Are you getting ready to sell or buy a home and are confused or have questions about commission rates? Let’s talk about realtor fees and draw back the curtain on how real estate agents get.
How Much Are REALTOR® Fees?
Dated: November 15 2021
Are you getting ready to sell or buy a home and are confused or have questions about commission rates? Let’s talk about realtor fees and draw back the curtain on how real estate agents get paid.
No Set Commission Rate
Before getting into the specifics about realtor fees, first, understand that commission rates are negotiable and can vary in different situations and between different agents. Before searching for a realtor, consider what rate and service best fit you.
Who Pays Realtor Fees
In most cases, the seller deducts realtor commissions from their proceeds at closing. Prior to signing the listing agreement, the seller will set the commission rate for both agents. The listing agreement will be signed by the seller, the listing agent, and the agent’s broker. The document will provide the commission rate along with outlining how the seller’s and buyer’s agents will split the fee. The listing agreement also provides other important details regarding pricing, services, and more.
How Much Are Realtor Fees
The commission rate often matches the services provided by the Listing Broker. A Realtor who incorporates a holistic approach to selling a home, providing marketing, staging, and other advanced services, will most likely have a higher commission. On the other hand, Discount Brokers who provide minimal services will most likely have a lower commission.
The typical commission in Pennsylvania ranges from 5%-6%, often split evenly between both agents. If you are looking to put your home on the market for $500,000, you can expect to deduct $25,000-$30,000 for realtor fees from the proceeds of your sale.
Why Do Sellers Pay
A lot of people ask why it is common for the seller to pay the buyer’s realtor fees. Most homes are sold this way because there are benefits to both sides.
In most listing agreements that allocate commissions to the buyer’s side, the cost of the realtor fees will be reflected in the price of the home. By doing this, the seller can transfer financial responsibility for the cost of the buyer's realtor fees, while allowing them to avoid paying out-of-pocket. Buyers are limited to their out-of-pocket capital, which is often tied up in down payments and other fees. In addition, lenders usually do not pay for the buyer’s closing cost. By adding the cost to the sale price of the home, the buyer is able to afford more and make competitive offers.
By allocating commission to the buyer’s agent, the seller is also helping to ensure a secure transaction. The seller is incentivizing other agents to show their home to ready and able buyers. This can benefit the seller by helping facilitate a smoother transaction.
Do Sellers Always Pay Realtor Fees
While most Listing Agents split commissions with the Buyer’s Agent to incentivize smooth and quick sales and act in the best interest of their client, this is not always the case.
Research from, 2020 Profile of Home Buyers and Sellers, published by the National Association of Realtors, found that 77% of sellers paid realtor fees in 2020 and 16% of sales ended with buyers paying some or all of their agent’s commission out-of-pocket.
From our experience helping clients buy homes in the Chester County real estate market, very few transactions resulted in the the buyer paying out-of-pocket realtor fees. Of these transactions, most were FSBOs (For Sale By Owner), where the sellers represent themselves. To ensure our clients are not hit with any unexpected charges, we make sure they know all details prior to even showing the home.
Associate Broker License 2011Philadelphia Magazine Five Star Award Winner ~ 10 consecutive years starting in 2010Main Line Today Top Realtor 2020Forbes Magazine Top ....