Who Pays the Realtor Fees in Texas?

Realtor fees are a significant expense in Texas real estate transactions for both buyers and sellers. Understanding how these commissions are structured and paid is important for anyone navigating the Texas housing market.

Standard Commission Practices

In Texas, the entire real estate commission has traditionally been paid by the seller. This commission is typically calculated as a percentage of the final sale price of the home. While there is no legally mandated rate, the average commission in Texas has often ranged between 5% and 6% of the sale price. For example, on a $350,000 home, a 6% commission would amount to $21,000.

This total commission is then typically split between the listing agent, who represents the seller, and the buyer’s agent, who represents the purchaser. A common split involves each agent’s brokerage receiving approximately 2.5% to 3% of the sale price. This long-standing industry practice is rooted in the contractual agreement between the seller and their listing broker, often documented in a listing agreement.

Negotiating Real Estate Commissions

Real estate commission rates in Texas are not fixed by law or any professional association; rather, they are fully negotiable between the client and their real estate broker. The Texas Real Estate Commission (TREC) does not set commission rates, emphasizing that they should be agreed upon by the parties.

Negotiations can occur at various stages, such as when a seller first signs a listing agreement with their agent. Factors influencing commission rates might include current market conditions, the property’s value, or the specific services an agent offers. For instance, in a fast-paced seller’s market, agents might be more flexible with their rates. Any agreed-upon changes to the commission structure, including a lower percentage or alternative payment arrangements, must be clearly documented in the listing agreement or other relevant contracts.

Buyer Responsibility for Agent Fees

While sellers have historically paid the commissions for both agents, there are specific situations where a buyer in Texas may become responsible for their agent’s fees. This often arises through a buyer representation agreement (BRA), which is a contract directly between the buyer and their real estate agent. This agreement outlines the agent’s duties and the buyer’s obligation to compensate them.

A buyer might pay their agent if the seller’s commission offer is insufficient or absent. This scenario commonly occurs when purchasing a “For Sale By Owner” (FSBO) property, where the seller may not offer a commission to a buyer’s agent. Another instance is if the commission offered by the seller’s listing agent is less than the amount the buyer agreed to pay their agent in the BRA, obligating the buyer to cover the difference.

Paying Commission at Closing

Real estate commissions in Texas are typically paid at the closing of the real estate transaction. This is the point where property ownership is legally transferred, and all financial obligations are settled. The title company or an escrow officer plays a central role in this process, responsible for disbursing all funds, including the agent commissions.

The commission amount is generally deducted directly from the seller’s proceeds from the sale. If a buyer has contractually agreed to pay their agent directly, those funds are also handled by the title company at closing. The title company uses a Commission Disbursement Authorization (CDA) form, provided by the brokerage, which details how the commission will be split and disbursed to the respective brokerage firms.