This isn’t the most common question, although many home buyers do not know the answer. For the most part, Seller’s do know because 9 times out of 10, they’re the one paying both the Listing Agent and the Buyer’s Agent. Yes, you heard that right. Buyers GENERALLY do not pay the commission to their agent! So as a home buyer, you’re getting your agent for free. Okay, let’s get into it.
Who pays the Realtors commission?
When someone wants to sell their home, whether it’s their primary residence or an investment property, they generally will hire a Real Estate Agent to sell the home. When a Seller hires an agent they sign a Listing Agreement. In this agreement the Seller agrees to sell the home at X price and agrees to pay a percentage of the sales price towards the agents commission. The Listing Agent (represents the Seller) then offers out a percentage to the Buyers Agent (represents the Buyer) for bringing in a Buyer.
For Sale by Owner Properties
I’m not going to dive too deep into “For Sale by Owner” houses. I will say, since these Sellers have chosen not to hire a Real Estate Professional, they have also not signed a listing agreement. Meaning, they have not agreed to pay a Buyer’s Agent for bringing them a buyer. Consult with me more about this circumstance & proceed with caution 😉.
How do Realtors get paid?
So now that we’ve clarified who pays the commission, let’s talk about how and when a Realtor is paid. Realtors do not see a dime until Escrow closes. Realtors are paid through escrow and should never, EVER accept cash, check, or any other form of payment directly from a client. They only get paid if and when Escrow closes.
The unexpected happens. Sometimes you have every intention of buying or selling your home, but then life happens and those plans change. AND THAT IS OKAY! Although you should know, that time and effort your agent put in is unpaid time and effort. I don’t write this for sympathy or to scare you. I write it so you know! I’m sure my fellow Realtors would agree with me when I say, I would NEVER want you to buy or sell your home if it’s not what’s right for you and your family. If the time comes where you hire an agent and then life happens and you end up not making that sale or purchase, take note of the hard work that your agent put in and send some referrals their way. They’re sure to appreciate that!
So how much are they making?
Good question. There isn’t a set percentage. Commissions are always negotiable! I do want to touch on how offering a low commission can hurt you in the grand scheme of things. Offering an unusually low commission can actually hurt you as a Seller, especially when there are other homes for Buyers to choose from! I’ll put it in perspective. Let’s say you had 2 job opportunities to choose from. They are the exact same job, but for different companies. Except, one of the companies offered you $20,000 more a year… which job would you take? A good, ethical Realtor (like me) would show both homes & take themselves out of the equation. ALTHOUGH, not all agents are created equal. This could be a detractor for some agents and they may choose to not show the property at all. Now how do you think that may affect you as a Seller?
Why hire a Realtor?
Who knows the Real Estate Market better than a Real Estate Agent? Would you hire a Plumber to repair your roof? Or an Electrician to fix your sink? NO. Realtors put in a lot of hard work and time for their clients. A lot of which clients don’t actually see. Negotiating terms, repairs, keeping time frames and handling a lot of different personalities isn’t always easy. The goal for me as an agent is to make it so my clients don’t have to see the “ugly” side of Real Estate. The buying and selling processes are stressful enough! Additionally, having an unbiased party representing you and your best interests can help you to keep a level head through the process.
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