Real Estate commission…? Who pays? How much money do they make? When agents give advice to and represent the buyer in a real estate transaction, they will typically earn a commission for their knowledge and ability to close the deal. They help you find lenders, your dream home, facilitate the entire transaction, and strive to obtain the keys to your front door.

When you buy real estate, in most cases you will not owe a real estate professional any money at all. The commission usually is paid by the seller when the settlement funds are disbursed.

When Does the Home Buyer Owe a Commission?

In the beginning stages of the relationship with you, agents will stress the fact that not all listings and homes will be “listed” through a real estate firm. Sometimes, you will want to look at homes offered by “for sale by owners.” For sale by owners generally have a harder time selling their home because they do not offer a commission to the selling agent. However, in today’s market most FSBO’s are willing to pay a small commission to the selling agent as the market has slowed down and buyers are much harder to come by.

What is the Average Commission

When showing you a home that is listed through the Multiple Listing Service (MLS), the listing agent (representing the seller) will usually offer the industry standard 3%. The agent will usually list a home at 6% and offer 3% to the agent that sells the home. When all is said and done, most firms are a 3% company, meaning that anything below 3% is not accepted (unless special circumstances arise). In most cases, a for sale by owner will offer the selling agent 3% to cut the total “average” 6% commission in half. If this is the case, then your agent will not have an issue and will show you the property. However, if the FSBO is not willing to pay the 3%, it will have to be negotiated within the contract between you and the seller. Again, we advise you to contact a few of the agents listed on this site to explain these issues before you start your search for your next home. If you should not agree to paying part of our commission in these types of scenarios, then they will agree with you not to show you any properties that are “for sale by owner.”

The Breakdown

The listing agent gives up 3%. Even if your agent spends 100 hours representing you and helping you, if they can’t get you to the closing table successfully, they do not earn any money. On any real estate transaction, agents earn roughly .75%-1% a piece (a well deserved cut, when you consider you don’t even pay this fee). Please read more of our Home Buying Sections and as always, we hope you select one of the agents listed on our website to help conduct any real estate endeavors.

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