Who Pays Realtor Commissions in Pennsylvania?

In Pennsylvania real estate transactions, understanding who pays commissions is a common question for both buyers and sellers. While traditional practices have historically placed the primary responsibility on one party, recent changes in the real estate landscape have introduced more flexibility and negotiation into the process.

Understanding Real Estate Commissions

A real estate commission represents the fee paid to real estate agents for their professional services in facilitating a property transaction. In Pennsylvania, average total commission rates generally range from 5.35% to 6% of the sale price, though these rates are always negotiable between the parties involved.

Real estate professionals provide a range of services covered by these commissions. These services include conducting market analyses to determine appropriate pricing, marketing the property through various channels, coordinating property showings, negotiating offers and counteroffers, and managing the extensive paperwork involved in a real estate deal. While a percentage of the sale price is the most prevalent structure, some agreements might involve flat fees or other arrangements depending on the specific services offered and negotiated terms.

Seller’s Primary Obligation

Historically, and often still, the seller has been the party responsible for paying the entire real estate commission in Pennsylvania. This arrangement is formally established in the listing agreement, which is a contractual document signed between the seller and their listing brokerage. The listing agreement specifies the total commission rate and the terms under which it will be paid.

This commission is typically factored into the property’s sale price and is paid out of the sale proceeds at the time of closing. The total commission is then divided between the seller’s agent’s brokerage and the buyer’s agent’s brokerage, compensating both sides for their roles in the transaction. This traditional method ensured that both agents received compensation from a single source, simplifying the payment process for many years.

Buyer’s Agent Compensation

Compensation for a buyer’s agent in Pennsylvania has traditionally come from the total commission paid by the seller, rather than directly from the buyer. However, recent changes stemming from a 2024 federal lawsuit settlement have shifted the landscape, requiring more direct negotiation regarding buyer agent fees.

While sellers can still offer to pay a buyer’s agent commission as a concession, it is no longer a mandatory inclusion in property listings. Buyers are now often expected to sign a buyer agency agreement with their agent, which outlines the services to be provided and the agreed-upon compensation. This agreement formalizes the relationship and clarifies the agent’s responsibilities to the buyer, even if the seller ultimately covers the cost. In situations where a seller does not offer to pay the buyer’s agent commission, the buyer may be directly responsible for compensating their agent as per their agency agreement, or they may negotiate for seller concessions to cover these costs.

Commission Payment Timing and Conditions

Real estate commissions in Pennsylvania are almost universally paid at the closing of the real estate transaction. Payment is contingent upon several conditions being met, including the formal transfer of the property title from the seller to the buyer and the full funding of the transaction.

The closing agent, such as a title company or real estate attorney, plays a central role in disbursing these funds. They manage the financial aspects of the closing, ensuring that the commission, along with other closing costs, is paid directly from the sale proceeds to the respective real estate brokerages. Should a sale fall through before closing, the commission is generally not due, as the conditions for payment have not been fulfilled. This structure aligns the agent’s compensation with the successful outcome of the property sale.