Who Pays Realtor Fees in NJ?

Real estate commissions are a significant financial aspect of property transactions. Understanding their structure and payment is important for anyone navigating the housing market. These fees compensate real estate professionals for their expertise, marketing, negotiation, and guidance during property transfers.

Seller’s Primary Responsibility for Commission

Historically, sellers typically paid the entire real estate commission. This commission was calculated as a percentage of the home’s final sale price. It was disbursed from the seller’s proceeds at closing, not as an upfront expense.

The commission rate and terms are established in the listing agreement, signed between the seller and their listing agent’s brokerage. This agreement outlines the total percentage paid as commission upon a successful sale. While traditionally including compensation for both the seller’s and buyer’s agents, recent changes allow flexibility for buyer’s agent compensation. Sellers can still offer buyer’s agent compensation, but this must be explicitly negotiated and documented outside the Multiple Listing Service (MLS).

How Commissions Are Shared

The total commission paid by the seller was typically divided between the listing brokerage and the buyer’s brokerage. Historically, this split was often 50/50, with each brokerage receiving roughly half the total commission. For example, if the total commission was 6%, each brokerage might receive 3%.

After brokerages receive their share, agents are paid based on their individual agreements. These internal splits vary widely, often ranging from 50/50 for newer agents to 80/20 or 90/10 for experienced agents. The brokerage’s share covers overhead, marketing, administrative support, and liability.

In dual agency, where a single agent represents both buyer and seller, the agent’s brokerage may receive the entire commission. While this can sometimes lead to a slightly lower overall commission for the seller, it also presents potential conflicts of interest, as the agent must balance differing objectives.

Negotiating Realtor Fees

Real estate commissions are not fixed by law and are fully negotiable between the seller and their agent. Sellers can discuss and agree upon a commission rate that aligns with their expectations and the services provided. This agreed-upon rate is a fundamental component of the listing agreement, signed before the property is marketed.

Factors influencing commission rates include market conditions, such as whether it is a buyer’s or seller’s market, which can make agents more flexible. The services offered, property value, and anticipated selling effort also affect the rate. Sellers should discuss commission structures with prospective agents to ensure transparency.

Buyer’s Perspective on Realtor Fees

Traditionally, buyers did not directly pay real estate agent fees. Buyer’s agent compensation was typically part of the larger commission paid by the seller, shared with the buyer’s agent’s brokerage at closing. This made the buyer’s agent’s services effectively “free” to the buyer.

However, recent changes effective August 2024 have shifted how buyer agent compensation is handled. While sellers may still offer to pay a buyer’s agent as a concession, buyers are now explicitly responsible for negotiating and agreeing to their agent’s compensation through a written buyer-broker agreement. This compensation can come directly from the buyer at closing, be covered by a seller credit negotiated in the offer, or potentially be financed into the mortgage if permitted by the lender.