Commissions

A real estate agent typically makes 5% - 6% of the sale price of the home. Both agents will usually split that 6%. However, negotiations are what it’s all about. These are net predetermined numbers, but the average is 5% - 6% and the agents will divide their earnings between themselves. 

Who pays the commission?

The seller of the property is the one who is on the hook. They pay both agents commission. The buyer is never responsible for paying commissions. The buyer isn’t getting away scott free though, they pay the closing costs. 

Are commission fees negotiable?

The most common way this is done is when the agent represents both the buyer and seller. If this is the case they will often lower their commission fees. This is what is known as “dual agency”. 

How commission works for buyers

If the seller is clever, and truly feel it is justified, they can raise the listing price in order to pass the cost along to the buyer. This is done by the buyer pays closing costs, and they get a little pricer as the listing price is increased. Again, the buyer is mainly responsible for closing costs, which doesn’t allow them to pay nothing. 

Do you pay commission if you don’t buy a home?

No! Agents are paid once a transaction has taken place, so if you don’t buy a home, there is no commission to be paid to the agent. Agents can protect themselves by drafting a buyer’s agency agreement which is a contract binding you to them for whatever terms and conditions they may set. 

What if the home doesn’t sell?

Typically not. Again, agents are paid after a transaction has been made, so if the home doesn’t sell there’s no commission to be paid. 

But, read your contract and make sure you don’t end up owning them money after the home sits on the market for a long while. It has happened where agents state in their contract they will be paid for their time if a no-sale occurs. 

It’s not uncommon for an agent to be paid for finding a buyer during the life of the contract. 

Also, if an offer is accepted you must pay the agents commission promptly. If for whatever reason you blackout at the last minute, you’re still on the hook for their commission. If the buyer backs out, you are probably still responsible for the commission. If this happens your line of defense is doing the buyer for breach of contract. 

To best protect yourself, just read and understand the contracts. A good agent will feel paid through your satisfaction, along with the actual dollars going in their pocket.

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