Who Pays Realtor Fees in Hawaii and How Much Are They?

Real estate transactions in Hawaii involve various financial considerations, with realtor fees representing a significant portion of the overall costs. These fees compensate real estate professionals for their services, which range from marketing properties and guiding negotiations to managing complex paperwork. Understanding commission structure and payment responsibility is important for navigating the housing market. Recent adjustments to industry practices have introduced new clarity regarding these financial arrangements for both buyers and sellers.

Standard Practice for Commission Payment

Historically, the seller has typically been responsible for paying the entire real estate commission in Hawaii. This long-standing practice meant that the seller’s proceeds from the sale would cover both their own listing agent’s commission and the commission for the buyer’s agent. The commission was traditionally deducted from the sale proceeds at the closing of the transaction.

However, recent changes, specifically the National Association of Realtors (NAR) settlement effective August 2024, have altered this traditional structure. Under the updated rules, buyers are now explicitly required to sign an agreement outlining their agent’s fees before receiving services like property tours. This means that each party, both the buyer and the seller, is now contractually responsible for paying their own agent’s commission. Despite this change, sellers can still offer to pay a concession towards the buyer’s agent fees as part of the overall negotiation process to make their property more attractive.

How Commissions are Determined and Shared

Real estate commissions in Hawaii are generally calculated as a percentage of the final sale price. The average total commission typically ranges between 5.22% and 5.53% of the home’s sale price. This percentage is not fixed by law and can vary based on market conditions, the specific services provided, and the agreement between the client and their agent. For instance, a home selling for $630,000 might incur approximately $32,886 in total realtor fees.

The total commission is usually divided between the two brokerages involved: the listing brokerage, representing the seller, and the buyer’s brokerage, representing the buyer. A common split sees the listing agent’s commission averaging around 2.65%, and the buyer’s agent’s commission averaging about 2.57%.

Negotiating Commission Rates

Real estate commission rates in Hawaii are not standardized and are fully negotiable between the client and their agent. Sellers primarily negotiate the listing commission rate with their listing agent, and this rate can range from 1.00% to 4.00% or more, depending on various factors. Buyers, under the new regulations, must now negotiate their agent’s compensation directly. This compensation can be a percentage of the home’s price, a flat fee, or another agreed-upon structure.

Several factors can influence the willingness of agents to negotiate their fees. Properties in high demand or those expected to sell quickly may offer more room for negotiation on commission rates. The overall market conditions, whether it’s a seller’s or buyer’s market, can also play a role in commission flexibility. Furthermore, the level of service an agent provides, their experience, and their marketing strategies are all considerations that can affect the negotiated rate.

Financial Impact on Buyers and Sellers

For sellers in Hawaii, realtor fees represent one of the largest costs associated with selling a home, directly reducing their net proceeds from the sale. These fees are typically deducted from the sale revenue at closing, meaning sellers do not usually pay them upfront. For example, on a $1,250,000 home, total realtor fees could amount to approximately $65,250. This significant expense highlights the importance of understanding and negotiating commission rates to maximize the seller’s return.

For buyers, while they now formally agree to pay their own agent’s commission, sellers can still offer to contribute to these fees as a concession during negotiations. This means the buyer might not have to pay their agent’s fee out-of-pocket, as it could be covered by the seller from the sale proceeds. However, if the seller does not offer a concession, the buyer would be responsible for their agent’s fee in addition to their down payment and other closing costs. Beyond realtor commissions, both buyers and sellers incur other closing costs, which can range from 1% to 4% of the home’s purchase price, encompassing various charges such as recording fees, escrow fees, and potentially loan origination fees for buyers.