versus a buyer’s market (low demand, high inventory). Properties in competitive markets or those with higher home prices might see slightly lower percentage rates. The type and value of the property also influence rates; a higher-value home might allow for a lower percentage commission while still providing substantial compensation to the agents.

The scope of services offered by the real estate agent or brokerage is another factor. Agents providing extensive marketing, professional photography, virtual tours, or specialized expertise may command higher rates. Geographic location is also relevant, as average commission rates can differ between cities and regions based on local norms and market competition. An agent’s experience and reputation can affect their willingness or ability to negotiate rates, with highly sought-after agents potentially being less flexible.

Negotiating Commission Agreements

Real estate commissions are always negotiable. The commission rate is agreed upon between the seller and their listing agent and formalized within the listing agreement. This agreement is a legally binding contract outlining the terms of the agent’s representation and compensation.

Sellers can approach negotiation by directly discussing the percentage rate with their prospective agent. Researching average local rates helps establish a realistic target. Some sellers might consider alternative models, such as flat-fee services, where a fixed amount is paid for listing on the MLS, regardless of the sale price. This approach can save money on commissions, especially if the seller is willing to handle some aspects of the sale themselves.

Another negotiation strategy involves understanding the specific services included in the agreed-upon commission rate. Sellers can inquire about marketing plans, open house schedules, and other activities the agent will undertake. For instance, if a property is expected to sell quickly or if the seller finds the buyer independently, there may be grounds to negotiate a reduced commission. Review the listing agreement thoroughly to ensure all terms, including payment timing and any conditions for commission, are clearly understood before signing.