Who Pays Realtor Fees in Illinois?

Realtor fees are a significant cost in real estate transactions. Understanding who pays these commissions is important for buyers and sellers in Illinois. Clarity on these costs helps individuals prepare for their real estate endeavors.

The Standard Practice

In most real estate transactions, the seller typically pays the entire commission for both their listing agent and the buyer’s agent. This arrangement is established through a listing agreement between the seller and their chosen real estate brokerage. The agreement outlines the total commission percentage the seller pays upon successful sale.

This commission is not paid upfront but is deducted from the sale proceeds at closing. The seller agrees to a total commission rate covering services from both brokerages. This practice makes it customary for buyers not to directly pay their agent’s commission.

How Commissions are Structured

Real estate commissions are calculated as a percentage of the final sale price. In Illinois, the average total commission for both agents combined is around 5.07% to 5.18% of the sale price. This percentage is not fixed by law and is negotiable between the seller and their listing broker.

The total commission is typically divided between the seller’s and buyer’s brokerages. For example, the listing agent’s commission averages 2.60% to 2.64%, while the buyer’s agent’s commission averages 2.43% to 2.58% in Illinois. Individual agents receive a portion of their brokerage’s share based on their compensation agreement. This internal arrangement does not affect the total commission paid by the seller.

Buyer-Side Considerations

While sellers traditionally cover agent commissions, buyers might directly or indirectly contribute in specific situations. As of August 17, 2024, Illinois buyers working with realtors must sign a written agreement detailing the broker’s work, compensation, and payment method before touring properties. This buyer broker agreement can obligate the buyer to pay their agent directly if the seller offers insufficient or no commission, such as in some “For Sale By Owner” (FSBO) situations.

In new construction, builders often incorporate agent commissions into the home’s price. Builders may also offer incentives that influence commission structures, though they typically cover the agent’s fee. Additionally, some agents offer commission rebates to buyers, returning a portion of the commission received from the seller at closing. This reduces the buyer’s out-of-pocket costs, even though the seller paid the full commission.

Negotiating Fees

Real estate commissions are not standardized; they are always negotiable between the client and the brokerage. Sellers can discuss and agree upon the commission rate with their listing agent before signing an agreement. This negotiation can involve the overall percentage or specific services included.

Sellers should discuss expectations and compare proposals from different brokerages to align with their financial goals. Buyers do not directly negotiate their agent’s commission, as it is usually paid by the seller. However, buyers can discuss the scope of services their agent will provide. Understanding commission flexibility allows for more informed real estate transactions.