Who Pays Realtor Fees for Sale by Owner?

Selling a home involves various financial considerations, particularly real estate commissions. For Sale By Owner (FSBO) transactions, where sellers manage the sale process themselves, often raise questions about who is responsible for these fees. Understanding typical commission structures clarifies how costs are handled when an owner sells without traditional agent representation.

Traditional Real Estate Commission Structures

In a standard real estate transaction, the seller traditionally bears the entire commission, divided between the listing and buyer’s agents. This total commission typically ranges from 5% to 6% of the home’s final sale price. For instance, on a $400,000 home, the combined commission could be $20,000 to $24,000. This payment is usually deducted from sale proceeds at closing, not an upfront expense for the seller.

The total commission is commonly split, often 50/50, between the seller’s (listing agent) and buyer’s (buyer’s agent) brokerages. For example, a 6% total commission might mean 3% for each. Each brokerage then divides its share with its agents, based on their individual agreements.

Recent legal settlements have altered how buyer’s agent commissions are disclosed and negotiated. While sellers traditionally covered both agents’ fees, new rules emphasize buyers are now responsible for compensating their own agent, unless negotiated. However, sellers can still offer concessions to cover the buyer’s agent commission, a common practice to attract buyers.

Realtor Fees in For Sale By Owner Sales

When a property is sold For Sale By Owner (FSBO), the seller handles listing agent responsibilities, avoiding that commission. This represents significant savings, potentially 2.5% to 3% of the sale price. However, who pays the buyer’s agent in an FSBO transaction is nuanced, as the seller is not legally obligated to pay this fee.

If a buyer is not represented by an agent, the FSBO seller typically pays no real estate commissions, maximizing savings. This direct transaction eliminates the need for agent compensation from either side.

If a buyer works with an agent and the FSBO seller has not offered a commission, the buyer is generally responsible for their agent’s fee. Buyer-broker agreements often stipulate this. The buyer might pay their agent directly, ask for the commission to be rolled into the home’s sale price, or walk away if they cannot cover the cost.

Alternatively, an FSBO seller can offer a commission to a buyer’s agent. This strategic decision, not an obligation, broadens the pool of potential buyers. Many buyers use agents, who prefer properties with clear compensation. While offering a buyer’s agent commission reduces FSBO savings, it still results in substantial savings compared to a traditional sale where both a listing agent and a buyer’s agent are compensated. The percentage offered is negotiable, typically 2% to 3% of the sale price.

Strategies for Buyer Agent Compensation in FSBO

To attract more buyers, an FSBO seller can offer compensation to a buyer’s agent. Though not obligated, this increases property exposure and appeal. This approach bridges the gap between FSBO and traditionally listed properties, making it visible to agent-represented buyers.

An effective way for an FSBO seller to offer buyer’s agent compensation is by listing on the Multiple Listing Service (MLS). Since only licensed real estate agents can directly access the MLS, FSBO sellers often use flat-fee MLS listing services. These services allow a seller to pay a one-time fee (typically under $100 to several hundred dollars) to list their property. When using a flat-fee MLS service, the seller specifies the commission percentage offered to the buyer’s agent, usually 2% to 3%. This ensures buyer’s agents can easily identify the compensation.

Beyond MLS listings, an FSBO seller can directly negotiate with a buyer’s agent who brings a client. This involves discussing and agreeing upon compensation directly with the agent. Such negotiations typically occur during the offer and counter-offer process, where the buyer’s agent’s fee might be included as a concession within the purchase agreement.

FSBO sellers offer buyer’s agent compensation for several reasons. It increases property visibility, as most serious buyers work with agents using the MLS. Offering a commission attracts more qualified buyers and facilitates a smoother transaction, as buyer’s agents assist with paperwork, negotiations, and closing. While this cost reduces overall savings compared to a sale with no agents, it still represents substantial savings over a traditional sale with a listing agent’s commission.