Who pays in a real estate transaction?
Often, people who are starting the process of purchasing real estate have little or no idea how their agent gets paid. Do the buyers pay the agent? Does their pay come out of the selling agentâ€™s pockets? Are agents paid by the agencies? If so, which one, buyerâ€™s or sellerâ€™s? Just how are those people compensated for all the time and effort they put in to find you the perfect house?
It is a great question. And the answer is relatively simple.
Generally speaking, both the agent for the seller and the agent for the buyer are compensated from the commission paid by the seller when a home is sold. Hereâ€™s how it works.
The owner of a home contacts a real estate agent, asking that agent to list and sell this home. The agent and the seller agree to list the home at a certain price, and also agree that when the home is sold, the seller will pay the agentâ€™s brokerage (the agency affiliated with the agent) a commission for selling the home. That commission is a percentage of the sale price, usually 5 or 6 percent, though it can be more or less, depending on what the seller and the agent agree to.
Say the home sells for $200,000.The sellers agreed to pay the brokerage 6 percent of the sale price when the home is sold and title is transferred at settlement. Six percent of $200,000 is $12,000.
Of that $12,000, the agent and broker who list the house have agreed to split or share that commission with the agent who represents the buyer and that agentâ€™s broker (the agency for which the buyerâ€™s agent works). That split is generally 50-50. Half of the $12,000 would go to the sellerâ€™s broker and half would go to the buyerâ€™s broker. Each broker would then get $6,000
Each broker or agency would then pay a predetermined share of the $6,000 commission to the agent for the seller and the agent for the buyers.
As you can see, the commission paid by the seller at settlement is divided four ways, between the sellerâ€™s agent, the broker for the sellerâ€™s agent, the buyerâ€™s agent and the broker for the buyerâ€™s agent.
If the home does not sell, nobody gets paid.
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Coldwell Banker Hearthside
Office 215-794-1070 Ext. 117