Who Typically Pays Realtor Fees in Arizona?

Real estate transactions involve services provided by real estate professionals, which come with associated fees. Understanding the structure and payment of these fees is important for participating in the real estate market. In Arizona, these financial arrangements are governed by agreements between the parties involved. Clarity regarding who is responsible for these professional costs is essential.

Understanding Real Estate Commissions

Real estate commissions are the primary compensation for real estate agents and brokers in a property transaction. These commissions are calculated as a percentage of the home’s final sale price. In Arizona, the average total commission ranges from 5.4% to 6% of the sale price. For instance, on a $441,000 median-priced home, the total commission could amount to approximately $26,460.

This total commission is divided between the two brokerages involved: the listing agent’s brokerage, representing the seller, and the buyer’s agent’s brokerage, representing the buyer. Historically, this split meant roughly 2.5% to 3% for each side. The commission compensates agents for various services, including market analysis, property marketing, negotiations, and guidance through the closing process.

Standard Practice for Commission Payment

The seller typically bears the financial responsibility for real estate commission payment. This arrangement is established through a listing agreement, a contract between the seller and their real estate broker. This agreement outlines the total commission percentage the seller agrees to pay upon the successful sale of their property.

Traditionally, the listing agreement specified a portion of this total commission for the buyer’s agent’s brokerage. Recent changes now require the seller and buyer to negotiate their respective agent’s fees separately. While sellers are not obligated to cover the buyer’s agent’s commission, many still choose to offer a concession to attract more potential purchasers.

How Commissions are Paid

Real estate commissions are paid at the time of closing. The commission is deducted directly from the seller’s proceeds from the sale. This deduction is handled by the escrow or title company managing the closing process. The seller does not pay these fees upfront; they are settled as part of the overall financial settlement of the transaction.

The escrow officer plays a central role in this process. They are responsible for disbursing funds to the respective brokerages involved. This ensures both the seller’s and buyer’s brokerages receive their agreed-upon compensation directly from the sale proceeds.

Variations in Commission Agreements

While the traditional model involved sellers covering commissions, various alternative arrangements exist. One such variation involves buyer-broker agreements, which are contracts directly between a buyer and their real estate agent. These agreements outline the agent’s services and how they will be compensated, including instances where the buyer might directly pay their agent a commission. This can occur if the seller’s offered compensation is insufficient or if the buyer desires specific services not covered by a seller-paid model. As of August 2024, buyer’s agents are required to have a signed agency agreement with buyers before providing services.

For-Sale-By-Owner (FSBO) transactions also present different commission scenarios. In an FSBO sale, the seller does not engage a listing agent, avoiding the listing agent’s commission, which averages around 2.74% in Arizona. However, if a buyer’s agent is involved, the FSBO seller may still choose to pay a commission to that agent to facilitate the sale. If no agent represents the buyer, the seller might pay no commission.

Another alternative includes flat fee services, where real estate professionals offer specific services for a predetermined, fixed fee instead of a percentage-based commission. These services can range from merely listing a property on the MLS for a fee, which can be as low as $89, to more comprehensive packages. This model allows sellers to save on commission costs by paying a flat rate, irrespective of the home’s sale price.