Real estate agents are providing a service to their clients, but generally don’t get paid in advance for the work that they do until a property sells. There are two commissions, the buyer’s agent commission, and the seller’s agent (also called the Listing Agent) commission. Generally, both agents share a total commission of the purchase price of the home of around six percent, so three percent per agent. While this figure is considered the norm, there are situations and circumstances where the percentage may be adjusted higher or lower.
Who Pays the Commissions?
Generally, the seller is the one who disburses both commissions. However, since the commissions paid are based on the sale price, it can be argued that the buyer is paying the commissions since payment is coming from the funds they’re paying the seller to buy the house. Sellers can account for the commission to be paid and can adjust the price of the home accordingly.
Additionally, there have been legislative and legal movements nationally to have both parties pay for their representation individually, but so far here in Idaho, that’s not the case.
How Agents Earn their Commission
Agents who take you on as a client are assuming a lot of risks to help you buy or sell a home. Since they don’t get paid until the deal closes, they’re motivated to work hard to get you the best deal possible.
If you’re working with a buyer’s agent, the commissions help pay for brokerage services, negotiation, their time researching listings, driving to home tours, doing price analysis, coordinating inspections and appraisals, completing the closing paperwork, as well as other administrative tasks.
Listing agent commissions help pay for brokerage services, marketing, and advertising (typically includes signage, flyers, photography, video, etc.), MLS fees, doing open houses, negotiations, and other administrative tasks.
The Last Word
A REALTOR® is your advocate to make sure you get the best deal possible when buying or selling a home. While they’re paid differently compared to most traditional service industries, their expertise and guidance are well worth what they’re paid.